CHAPTER 25
The faces flashed terror – and occasionally bravado – in the miner’s lamps as the journalists reached the huge longwall monster in the hot, black belly of the earth. The 300-metre juggernaut roared as it advanced along its length, the journalists behind, a great sawtoothed mechanical drum feasting on the coal seam and vomiting the masticated lumps on to a pan line that took it to a conveyor belt and thence to the surface. They shouted – screamed – to make themselves heard above the thundering mechanical mole that endlessly devoured the 350-million-year-old remains of giant forests heated and pressured over the millennia into carbon-rich fuel for the world’s industrial furnaces.
As it advanced, the overlying rock, no longer supported by the coal, slowly cascaded to the floor behind the operation. Sensors in the ‘eyes’ of the beast detected how much of the seam remained ahead, and robotic controls adjusted its course. Two miners ‘rode’ the monster with the journalists, and others emerged from the gloom to tend it through marathon six-hour shifts. Among the journalists, some of the screams took on a note of panic. The darkness was impenetrable, the heat unbearable, the noise insupportable, millions of tons of earth and rock poised to collapse on them, bury them.
Back on the surface in the clear, cool air with an open sky and a wide Queensland horizon, the journalists quickly recovered. The guide commiserated. ‘You get used to it. The pay’s pretty good ... and you’re doing something for your country.’
‘Yeah?’
‘Where would we be without our exports?’ 1
A rhetorical question, but it goes to the heart of the conundrum. Australia is easily the biggest coal exporter in the world, with about 30 per cent of market share, worth $24.5 billion in 2006–07. And BHP Billiton is the dominant producer. In Queensland, its vast Bowen Basin deposit – stretching 600 kilometres from Collinsville in the north, through the regions near Moranbah, Dysart, Emerald and Blackwater to Moura and Theodore in the south – holds an estimated 25,000 million tonnes.
To the Australian Government, this is a treasure trove that permits the country to import its needs for continued growth. And the tax on industry profits contributes to government services, from preschools to pensions. Yet coal is the principal polluter in the global battle against climate change.
The company’s approach to the commodity illustrates the transformation that has taken place in the past century. In the early days, BHP followed the traditional practice of taking the iron to the coal in creating its steelmaking plant in Newcastle. But with the discovery of the Bowen Basin coking-coal deposit in Queensland in the 1960s – and the development of enormous bulk carriers by Japan and later Korea – the seas became a superhighway. The coal and the iron ore could be brought together anywhere on the globe that was accessible to the ocean-going leviathans.
When BHP took over Utah in 1984, it also clinched a Japanese partnership to form BHP Mitsui Coal, with big mines in the southern sector of the coalfield. Then, in June 2001, the company brokered a partnership with Mitsubishi, the BHP Billiton Mitsubishi Alliance (BMA), which produced a massive 59 million tonnes annually. This made it Australia’s biggest coal miner and exporter and the world’s biggest supplier to the seaborne coking-coal market. New mines on the seam are continually being developed.
Similarly, in South Africa, Colombia, New Mexico and Indonesia, major BHP Billiton coal-mining expansion is underway. But just as coal has contributed to the company’s rising profits – topping sales of $14 billion in 2006–07 – so too has it contributed to global warming. Australia’s coal exports account for about 620 million tonnes of CO2 emissions annually – compared with Australia’s entire domestic emissions of 560 million tonnes. And, according to the Australian Bureau of Agricultural and Resource Economics (ABARE), coal exports will almost double by 2030. A new coal-fired power station is being built in China every two weeks. India is next in line for a massive expansion.
Against this background, BHP Billiton began a public-relations offensive under Chip Goodyear. In 2005, the BMA issued a charter ‘to create value through the mining, production and marketing of high-quality coal resources, and the provision of innovative customer and market-focused solutions’.
A much wordier update on the Paul Anderson original, it continued with statements affirming its commitment to ‘active management’, ‘high performance’, ‘integrity’, ‘safety’ and ‘a superior return on investment’. But the only mention of coal’s devastating role in global warming came under the heading ‘We value’. First on the list was ‘Safety and the environment – an overriding commitment to health, safety, environmental responsibility and sustainable development’. This refers principally to mine workers and their surroundings. The larger issue of climate change was ignored.
