Economic arguments for McArthur River Mine expansion questioned in report
Summary: The economic arguments being used by mining giant Glencore in its application to keep expanding its controversial McArthur River Mine are "almost comical" according to a report by think tank the Australia Institute.....
Both the Northern Territory and Federal Governments are considering the company's Environmental Impact Statement (EIS) application for the mine in the Gulf of Carpentaria to keep producing zinc and lead for another 30 years.
Glencore was ordered to submit the EIS in 2014 after reactive rock on its waste dump started burning, sending smoke over nearby Indigenous communities.
In the EIS Glencore said: "This project estimates significant benefits arising from the approved mine life, with taxes and royalties exceeding $1.5 billion over the four phases, jobs for approximately 840 people, and continuing community investment through the … Community Benefits Trust."
But a report by the Canberra-based Australia Institute, Wishful Zinking, has raised multiple questions about the company's argument that the financial benefits offered by the project outweigh the environmental risks.
"The modelling and economic analysis in these EIS documents … are based on assumptions that are, at times, almost comical," the report said.
"Based on the company's analysis, it's very unclear how you could come to a conclusion that the McArthur River Mine is even a net positive to the Northern Territory economy," report author Rod Campbell told the ABC.
Glencore estimates the mine will pay a total of $435 million in royalties to the NT Government over 1,000 years.
Mr Campbell said this figure was unrealistic because, "In most years, Glencore doesn't pay royalties for McArthur River Mine at all".
This is because the NT has a profits-based, rather than production-based, royalties system, unlike most other states.
PHOTO: The Australia Institute's Rod Campbell says the company's EIS tax forecasts do not withstand scrutiny. (Supplied)
"The only known royalty payment of $13 million came in 2008 after a historic peak in the zinc price," the report said.
The EIS estimated Glencore would pay $1.035 billion in company tax to the Federal Government.
The Australia Institute assessed this as unlikely because, "It is known that the company often pays zero in company tax".
"ATO data shows that despite $108,107,933 in taxable income, Glencore entities paid no company tax in 2014-15," the report said.
The EIS estimated the company's payroll tax would be $117.4 million over 1,000 years, even though for the last 945 years of the project only four employees were expected to be needed to monitor the site.
"It's comical. Economists don't like to forecast anything over 20 years at the most," Mr Campbell said.
"Here we've got tax revenues forecast over 1,000 years. This is unprecedented."
On jobs, the report said: "Glencore estimates that only 4 per cent of the mine's workforce will be local people. Others will be fly-in, fly-out."
The company estimated it would put $27 million into its Community Benefits Trust and provide, "generous contributions to local health, education, cultural and capacity building initiatives, and the funding of vital public services".
"There is no doubt the trust has helped upgrade the local store, with fencing and provided machinery to local businesses," Mr Campbell said.
"But the local area's vital health and education services are funded almost entirely by government."
The report also pointed out that in its EIS, Glencore suggested there may need to be government funding to keep managing the site for the project's last 945 years.
"The economic assessment is wilfully myopic in terms of potential environmental costs, and makes no attempt to weigh that up in dollar figure terms in relation to any potential economic benefits," Mr Campbell said.
"From an economic perspective, it is likely that the best approach would be to close the mine and rehabilitate the site and to ensure this is paid for by Glencore," the report concluded.
However, the economic implications of the project could change before the two governments make their decision on the EIS.
The NT Government is considering changing its royalty system to include a production-based element, which could collect more money from the mine.
"The first thing we need to do is consult and talk to the right people and that's what we'll continue to do before any decision's made, but any decision will not be made without input from the industry," NT Resources Minister Ken Vowles said.
Glencore responded by providing a statement to the ABC saying it, "had no participation in the Australia Institute's report".
The company added: "It should be noted that the economic forecasts in our draft EIS have been calculated using a wide range of factors by an independent and respected consulting firm."