0
The economics and impacts of resource developments  John Rolfe  CQUniversity
Resource developments are becoming more contested <ul><li>Tradeoffs between mining, agriculture and communities becoming m...
Economics of resource development in regional areas  <ul><li>Resource developments generate economic benefits in regional ...
Coal mine case study  <ul><li>Medium sized mine in Bowen Basin </li></ul><ul><ul><ul><li>3.8 Mtpa of coking coal  </li></u...
Applying economic analysis  <ul><li>What are the net benefits of allocating land resource to coal mining or cattle product...
Broad estimates of annual revenues & profits by coal price
Comparing benefits and costs of coal production At lowest expected price, and discounted over 16 years at 10%, coal will g...
How does the same analysis apply to Coal Seam Gas in Surat Basin? <ul><ul><li>Involves joint use of land  </li></ul></ul><...
Gas well development is low intensity <ul><ul><li>Well footprint of about 60m x 60m (.4ha) when drilling, and 15mx15m (.02...
Australia Pacific LNG example  <ul><li>Plans to develop up to 10,000 wells in Surat basin over 30 year period </li></ul><u...
Why the level of protest? <ul><li>Given the economics of allocating land to CSG, why the level of protest? </li></ul><ul><...
Reason 1: distribution effects  <ul><li>Concern is that regional area will not share in the wealth  </li></ul><ul><li>But ...
Salary payments in Queensland LGAs with top ten expenditure areas labelled
Supplier expenditures in Queensland LGAs with top ten expenditure areas labelled
Total addition to Gross Regional Product by LGA
Input-output models used to estimate flow-on effects  <ul><li>Multipliers based on Aust. 2006 accounts </li></ul><ul><li>D...
Selected comparisons across LGAs
Modelled employment impacts  <ul><li>For every resource sector person currently living in the Surat basin (Darling Downs) ...
Distribution of economic impacts  <ul><li>Increasing share of economic benefits going to major centres and coastal zones <...
Reason 2: Externalities  <ul><li>Concerns are that land use change will generate other costs </li></ul><ul><ul><li>Busines...
APLNG example  <ul><li>APLNG will cover approximately 570,000 ha of gas fields (joint use with agriculture) </li></ul><ul>...
Reason 3:  Lifestyle and assumed property rights  <ul><li>Concerns about inconvenience issues </li></ul><ul><li>Concerns a...
Conclusions  <ul><li>CSG has very high level of economic returns relative to agriculture  </li></ul><ul><ul><li>Makes it d...
Upcoming SlideShare
Loading in...5
×

John Rolfe-Eidos Sustainable Development in Resource Intensive Regions

378

Published on

.

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
378
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
5
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Transcript of "John Rolfe-Eidos Sustainable Development in Resource Intensive Regions"

