Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Senate Select Committee on the Scrutiny of New Taxes
01/09/2011
Carbon tax pricing mechanisms

BARLOW, Mr Nicholas Anthony, Head of Resource Development and Operational Excellence, Anglo American Metallurgical Coal Pty Ltd

STEVENS, Ms Shona, Stakeholder Engagement Specialist, Government Policy, Anglo American Metallurgical Coal Pty Ltd

CHAIR: I now welcome Mr Nick Barlow of Anglo American Metallurgical Coal to today's hearing. Mr Barlow, do you wish to make a short opening statement?

Mr Barlow : Yes, thank you. Anglo American welcomes this opportunity to outline our concerns in regard to the current design of the carbon pricing mechanism. Appearing as a witness today complements our extensive engagement on this issue with the Prime Minister, key ministers, members of parliament and state premiers. As you will have seen from our submission, Anglo American is a company with a demonstrated commitment to emissions reduction. Over the past five years we have spent more than $120 million to reduce our carbon footprint by a total of eight million tonnes of CO2 equivalent. We have contributed almost $10 million annually to the COAL21 fund and the Australian Coal Association research program. It is in this context that we understand and support the federal government's commitment to combat climate change and reduce carbon emissions. We also support the view that an emissions trading scheme, carefully designed and aligned with global developments, can be a cost-effective and efficient means to reduce Australia's carbon footprint.

However, we do not support the federal government's proposed carbon pricing mechanism in its current form. The proposed carbon pricing mechanism will severely impact Anglo American. The value of our four planned new mines would be significantly reduced, putting at risk $4 billion of investment, more than 3,200 jobs and $5.7 billion of ongoing royalty payments to state governments. This is not because of an unwillingness to respond to permit price signals by reducing emissions; it is because the absence of readily available mitigation technologies means that for a period of up to 10 years we will be unable to sustainably reduce our emissions below current levels.

The carbon pricing mechanism does not provide for a reasonable transition implementation such as a phased auctioning of permits, and this is compounded by the deliberate exclusion of the coal industry from the Jobs and Competitiveness Program available to other emissions-intensive trade-exposed sectors of the economy. In addition, the proposed carbon pricing mechanism covers fugitive emissions from coalmines despite the fact that no other major coal-producing country or export competitor imposes a direct climate policy constraint on fugitive coalmining emissions.

Let me explain the Anglo American predicament in more detail. In 2009-10, Anglo American's emissions were 4.65 million tonnes of carbon dioxide equivalent as reported under NGERS. Seventy-five per cent of our emissions are fugitive emissions from underground and open-cut coalmines. The remaining 25 per cent of emissions are largely electricity and fuel consumption. Primarily this is diesel fuel at our open-cut operations. Our challenge is how to abate these emissions. In simple terms, we cannot capture 53 per cent of our emissions due to a lack of technology to mitigate fugitive emissions. There are currently no commercial-scale technologies available to mitigate ventilation air methane from underground mines and open-cut fugitive emissions.

While high concentrations of rich methane from underground mines are a particular problem for us because the high-quality metallurgical and thermal coal we export is found in gassy seams, over the past five years we have invested around $120 million in existing technology to capture this methane and divert it into two coal seam methane power stations and also the Townsville gas pipeline. The emission reductions realised by these projects are equivalent to taking more than half a million cars off our roads every year. However, VAM, or ventilation air methane, makes up 31 per cent of our footprint, and technology to abate VAM is in its infancy. While regenerative thermal oxidiser, or RTO, technology is being trialled in different places in the world, including in the Illawarra, it is in its early days. There are still a range of issues relating to safety, process stability, process control and operability which have to be successfully addressed. Current thinking is that this will take up to 10 years to be addressed adequately before a commercialised system is available.

More than 15 per cent of our emissions are fugitive emissions that arise from open cut mining. It is not technically feasible for most of the coal industry, including Anglo American, to capture these emissions. Possible solutions are only in the research stage, and it could be as long as 15 to 20 years before there are any viable means to mitigate these emissions.

Finally, electricity and fuel use is around 25 per cent of our footprint. By introducing more energy efficient technologies and processes, we have reduced our energy consumption and actual energy intensity per product tonne by around four per cent over the last year. We will continue to look for ways to further reduce our energy consumption, but these are likely to be small reductions.

