The coal industry is at a crisis point worldwide, and any fallout from its decline will impact heavily on the Australian economy.

Barack Obama has stated that his goal is to gradually shut-down every coal fired power station in the USA, and Green lobby groups worldwide are calling for the picketing of all new coal mines anywhere on the planet. Warren Buffett has said that decline of coal mining is gradual, but permanent.

Gas, more so than nuclear, is being promoted as the ideal alternate to totally replace coal and, to add to the problem, coal prices are steadily dropping to the point where it soon will become uneconomic to dig it up. Then, there is the issue of the relationship between miners and farmers, which is at a low ebb and becoming even more militant on both sides.

All of this uncertainty has led to a tightening of the equity and debt markets for coal mines, with junior miners not having strong enough balance sheets to back their development capital requirements. This leads us to a dismal looking future for coal — so the industry is now slowly and reluctantly seeking ways to turn its fortunes around.

There are two main options in turning the tide: carbon capture technology and reducing costs of production so as to make coal more affordable on world energy markets.

Both are languishing in a lack of will. Too many miners and politicians believe, misguidedly, that as the population of the world is increasing rapidly and there is currently a seriously inadequate supply of energy to at least half of the existing population of developing nations, this will mean that coal will always be needed, as other forms of energy will never cope with the demand.

Such a complacent attitude is the equivalent of “Nero fiddling while Rome burned.”

So, let us take a positive look at both challenges, as it is possible to turn them into assets.

Coal can retain its dominance as the world’s prime source of energy if it solves the issues relating to its perceived pollution of the atmosphere. This can be achieved by making coal clean by safely storing carbon.

Coal producers have invested moderately in this initiative in Australia in recent years through the Coal21 Fund, and governments have provided token support, but it is a long way from sufficient and shows a failure to take the matter seriously.

China, a massive user of coal power, has made the largest carbon capture investment by far and, interestingly, has employed many American scientists in their team — people frustrated by their own nation’s disinterest in the matter.

Australia has become a partner of China in this initiative by joining the Asia-Pacific Partnership on Clean Development and Climate. India, Indonesia, South Korea and Japan have joined also, thus creating a framework through which progress can be made. It is conservatively estimated that at least 30 billion dollars must be spent by the Partnership over the next decade before there will be a majority of power stations working with efficient, low-cost carbon capture and storage.

The unanswered question is whether the coal industry and governments are willing to invest capital of this significance. Actually, they have no alternative but to do so.

Australia has made a number of attempts at establishing small clean coal power stations — 15 in all so far, at places like Callide, Tarong, Munmorah, Hazelwood, Loy Yang, Mulgrave, Otway, Collie, etc.

Some have failed, others are slowly progressing, and a couple are looking very promising, particularly where oxyfuel capture technology is being used. Those to have failed have suffered from very high costs of production and an inability to find places nearby to safely store CO2. Similar projects overseas have also experienced failure for the same reasons — causing some scientists to say that it will be at least 2030 before long-term solutions are found, but this forecast is unnecessarily gloomy.

There is no doubt that CCS technology works, but the cost of building power stations with capacity to handle this technology will consume a lot of capital. This will be offset by the knowledge that, in the long term, operating costs will be lower and pollution will disappear, making the investment worthwhile.

Storage of CO2 in liquid form is another major issue. Underground sites are best, and there are many possibilities out in the Australian desert, except that it is a long way from the people who consume the power. Additionally, authentic answers must be found to allay fears that it may contaminate water reserves or slowly escape into the atmosphere. Nonetheless, the task is by no means impossible.

The inescapable issue is that the future of coal is dependent on finding economic and socially acceptable solutions for all of the above. It will become unjustifiable for the coal industry to say that it can’t be done because it will cost far too much. This price must be paid or the industry will die.

Governments cannot wash their hands of the matter like Pontius Pilate. They have no option but to partner the industry, as they will lose billions of dollars in royalties unless they become major investors in the action. They also have an unavoidable responsibility to be prime carers of the environment.

This being so, let us look at the cost of producing coal as it is the other major problem, particularly in Australia, where wages paid by mining companies are an outrage — out in the field and in head office. BHP, Rio Tinto and other major miners set an extraordinarily bad example in the boom years of mining by paying all executives and workers extravagant wages and bonuses in the naive belief that the boom would never end. In acting so irresponsibly, they caused enormous wage pressures in other industries to the detriment of the national economy as a whole.

All mining companies must now take urgent action to remedy this. They must cut executive pay first, then negotiate with unions to bring workers’ pay levels down to the same scale as the rest of Australia. I can already hear the yells of outrage, but the solution may be to progressively close every mine in Australia for a year and then open them again with new wage contracts that have a trace of commonsense in them.
Unless the pain of this drastic action is absorbed as a matter of priority, they will all be out of jobs within a decade.