  1. 1. The economics and impacts of resource developments John Rolfe CQUniversity
  2. 2. Resource developments are becoming more contested <ul><li>Tradeoffs between mining, agriculture and communities becoming more obvious </li></ul><ul><li>Developments of coal seam gas in Darling Downs and other areas is bringing concerns to a head </li></ul><ul><ul><li>Loss of good agricultural land </li></ul></ul><ul><ul><li>Risk of impacts on water quality below ground </li></ul></ul><ul><ul><li>Risk of impacts on water quality above ground </li></ul></ul><ul><ul><li>Changing face of communities </li></ul></ul><ul><ul><li>Pressure on infrastructure </li></ul></ul><ul><ul><li>Unknown risks for people living close </li></ul></ul>
  3. 3. Economics of resource development in regional areas <ul><li>Resource developments generate economic benefits in regional areas </li></ul><ul><li>Key knowledge gaps are: </li></ul><ul><ul><li>How big are the benefits? </li></ul></ul><ul><ul><li>Where do they accrue? </li></ul></ul><ul><ul><li>How to balance up the benefits against other impacts and risks? </li></ul></ul><ul><li>Addressed in this talk with a focus on coal and gas industries </li></ul>
  4. 4. Coal mine case study <ul><li>Medium sized mine in Bowen Basin </li></ul><ul><ul><ul><li>3.8 Mtpa of coking coal </li></ul></ul></ul><ul><ul><ul><li>16 years of mine life </li></ul></ul></ul><ul><ul><ul><li>Footprint to cover 2,030 ha of grazing country </li></ul></ul></ul><ul><ul><ul><li>Up to 90 hectares of native vegetation may also be cleared </li></ul></ul></ul><ul><ul><ul><li>Other environmental impacts managed on site </li></ul></ul></ul><ul><ul><ul><li>Site will be rehabilitated to grazing post-mining </li></ul></ul></ul><ul><ul><li>Major tradeoff in resource use is between using land for cattle production or for coal mining </li></ul></ul>
  5. 5. Applying economic analysis <ul><li>What are the net benefits of allocating land resource to coal mining or cattle production? </li></ul><ul><ul><li>Identify the profit streams of using land for coal production, including all environmental and land rehabilitation costs </li></ul></ul><ul><ul><li>Compare to the profit streams of maintaining for cattle production </li></ul></ul><ul><ul><li>Net present value (NPV) of streams identifies which is best option </li></ul></ul>
  6. 6. Broad estimates of annual revenues & profits by coal price
  7. 7. Comparing benefits and costs of coal production At lowest expected price, and discounted over 16 years at 10%, coal will generate $552M in profits and royalties Maximum profit from cattle production in future on same resource is $3M
  8. 8. How does the same analysis apply to Coal Seam Gas in Surat Basin? <ul><ul><li>Involves joint use of land </li></ul></ul><ul><ul><ul><li>small proportion reserved for well heads and pipelines </li></ul></ul></ul><ul><ul><li>Wells can operate for up to 20 years </li></ul></ul><ul><ul><li>Density varies, but minimum spacing of 750 metres (approximately 1 well per 200 ha) </li></ul></ul>
  9. 9. Gas well development is low intensity <ul><ul><li>Well footprint of about 60m x 60m (.4ha) when drilling, and 15mx15m (.02ha) post drilling </li></ul></ul><ul><ul><li>assume 1ha/well with pipelines and roads </li></ul></ul><ul><ul><li>Loss of productive land is 0.5% </li></ul></ul><ul><ul><li>Ag. Land prices range from $950/ha to $6000/ha </li></ul></ul>Image Copyright Origin Energy, 2002.
  10. 10. Australia Pacific LNG example <ul><li>Plans to develop up to 10,000 wells in Surat basin over 30 year period </li></ul><ul><ul><li>Up 10,000 hectares out of agricultural production (for 20 years) </li></ul></ul><ul><ul><ul><li>At average land price of $3500/ha = $35M in perpetual lost Ag. profits </li></ul></ul></ul><ul><li>Annual increase in Gross State Product of > $900M in Surat Basin for 30 years </li></ul><ul><li>Assuming 10% of GSP is profit and royalties, PV at 10% discount rate is $850M. </li></ul><ul><li>CSG generates > 20 times economic return of agriculture </li></ul>
  11. 11. Why the level of protest? <ul><li>Given the economics of allocating land to CSG, why the level of protest? </li></ul><ul><li>Three reasons tested </li></ul><ul><li>Distribution effects </li></ul><ul><li>Externalities (Water) </li></ul><ul><li>Lifestyles and assumed property rights </li></ul>