In 2006, Goodyear initiated a sustainability report. It too is replete with the clichés and jargon of environmental concern. It states that for society to continue to grant the company ‘a license to operate’, it must fulfil its role as a responsible and ethical corporate citizen. Each year, it measures its performance in the areas of health, safety, environment and community (HSEC) and invites selected environmental organisations to ‘interrogate’ the results. ‘I didn’t find the interrogation particularly challenging,’ Goodyear says. ‘As the carbon issues came along, it just fitted into our business agenda like any other environmental, community or safety issue. I would say to our team, “The world has made its decision about the role carbon plays in the global environment, particularly around global warming. We can argue that, we can debate that, but the facts are that the communities in which we operate have made that decision. So how do we continue to create opportunities for ourselves? We must factor the environmental issue into our operations, particularly with carbon.”
‘We set targets very early on. Today, we’ve had 13 years in which we’ve had targets for energy efficiency and targets to reduce carbon emissions. And we’ve met those targets. We took a very strong leadership role, and the facts are we have done a tremendous amount.’ 2
Don Argus says, ‘Two of the best meetings that I attend during the year are with the NGOs. The NGOs come in and they interrogate and critique our sustainability credentials. All the main NGOs, the noisy NGOs, that you would want. 3 [In 2007, the company] met or exceeded its HSEC targets in 19 of the 26 measured areas. Greenhouse-gas emissions generated from the business have been stable over the last five years, despite increased production.’ 4
In setting its targets, the company has adopted the criteria of the International Council on Mining and Metals (ICMM). And while good corporate and ethical governance and increasing shareholder value are not necessarily in opposition, the stewardship of the earth has never been the overriding priority for any mining company.
At the same time, the company declared its support for ‘clean coal’ technology. Indeed, the Australian industry has levied its coal exports $300 million over five years for research and development in the area. The industry also agreed to match the $500 million promised by then opposition leader Kevin Rudd during the 2007 election campaign.
The research is centred on carbon capture and storage (CCS), also known as geo-sequestration, designed to capture carbondioxide emissions from coal-or gas-fired power plants and carry it off via pipelines or haulage to be stored underground or in the ocean bed. The process has garnered some important scientific support. The Intergovernmental Panel on Climate Change (IPCC) said, ‘With greenhouse-gas-emission limits imposed, many integrated assessments foresee the deployment of CCS systems on a large scale within a few decades from the start of any significant climate-change mitigation regime.’ However, the IPCC warned that ‘notwithstanding significant penetration of CCS systems by 2050, the majority of CCS deployment will occur in the second half of this century’. 5
‘We’ve contributed about $300 million into a lot of that research,’ Don Argus says. ‘I’d like to think we can get a solution. There’s a commitment to it and we’ll get a solution of some description.’ 6
Theoretically, it would be possible to capture 85–90 per cent of the carbon dioxide from a coal-fired power station, but the process would require the plant to burn 11–40 per cent more coal. This would result in greater emissions of other pollutants such as sulphur and particulates. And, of course, the increased coal mining required would bring its own environmental consequences to land, water and biodiversity. Modelling by the Massachusetts Institute of Technology in 2007 strongly suggested that even with widespread use of CCS, coal emissions would still be higher in 2050 than at present.
In March 2008, the federal energy minister, Martin Ferguson, opened a demonstration plant that would inject up to 100,000 tonnes of carbon dioxide into a storage site two kilometres under dairy-farm country in Victoria’s Otway basin. At the time, it was the world’s largest carbon-capture pilot project and was run by a consortium that included BHP Billiton, Rio Tinto and the federal government, among others.
Indeed, the political winds of change that would bring Kevin Rudd to power wrought profound changes to the climate-change issue. And ever alert to the political weathervane, chief executive officer Chip Goodyear issued a ‘revised climate-change policy’ on 18 June 2007. ‘BHP Billiton has recognised that our company, as well as society generally, must make real behavioural changes and accelerate technological progress if we are to achieve a meaningful reduction in energy use and greenhouse-gas emissions,’ Goodyear said.
He nominated four ‘action areas’:
These are high-sounding, if largely non-specific, aspirations. Undoubtedly, BHP Billiton is aware that it must be seen to conform to the zeitgeist of the day. Within the first week of his taking office, in December 2007, Prime Minister Rudd travelled to the United Nations climate-change conference in Bali, where he publicly signed on to the Kyoto Protocol. The Australian delegation took a leading role in developing the ‘road map’ for action leading to Copenhagen, the 2009 successor to Kyoto.
On his first major trip to the United States, in March 2008, Rudd told the US Chamber of Commerce in Washington DC, ‘We must move to a low-carbon economy. That will mean a profound shift in the Australian economy and in the global economy. We will have to make that shift in a way that maintains our competitiveness. That is why we need a global approach to climate change.’