The plus is that a reduction in the cost of coal on world markets, together with it becoming an environmentally clean product, will usher in an era of responsible prosperity for an important industry.
To emphasise my point, let me give a small example of the stupidity of the current wage structure in mining: A truck driver at a mine gets twice as much pay as an environment manager. This indicates what priority the environment has in the scale of thinking within the mining industry. It actually reveals the core of their problems.

But, lest we get too gloomy, I am pleased to read that Australia’s Energy Minister, Gary Gray, has visited and praised the CCS Plant at Otway in Victoria, where CO2 is being successfully stored, and has announced a grant of 50 million dollars to help develop a network of similar facilities.

I note also that American mining giant, Peabody, has now joined the government of China in a similar initiative. Equally encouraging is work of James Cook University in Townsville which is experimenting in using algae to absorb CO2 and converting the residue into marketable fertiliser.

So, we come to the crunch point. Green politicians and environment lobbyists worldwide are becoming increasingly militant, and have long-range plans to crank-up their militancy to a sustainable fever pitch that will last for decades. Their supporters are swamping the social media with virulent anti-coal messages, and the general public is becoming more and more uneasy about the damage that coal could be doing to the environment.

The problem will not go away, and the longer it is not resolved, the more attractive a reformed nuclear power industry begins to look.

We create clean coal or the industry dies.


EVERALD ON THE PROWL

Downfall of the ALP
Aaron Patrick used to be an active member of Young Labor at the time when Bill Shorten was its leader. He went on to success as a journalist, particularly at the Australian Financial Review, and has written a book called “Downfall” in which he chronicles what he believes has led to the decline of the ALP as a political party. He clearly has many inside sources, and he takes a lot of swipes at Shorten and his political friends, as well as analysing all the defects in the armour of Rudd and Gillard. He laments also the unnecessary power of Trade Unions within the Party.

It is an interesting and informative read that raises numerous questions in the minds of readers, particularly the viability of Australia having a major party on the Left that has no affiliation with Unions or any association with Greens. It is an important question that must be faced sooner rather than later, as I know people on the political left who have joined the Greens solely because they do not want to be formally associated with Unions, but are unhappy with the extreme stances of Green politics.
Being involved with trade union members who voluntarily join the ALP and pay their own membership subscriptions would be regarded by them as an entirely different situation.

The Snowy
My article last month on “Turning Back the Boats” brought one of the biggest responses to Everald@Large that I have ever experienced. What surprised me was that those responses were five-to-one in favour of my comments — whereas I had expected a lot of flak. Since then, Kevin Rudd has implemented his Papua-New Guinea solution, which takes the debate to a new and lamentable dimension. It is a short-term political fix designed solely to win an election, whereas the refugee crisis worldwide will continue to grow for decades ahead, particularly when millions inevitably begin to flee from democratic and economic oppression in China.

Tony Abbott’s policy is even more extreme than Rudd’s, so we are a long way from effectively managing the flow of refugees, and we have no humane policies associated with our strategy. A policy that does not seem to have been looked at is to follow the example of the way in which the Snowy Mountains project was built just after World War II. We achieved that only by inviting migrants from Europe to go there to work, not live in our capital cities. We can now place the same requirement on refugees. They can work in new industries to be created in Northern Australia, such as the construction of water channels and dams to divert tropical rainfall down to the Darling River, and in creating a food bowl in the great black soil plains that will be opened-up in north-western Queensland as the result of an adequate water supply.

Fairfax
Colleen Ryan has written a dramatic account of the history of Australia’s first great news empire pioneered 150 years ago by the Fairfax family. Called “The Rise and Fall of Fairfax”, it reads like a thriller, but is a very well researched piece of good journalism. Internal fighting within the Fairfax family caused the initial problems, mainly due to the naïve antics of young Warwick Fairfax and his dreams of dominance, fuelled by his irrational financial partnership with Laurie Connell. Then, there has been a long line of plunderers led by Conrad Black, Rupert Murdoch, Kerry Packer, Gina Rinehart and others, plus some very ordinary management by people such as Fred Hilmer and Brian McCarthy, etc. A sad story which, we hope, will have a better ending, as the hold of Murdoch on the Australian media is oppressive and must have stronger competition. This will reach its zenith if Fairfax finally collapses — a possibility that may actually occur, as current management practices make it a very unhappy place to work.

Tony Abbott
A few short weeks ago, it appeared that Tony Abbott was heading for the Prime Ministers Lodge with unerring accuracy. Now, there is some doubt about that destiny, as Rudd appears to have gained considerable ground, and the media, fresh from demolishing Julia, have decided that Tony is their next victim. To crank-up the pressure, they are boosting the stocks of Malcolm Turnbull. Interestingly, they are not pushing the barrow of Joe Hockey, who probably has more votes in the party room than Turnbull. They may be correct in thinking that Malcolm is more likely to beat Kevin.