While some of these issues are common to the entire coal industry, the particular gassing nature of several of our operations means that Anglo American will be disproportionately negatively impacted by the carbon-pricing mechanism in its current form. Under the government's carbon-pricing mechanism, Anglo American's current operations and planned investments will face cost increases of more than $1.4 billion by 2020. Three of our existing mines face cost increases of $200 million to $350 million over this period. This is after the expected assistance from the Coal Sector Jobs Package is received. If the carbon-pricing mechanism is introduced in its current form, Anglo American will be facing some very unpalatable decisions. To remain internationally competitive, we will need to reduce internal costs and potentially shed jobs. If we do not, we will lose market share and the viability of our operations will be placed at risk.

In terms of our projects, the value of our four planned new mines would be reduced by 24 to 32 per cent under the proposed pricing mechanism using the core scenario. Utilising the high scenario, that reduction is as high as 50 per cent. These new mines must pay 100 per cent of their carbon liability from day one, as the Coal Sector Jobs Package does not include transitional assistance for new projects. This value drop pushes our Australian projects down the list of Anglo American investment priorities, and they would be at risk of not being progressed. Grosvenor is the first of these planned Australian projects and is being presented to the Anglo American board for approval in December. Based on the reduced return and increased risks, it may not go ahead. Australia may lose Anglo American's investment of $4 billion, more than 3,200 jobs and $5.7 billion of ongoing royalty payments to state governments with no impact on global emissions, as projects will proceed in other countries.

We believe the government can achieve substantial emissions reduction without the severe economic impact that Anglo American faces. Our concern could be addressed with a single, simple change. It involves phasing in the auctioning of permits for trade exposed industries as proposed by the Minerals Council of Australia. This would allow Australia to make the transition to a low-carbon economy in the long term without destroying jobs in the short term. Australia's scheme does not have to raise significant amounts of revenue in order to reduce emissions. Phased-in auctioning will not impact on the environmental rigour of the scheme; however, it will influence the economic impact. For example, the European Union ETS has had a carbon price since 2005, while auctioning only two to three per cent of permits. In comparison, Australia's scheme will raise more tax in the first seven months than the European Union's ETS generated in the first 6½ years—that is, $A4.96 billion.

However, even within the confines of the existing carbon price mechanism proposed, one modification would transform the outlook for Anglo American. This is to replace the Coal Sector Jobs Package with an emissions price cap of $1 per tonne of saleable coal so that mines pay up to this level but no more for a period of at least 10 years. We would also support the inclusion of a review after five years from the start of the scheme to determine if this is still appropriate.

In summary, the government's proposed carbon-pricing mechanism has the potential to put the future of the Australian coal industry at risk. From Anglo American alone, Australians may lose $4 billion worth of investment and forgo more than 3,200 jobs. It simply does not make sense to implement the proposed carbon-pricing mechanism and forgo the benefits of the coal industry for little or no environmental gain. This is especially the case when a better way in the form of a phased-in auctioning of permits could be implemented at a much lower cost and ensure both the future of the coal industry and the intended environmental outcome. Thank you.

CHAIR: Thank you, Mr Barlow. You read from a prepared statement. Would you be able to provide a copy for the members of the committee today?

Mr Barlow : Yes.

CHAIR: That is great. The secretariat can organise that. Do I understand you aright? You say that if the government were to decide to introduce phased-in auctioning you would be quite relaxed about a carbon tax, a carbon price, an emissions trading scheme—that one single change would make a price on carbon acceptable to your industry?

Mr Barlow : That is correct, depending on the level of phasing in and obviously the time frame. We see a 10-year time period for what is required for the technology for us to be able to mitigate fugitive emissions. So phasing in over that period still sends the signal that you have to take action without the financial impact and actually allow us the funds to develop the technologies to do that.

Senator CAMERON: On the issue of the industry, Mr Barlow, you are not speaking for the industry, are you?

Mr Barlow : Today I am not speaking for the industry.

CHAIR: Are you speaking for Anglo American.

Mr Barlow : Correct.

CHAIR: I think that is understood. So Anglo American, either directly or through your industry body, presumably would have put the proposition to the government that that would be a change that would make the carbon pricing package acceptable to you. If you have, and I assume you have, why would the government not go along with that? What was the government's response?

Mr Barlow : We have put that proposal to the government directly and also through industry bodies. It was not accepted by the government, but I am not aware of the reasons why the government did not accept it.