However, as a Queenslander with a highly developed political antenna, he was quick to support the coal industry. ‘Australia is the world’s largest exporter of coal,’ he said. ‘For us, developing clean-coal technology is a crucial part of our response to climate change. That’s why we’re investing in accelerating the development and deployment of these technologies – the government working with the private sector to find commercially viable solutions to climate change.’
It remains to be seen whether Rudd’s faith in the private sector – or BHP Billiton specifically – is well founded or whether the industry is engaged in an elaborate public-relations exercise.
The company’s appointment of its director of public affairs, Geoff Walsh, as Kevin Rudd led the Labor Party to victory at the polls in 2007 could hardly have been better timed. Walsh, a former journalist, was a senior adviser to prime ministers Bob Hawke and Paul Keating, national secretary of the Labor Party from 2000 to 2003 and chief of staff to Victorian Labor Premier Steve Bracks in 2006. ‘The company has got a strong set of values,’ he says. ‘I was struck by how widely known and how frequently people reference them internally. This is ironic in a sense but from the outside people still have some outdated views about the way in which the company conducts itself. The company has commitments about its own energy use and has the view that action is needed.’ 7
Indeed, since the merger, BHP Billiton’s public-relations unit, begun in the 1960s by Derek Sawer to ‘open up’ the company, had been transformed into a highly sophisticated operation under the aegis of Graham Evans’s external-affairs department. He and his operatives developed extensive and intricate networks throughout successive administrations and the Canberra press gallery. They curried favour with journalists through lavish tours of the company’s mining operations in private aircraft liberally supplied with culinary delicacies and a well-stocked liquor cabinet. The result was well worth the outlay, made through the Minerals Council of Australia. Journalists duly reported the massive developments and their manifest contribution to the economy and the welfare of all Australians.
However, the real strength of Evans’s department was in the web of behind-the-scenes activity developed between lobby groups, the decision-makers in government departments and the Cabinet ministers they advised.
It was an operation conducted well below the public radar, and it would have remained so but for the revelations of a Liberal Party staffer and part-time lobbyist, Guy Pearse, who in 2007 published an exposé that revealed in detail the influence exercised by what he termed the ‘Quarry Vision’ cabal. Indeed, he quoted at length the key players in their successful campaign to reverse the initial Howard government support for the major climate-change initiative of the day – the ratification of the Kyoto Protocol.
Based on interviews conducted for his PhD from the ANU, his book, High and Dry, caused a brief sensation and inspired a Four Corners television program. But in the colour and movement of an election year, the real import of its 480-page exposure and analysis was not fully appreciated. The author and his work were dismissed or denigrated by former political colleagues; and the support he received from the then Labor opposition was muted in favour of their own ‘positive’ policies on the climate-change issue. However, it casts a deep shadow on BHP, before and after the merger with Billiton. And it calls into question the company’s commitment to ‘setting and achieving targets that promote ... reducing and preventing pollution’. 8
Pearse was born in Townsville the son of an engineer, and his mother had close family connections to BHP executive and Liberal Party enthusiast Tom Harley. After taking an Arts degree with combined honours in history and politics at James Cook University, Pearse became a member the Liberal Party in 1989. Soon afterwards, aged only 22, he joined Queensland Senator Ian Macdonald as his research and media manager. ‘For the next fifteen years,’ he said, ‘I was either literally or emotionally a servant of the Liberal Party of Australia.’ 9
A big, prepossessing man, he was soon marked out as a candidate for a safe passage into the federal parliament. ‘I recall meeting with Tom [Harley] in Melbourne in the early 1990s and he was thinking out loud about the best [electorate] to slot me in.’
But when opposition leader John Hewson lost the ‘unlosable’ 1993 election to Paul Keating, Liberal Party morale was shattered and there was a widespread expectation that they faced an extended period in opposition. ‘It was considered important that people like me who were looking for a long-term career used this time to develop their skills,’ he said. So party elders organised a place for him at the conservative Washington think tank, the Heritage Foundation, and Pearse applied for graduate-school courses at the top American universities.
‘I quickly discovered that mid-1990s US politics was far to the right of what I was used to in Australia,’ he said. ‘I had virtually no common ground with the Heritage Foundation.’ However, he won entrance to the John F. Kennedy School of Government at Harvard University. ‘It changed my life,’ he said. 10
His youthful experiences with his family at their rainforest holiday cottage had fostered a sympathetic interest in the environment. Now, at Harvard, he confronted the political nature of the issue:
He even joined Al Gore’s advance staff in the 1994 mid-term elections.