What it means is that a week is a long time in politics and a month is an eternity. There is definitely a large anti-Abbott vote out there, both in terms of personality and because many people blame him for failing to bring down Gillard’s minority government at least two years ago. But, I am inclined to believe that he has earned the right to have a second attempt to win the keys to the Prime Minister’s Lodge. If he fails, he will be blamed forever. Then again, if Kevin loses, he will wear and bear the mantle of destroying Australia’s first female Prime Minister to satisfy his personal ambition for no positive result. The margin of a loss may well be the votes of Gillard supporters who have now deserted him. Then again, history shows that lots of politicians have successfully walked over many dead bodies in the quest for power.

To the Ends of the Earth
Scotland is best known to the world for its whisky. Oddly, it is less well known for the migration of its citizens to almost every nation on earth, where they largely prospered through hard work and a frugal lifestyle. In terms of percentage of population, no other nation has sent so many of its people abroad. The incredible saga of its population export is splendidly outlined in a book I have just read which is called ‘To the Ends of the Earth’. Written by historian T M Devine, it says that the prime motivator of the great exodus was the Scottish tradition that a father’s property must be passed on to the eldest son in full, with no other family member, including the mother, receiving one penny. So, the remaining siblings often decided they had nothing to lose by going abroad to seek their fortune. In many instances, the migrating children became far more prosperous than the eldest son who had claimed the family inheritance and stayed at home.

The breeding grounds for the skills and attitudes that the Scots exported to the world were based in the great industries of the Lowlands, where the Clyde Shipyards were the largest in the world, as were their huge woollen and cotton mills. At one point in history, of the top ten wealthy people in the world, eight were Scotsmen. I think the quality of their whisky had something to do with it.

Equality of Women
Julia Gillard has put the word “misogyny” to the foremost levels of our vocabulary. This caused me to review Anne Summers book on the subject in last month’s edition of Everald@Large. Since then, two similar books have hit the newsstands, and they are worth reading. One is called “The Stalking of Julia Gillard,” and has been written by long-time political journalist Kerry Anne Walsh. It is a devastating account of the three years of hateful attempts by Tony Abbott, Kevin Rudd and others to bring about her political death. Walsh claims that no politician has been so ruthlessly attacked with such personal vindictiveness in the history of Australian politics. How she got out of bed every day with a smile on her face was beyond belief. But, she did. Read it and feel as sad as I did that it happened on our watch.

The second can be found in the latest edition of Quarterly Essay. It is titled “Unfinished Business.”  Author Anna Goldsworthy, a concert pianist, says in a hard-hitting 60 pages that the Gillard persecution is the tip of the iceberg, as most women suffer similar humiliation when they are appointed to leadership roles in any profession. The content of both books should not be dismissed as “whinging female chatter.” The issues are of far greater importance than that, and are worthy of serious debate which leads to action that ensures a level playing field.

How much is an MP worth
Since the start of the era when Kings and Queens were put in their place and Parliaments took over the ruling of the world, the issue of pay for politicians has been a subject of continuous controversy. Initially, all MPs were expected to work without pay, as election to Parliament was regarded as a civic honour and duty, not a profession. This, of course, meant that only the wealthy could afford to run for office and, so, that needed to be changed. In the first instance, MPs set their own pay rates, but now most Parliaments have an Independent Tribunal that determines the scale. This still means that no matter how responsibly they may act in making decisions, there is always a violent public controversy when they announce the new pay figures.

Be this as it may, it is ridiculous that a Prime Minister who is responsible for running the country should earn about the same as someone managing a small public company and about one-tenth of what a major bank CEO is paid. Similarly, it is not sensible that an MP gets a salary which is comparable with someone who is an executive on about the fifth level of a public company. Also, an MP has no security of tenure. If you lose your seat, your salary finishes that very night, and there is no severance pay other than superannuation.
The real issue lies in the public perception that we have too many governments in Australia and there are too many MPs wasting too much public money. Additionally, there is an excess of ordinary performers whom we reckon do not earn their keep. There should be much larger electorates and more staff to help MPs serve the voters. A good policy would be that an MP should receive higher pay after they have served an apprenticeship of two terms, in which they learn the business of government. Fundamental to all these reforms is the matter of quality of MPs. Candidates must be elected by a popular vote of Party members, so that factions and unions can’t promote into Parliament those from their ranks whom they want to get rid of.

And the Mountains Echoed
I always fit a good novel into my regular reading pattern, and I enjoyed a thoughtful one this month. It is primarily set in Afghanistan back in more peaceful times when Kabul actually had elegant suburbs. It tells the story of two young people who live through the terror of civil war and forced separation, and flee in search of safer places. Written by Khaled Hosseini, it is called “And the Mountains Echoed.” It takes us on a fascinating journey into a world that interests few in western civilisation, but helps us to understand the refugee environment much better.

Hosseini has written two other best sellers that I have also enjoyed: “The Kite Runner” and “A Thousand Splendid Suns.” This one is also worth the effort.


TOPIC FOR SEPTEMBER
Presuming that an Election will be called soon, we will look at the main issues that will determine the final result, how the main personalities are campaigning, what ways the Media will be planning to influence the result and how we all can outfox the Pollsters.