Caroona coal mine bail out: Speculation NSW government and BHP have cut a deal

The government refused to deny it has offered the company in excess of $100 million compensation in return for pulling the pin on the controversial Liverpool Plains mine.

Leading energy industry financial expert, Tim Buckley said such a deal would be a smart business decision by both the government and BHP.

“It’s a sensible move to cut their loses,” the Institute for Energy Economics and Financial Analysis director said.

“We know the Caroona mine is not commercially viable, we know there are massive water risks associated with it and we know it is critical for the NSW economy to start moving away from coal in an orderly way.

“This is a logical first step and if this deal comes through, the NSW government should be applauded – and I don’t say that lightly.”

BHP paid the government $100m for the Caroona exploration licence in 2006, which was renewed in 2011.

The NSW government didn’t answer any of The Leader’s questions, however a spokesperson for Resources Minister Anthony Roberts said the government was currently considering BHP’s application to renew its coal exploration licences for the Caroona mine.

"Other than that, we have no further comment," the spokesperson said.

The Leader asked NSW Premier Mike Baird and the Department of Industry about negotiations with BHP, but both referred to Mr Roberts’ response.

BHP also refused to answer questions regarding talks between the company and the government.

Former politician Tony Windsor said the stonewalling responses from the government and BHP added weight to the idea the company did not intent to proceed with the mine.

“There has been a rumour around for some time that BHP would get out of Caroona somehow,” Mr Windsor said.

“There was talk at one stage they would get the approval process as far as possible, then offload the project to someone else, like Shenhua, for a profit.

“However given Shenhua is in its own predicament at the moment, that window of opportunity has vanished. Now they will be looking to get out and break even.”

“The smart money would be saying ‘why diddle around any longer, let’s get out and put it down to experience’,” Mr Windsor said.

Mr Buckley said Mr Baird had a track record of letting the money talk.

In 2013 as the then NSW Treasurer, Mr Baird paid Origin Energy $300m to stop the development of the Cobbora coal mine - a project that was likely to cost NSW taxpayers up to $2b over the life of the mine.

BHP also told stakeholders it would not invest in greenfield (new) coal mines until its coal division started producing an acceptable rate of return, Mr Buckley said.

While the deal might make good business sense, Caroona locals remained doubtful.

SOS Liverpool Plains chair Rosemary Nankivell said it would be wonderful if the government negotiated a deal with BHP – but the community had been left “burnt and jade” in the past.

“We’ve had to jump at so many shadows it’s not funny – until I see it in black and white, I’ll remain sceptical,” Ms Nankivell said.