At home on holidays in Melbourne, he met with some of the BHP staff dealing with the environment. ‘I was toying with the idea of having them as my master’s thesis client, and possibly working with them when I graduated,’ he said. ‘Soon afterwards, Graham Evans flew me down from Boston for dinner in Washington DC to talk about possibilities.’ 12 It was a congenial occasion and there was an assumption that they would continue to talk.
After graduation in 1996, he was offered the role of speechwriter for Environment Minister Senator Robert Hill and when, in 1997, Hill negotiated a good deal for Australia at the Kyoto conference, Pearse was pleased to be part of the team. Indeed, as Hill entered the Cabinet room on his return, John Howard and his colleagues gave him ‘a standing ovation’.
Pearse chose to work from an office in the environment department rather than in the ministerial suite at Parliament House – a fundamental political error. He had not appreciated either the importance of propinquity to the source of power – the minister – or the paranoia of politicians under fire, as Hill soon was from his own side of the aisle.
When Hill asked him to write the Liberal Party’s environment policy statement for the 1999 election, he said he needed to check public-service regulations on purely political work. Hill snapped, ‘Forget about it.’
‘Only six months later did I learn from others in the party that I’d had a major falling out with Robert Hill,’ he said. ‘Because Hill had cut me off, so did other friends and patrons. Much to my disappointment, it became clear that I would have to spend some time in the political wilderness.’ 13
However, he now had the opportunity to pursue consulting and lobbying work, and he turned to Billiton (and later the merged entity with BHP). He also began a PhD at the Australian National University on the climate-change issue. The research involved interviews with a wide range of stakeholders, and since it was an academic exercise with promises not to reveal sources, ‘the lobbyists relaxed’. ‘Some of them,’ he said, ‘had clearly been waiting years to have their vital role in the history of Australian greenhouse policy recorded, if anonymously.’
Easily the most influential group was the Australian Industry Greenhouse Network (AIGN), the country’s biggest greenhouse polluters through industry associations and individual companies representing Australia’s biggest fossil-fuel producers and consumers. BHP, both before and after the merger with Billiton, was one of the leaders of the group. And, according to Pearse, their power to influence policy was ‘very unsettling’. 14
AIGN personnel were all former federal bureaucrats or ministerial staffers from the industry portfolio. They were often called upon to assist in the development of environment policy. Pearse said, ‘I was told that in at least two federal departments (industry and treasury), AIGN lobbyists had written cabinet submissions, ministerial briefings and costings on key greenhouse policy issues numerous times.
‘Meanwhile, the same people in their capacity as lobbyists were writing very similar advice to government on behalf of the big polluting interests. So the government – particularly the Cabinet – was receiving the same message from both sides.’
Not surprisingly, perhaps, the results were spectacular. In short order:
The final triumph for AIGN came in 2005 when the government announced the establishment of the Asia Pacific Partnership on Clean Development and Climate (AP6). Pearse said, ‘The AP6 covered countries responsible for more than 50 per cent of global emissions, including China, India and the US, but did not require anyone to reduce emissions or even slow their increase.’ 15
At the same time, Pearse continued consulting work for BHP Billiton; and he and his wife shared a Canberra house with Senator Brandis – a classmate of Tom Harley’s at Oxford – who had become a prominent supporter of Treasurer Peter Costello for the prime ministership.
‘For a time, BHP Billiton HQ in Melbourne also sought my advice on the company’s relations with the Howard government in general,’ Pearse said. ‘They were particularly interested in my good relationships with MPs close to Costello, obviously in anticipation of a possible leadership transition.’
One consequence was his introduction to the man Graham Evans had appointed the company’s vice president of government relations and asset protection, Bernie Delaney. ‘My first impression,’ Pearse said, ‘was that he was cluey but not half as intimidating as I would have expected.’ 16 They frequently did the rounds of ministerial offices seeking government subsidies for company projects. ‘More than once, I saw him bite his tongue and bide his time so as not to risk antagonising a petulant minister.’
They were paid on results. ‘I sat with senior BHP Billiton people outside Aussie’s Café in Parliament House one day and remember them explaining to me how they received personal bonuses on the basis of whether they secured government funding.’ 17
In 2002, Pearse accepted a retainer from Delaney to provide advice directly to him on the company’s broad relations with the federal government. The focus of the company’s continuing campaign, he says, was support for The Big Australian.
It was not always an easy sell. ‘How do we convince the federal government that we are still The Big Australian even though anyone looking closely can see that we are nothing like as Australian nowadays?’ he said. ‘Most of the shareholders are overseas, most of the projects are overseas, most of the board, and if it weren’t for the window dressing, HQ would probably be in London too.