  12. 12. Reason 1: distribution effects <ul><li>Concern is that regional area will not share in the wealth </li></ul><ul><li>But already substantial coal, gas, oil and power generation in southern Qld </li></ul><ul><li>CQU team did assessment of resource expenditure in every LGA in Qld in 2010. </li></ul><ul><li>Results show that there are already large impacts of resource industries in southern Qld </li></ul><ul><ul><li>1,185 direct jobs in the Darling Downs SD </li></ul></ul><ul><ul><li>$430M business and community spend </li></ul></ul>
  13. 13. Salary payments in Queensland LGAs with top ten expenditure areas labelled
  14. 14. Supplier expenditures in Queensland LGAs with top ten expenditure areas labelled
  15. 15. Total addition to Gross Regional Product by LGA
  16. 16. Input-output models used to estimate flow-on effects <ul><li>Multipliers based on Aust. 2006 accounts </li></ul><ul><li>Different to normal I-O or GE models in three main ways </li></ul><ul><ul><li>Modelled impact of initial spending by SD and LGA </li></ul></ul><ul><ul><li>Used actual spend data in 2009-10 </li></ul></ul><ul><ul><li>Counts both operating and capital expenditure </li></ul></ul>
  17. 17. Selected comparisons across LGAs
  18. 18. Modelled employment impacts <ul><li>For every resource sector person currently living in the Surat basin (Darling Downs) there are approximately: </li></ul><ul><ul><li>Another 2.4 jobs locally </li></ul></ul><ul><ul><li>Another 2.9 jobs in region </li></ul></ul><ul><ul><li>Another 1.5 jobs in Brisbane </li></ul></ul><ul><li>But there is likely to be some substitution between regional and Brisbane effects </li></ul>
  19. 19. Distribution of economic impacts <ul><li>Increasing share of economic benefits going to major centres and coastal zones </li></ul><ul><ul><li>Home location of workforce </li></ul></ul><ul><ul><li>Home location of contractors </li></ul></ul><ul><ul><li>Spending flows in business supply chain </li></ul></ul><ul><ul><li>Increasing economic leakages as wealth increases and population becomes more mobile </li></ul></ul><ul><li>While regional areas benefit from major projects, only a share is retained </li></ul><ul><ul><li>Level of expenditure capture appears to be falling in mining and smaller communities </li></ul></ul>
  20. 20. Reason 2: Externalities <ul><li>Concerns are that land use change will generate other costs </li></ul><ul><ul><li>Business, housing and labour force pressures </li></ul></ul><ul><ul><li>Social and community pressures </li></ul></ul><ul><ul><li>Impacts on water resources </li></ul></ul><ul><ul><li>Issues of CSG water and salt disposal </li></ul></ul>
  21. 21. APLNG example <ul><li>APLNG will cover approximately 570,000 ha of gas fields (joint use with agriculture) </li></ul><ul><li>Agriculture has concerns that there will be impacts on water tables and other issues. </li></ul><ul><ul><li>Assume in hypothetical worst case scenario that there are perpetual declines in agricultural productivity of 10% </li></ul></ul><ul><ul><ul><li>At average land price of $3,300/ha, total value of lost production is $200M. </li></ul></ul></ul><ul><ul><ul><li>All agricultural losses would still be less than production value ($850M > $35M + $200M) </li></ul></ul></ul><ul><ul><li>Range of other sustainability reasons for avoiding external impacts </li></ul></ul>
  22. 22. Reason 3: Lifestyle and assumed property rights <ul><li>Concerns about inconvenience issues </li></ul><ul><li>Concerns about impacts on perceived property rights </li></ul><ul><li>Perceptions that there are major impacts on good agricultural land </li></ul><ul><li>Perceptions about changes to communities and lifestyles </li></ul>
  23. 23. Conclusions <ul><li>CSG has very high level of economic returns relative to agriculture </li></ul><ul><ul><li>Makes it difficult to argue against introduction of CSG industry </li></ul></ul><ul><ul><li>Focus should be on minimising key problems </li></ul></ul><ul><ul><ul><li>Ensuring regional development impacts are positive </li></ul></ul></ul><ul><ul><ul><li>Avoiding and minimising negative externalities </li></ul></ul></ul><ul><ul><ul><li>Minimising lifestyle disruptions and encouraging culture change </li></ul></ul></ul>
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×