CHAIR: Presumably the government would have given reasons as to why that would not have been accepted. You are completely unaware?

Mr Barlow : I was not involved in those meetings.

CHAIR: Could you on notice provide us with any feedback as to why the government has not gone along with that.

Mr Barlow : Not a problem.

CHAIR: You are part of the list of the 500 top emitters, obviously, with 4.65 million tonnes of emissions. Doing a quick back-of-the-envelope calculation that is about $106.95 million in carbon tax in the first year for Anglo American. Is that right? I am calculating $23 per tonne times 4.65 million tonnes.

Mr Barlow : It is of that order, less any support.

CHAIR: That is my next question. How much of that will you get back through transitional assistance?

Mr Barlow : I do not have the figures on me. I could ask my colleague here.

CHAIR: Your colleague is welcome to make comments at the table. Will you get most of it back or will you get a small proportion of it back. I see you shaking your head.

Ms Stevens : The assistance equates to about 10 per cent of that total.

CHAIR: So you pay about $106.95 million and you will get about $10 million or $11 million back?

Ms Stevens : Yes. We will get assistance for two mines under the assistance package.

CHAIR: Is that 10 per cent across all of your Australian operations?

Ms Stevens : Yes, for those two mines it is roughly 50 per cent but across the whole business it is 10 per cent.

CHAIR: You end up with a cost of about $95 million that you do not face today. What proportion of your profit across Australia does that represent, roughly?

Mr Barlow : Taking our profits last year—it is publicly quoted information that our profit was USD $800.

CHAIR: Is that in Australia?

Mr Barlow : That is for our Australian operation.

CHAIR: And $100 million will come out of it?

Mr Barlow : That is Anglo's share. Yes.

CHAIR: So that is about 12 or 13 per cent?

Mr Barlow : Yes. But clearly in the last year or so we have obviously been seeing record coal prices. I think the majority of people recognise that commodity prices are cyclic and we are currently at the top of the cycle. The expectation is that they will not be there forever.

CHAIR: You have made the point that over the last however many years you have been reducing emissions and making efforts to reduce emissions, without there being a carbon tax. Moving forward, how much capacity do you have to avoid having to pay the carbon tax by reducing emissions beyond what you would do anyway if there were no carbon tax?

Mr Barlow : You have to look at each different area. In terms of rich gas, we are already capturing the majority of that through the power stations and also through the pipeline, but we are looking at extending one of those power stations. Right now we are doing a feasibility study with an organisation to add another 13 megawatts of power there, which will take more gas. The fugitive emissions are the issue, which are the 53 per cent from our open cuts and undergrounds. There is no technology available to mitigate that. On the 25 per cent of energy which comes from the electricity and diesel, we estimate that the best case for us is a 10 per cent saving—we have already made four of that—of 25, so that is only 2½ per cent of our emissions there. So, even though we put the power stations in place, we still have to flare some gas—10 per cent or thereabouts is what we are seeing. That is without the ability to deal with the ventilation air methane.

CHAIR: You talked about the potential of not going ahead with mines or having to close mines or losing market share. If you were to lose market share, where would you lose market share to?

Mr Barlow : In terms of metallurgical coal, which is our main business, right now I know there are major developments in Mozambique, in Mongolia and in Indonesia. They are the major three areas. As well as that, in North America, Canada is reopening a number of metallurgical coal mines. The US have industry there, but they have been limited by ports, and they are putting in place more port capacity to allow them to export more coal.

CHAIR: Are any of those competitors going to face a carbon tax or a price on carbon—

Mr Barlow : They are not going to face a carbon tax in terms of fugitive emissions. Clearly, in Canada and the US, there is always talk, but fugitive emissions are not included. In terms of Mongolia and Mozambique, which are probably the two main competitors, I am unaware of any discussion.

CHAIR: How does our coal production in Australia compare in terms of the level of fugitive emissions or other emissions? If activity were to shift from Australia to Mozambique, Mongolia or other places, would there be a difference in the emissions footprint?

Mr Barlow : In terms of the emissions footprint from burning coal, we would not think there would be much of a change at all.

CHAIR: So we would lose economic activity—

Mr Barlow : Correct.

CHAIR: and we would lose investment but there would not be any beneficial impact on global emissions?

Mr Barlow : Correct.