‘So, what can we do to maintain the political capital associated with being The Big Australian? That was my work: focusing on the financial contribution to regional Australia, the employment contribution, the indirect jobs created by the company’s activities here, and the large indirect stake many Australians had in the company through their superannuation funds.
‘My impression is that the company was completely accustomed to using The Big Australian moniker to their political advantage. They also weren’t shy about ignoring it either ... effectively threatening to take their business offshore unless government chipped in: sentiment when it suited, a whiff of economic blackmail when it didn’t.’ 18
However, later that year the contract terminated ‘very suddenly’. Delaney claimed the reason was a cost-cutting decree from chief executive officer Brian Gilbertson, but Pearse is not convinced. It came in the wake of a long conversation between Delaney and Prime Minister Howard’s chief of staff, Arthur Sinodinos, at the Liberal Party’s federal conference. ‘I suspect it was to do with Bernie’s assessment that “[Howard] is staying”,’ he said, so Pearse’s Costello contacts were less important.
By then, he suspects, Delaney might well have begun to be concerned about his greenhouse views. However, the termination was ‘relatively cordial’ and he continued to lobby for government support of the company’s Yabalu nickel refinery near Townsville and saw Delaney from time to time. ‘Bernie Delaney is a seasoned political poker player,’ he says. ‘He knew what my PhD research was about and he knew my green-for-a-Liberal views on Kyoto. So, in hindsight, I think this flavoured our discussions on Kyoto and emissions trading.
‘He gave me the impression that the company was ambivalent about these things and was far more ready than, say, John Howard to accept Kyoto and priced carbon. However, I also know that the aluminium side of the business was in the thick of the lobbying against both. And BHPB was also closely involved in most of the politicking by the Minerals Council of Australia [against them] too.
‘Further, they were among those hiring Andrew Robb 19 to lobby against Kyoto.
‘More recently, they have said they can slow the growth in their own emissions but that it’s unreasonable for a company growing as fast as them to be expected to achieve absolute reductions in greenhouse emissions in the foreseeable future.
‘On balance, for them to say something like that as recently as 2007 suggests that the moral imperative just doesn’t register.’ 20
Geoff Walsh says that Bernie Delaney remained the principal in-house lobbyist to government: ‘Bernie Delaney reports to me, but he’s the person who principally looks after government relations at the federal level – all sides of politics and the federal bureaucracy.’ 21
When asked his attitude to carbon emission and climate change, Marius Kloppers pauses for a moment. ‘We participate in the Coal 21 and Future Gen projects,’ he says. ‘I suspect, though, that the electricity-generation industry – which is multiple, multiple, multiple times the size of the energy-coal industry – will ultimately have the biggest vested interest to drive those changes. Changes in fuel-switching are largely made by generators, not by the people who supply them. The company’s policy [on climate change] is pretty clear – it goes out from the premise that the science is real, that CO2 concentration in the atmosphere is an issue and must be stabilised, so we favour policies that price the external cost of carbon-based fuels.
‘What is important is to reduce the carbon content of the atmosphere. In reality, that will be driven by the large economies and any attempt that is not squarely aimed at building a global community to influence that is likely to have very little impact. Basically, the world is in a prisoner’s dilemma at the moment on global warming – everybody is looking at everybody else because people are trying to set targets for something that is a hundred-year time frame.
‘In my personal opinion, the real endeavour has got to be to get started across as broad a base as possible, not to out-cut each other, because in reality if one party makes a very aggressive set of cuts you’re less likely to get international cooperation. You’re more likely to get a global set of issues if you just get started in a modest way and continue to then build the broad base, and only after you’ve built the broad base do I think you can really start influencing for a hundred-year time frame.’ 22
Don Argus also measures his words carefully. ‘I have a very strong view about the climate-change debate but I need to be careful that I don’t pre-empt [the policy] the company has,’ he says. ‘I don’t believe that you can go in isolation with emission trading.’ 23
He is concerned that the government would use the revenue from emission permits to ‘pick winners’ or subsidise renewable-energy initiatives that were not economic. If that occurred, Australia would not get the full benefit from the emissions-trading scheme.
‘I read the science,’ he says. ‘I read all the articles and I read the sceptical environmentalists and there’s enough data in there that would allow me to say “Yes, I query it”, but intuitively, seeing stuff spewing up in the air I’m aghast that we’re not bringing on the uranium debate here in Australia. I’m absolutely aghast. There’s only one solution to save the ecosystems of the world and that’s uranium.’ 24