Senator CAMERON: Mr Barlow, this seems to be a rerun of the mining resource rent tax argument. Be that as it may, what have you advised the Stock Exchange in relation to what you have told us today about severe impacts on your operations, $4 billion investment at risk and the loss of 3,200 jobs? What have you told the Stock Exchange?

Mr Barlow : We are not listed on the Australian Stock Exchange.

Senator CAMERON: Where are you listed?

Mr Barlow : We are listed in London and Johannesburg.

Senator CAMERON: What have you told the investors in London and Johannesburg?

Mr Barlow : I am unaware of the direct statements. I can provide that for you.

Senator CAMERON: When you say you are not aware, would you be aware if your company was making statements about the capacity to continue to operate in Australia either in the London Stock Exchange or the Johannesburg Stock Exchange?

Mr Barlow : I am aware that our CEO has made public statements in London about the fact—

Senator CAMERON: I am not asking about public statements. I am not asking what statements are being made in the public political area. I am interested in what you are telling potential investors in London and potential investors in Johannesburg about this crisis that you seem to be having to operate in Australia. What are you telling them?

Mr Barlow : I am not aware of exactly what has been said to the stock exchanges.

Senator CAMERON: Is it likely that you have said nothing to the stock exchanges?

Mr Barlow : I am unaware of what has been said.

Senator CAMERON: But would you know? What is your position, Mr Barlow?

Mr Barlow : I am head of resource development and operational excellence here in Australia.

Senator CAMERON: You are head of operational excellence. Do you think you would know if your company has made any statements to the South African or London stock exchange?

Mr Barlow : I do not see any statements across my desk to either of the stock exchanges, so I am unaware of what has been said to them.

Senator CAMERON: Could it be possible that nothing has been said?

Mr Barlow : I am unaware of what has been said.

Senator CAMERON: Yes, but that gives the impression that something has been said.

Mr Barlow : I cannot say either way because I am just unaware of any statements either way.

Senator CAMERON: You are unaware of any statements, so it could be that no statements have been made. It could be, couldn't it?

Mr Barlow : As I said, I am unaware of any statements.

Senator CAMERON: Okay, so no statements are being made on this crisis for Anglo American coal in Australia. Have you considered selling your coalmines in Australia if it is that bad?

Mr Barlow : Have we considered selling our coal mines? No, we are a global company that wants to invest throughout the world. We see Australia in the past has been an attractive place to invest. We would like to think that in the future Australia should be an attractive place to be.

Senator CAMERON: What are you telling institutional investors in relation to your operations in Australia?

Mr Barlow : As I said, similar to the stock markets, I am not involved in those discussions with institutional investors, which tend to take place overseas.

Senator CAMERON: Can you on notice provide us any statements that Anglo American have made to the stock exchange in South Africa or London in relation to this problem that you say you have in Australia?

Mr Barlow : I will take that on notice.

Senator CAMERON: Can you also take on notice what you are advising institutional investors anywhere in the world in relation to your operations in Australia?

Mr Barlow : I can take that on notice.

Senator CAMERON: How long do you think it will take to get that information back to us?

Ms Stevens : By the end of next week.

Senator CAMERON: That is good. You have said that 3,200 jobs would go. Do you know Ralph Hillman?

Mr Barlow : I do know Ralph Hillman.

Senator CAMERON: He is the Executive Director of the Australian Coal Association. Do you agree with his view that it is likely that overall production will continue to grow and new jobs will be created but not as many as would have been the case without the carbon tax?

Mr Barlow : Today I am here representing Anglo American and not forming positions about the industry.

Senator CAMERON: I am asking you whether you agree with that proposition from the Executive Director of the ACA. Do you agree with that?

Mr Barlow : I really do not have enough information to say either way.

Senator CAMERON: Mr Barlow, please! You are here representing your company and you are telling me that you cannot comment on a statement made by the Executive Director of the ACA that overall production will continue to grow and new jobs will be created. Are you seriously telling us that you cannot comment on that?

Mr Barlow : I would expect that they would. I am talking specifically about Anglo American and our position and the impact on us.

Senator CAMERON: So, if Anglo American sold up and left and said, 'It is all too hard for us to do business in Australia,' do you concede that jobs will still grow in the coal industry?

Mr Barlow : Potentially.

Senator CAMERON: So it is not a disaster, is it? If Anglo American say, 'We are out of here; it is all too hard for us,' other companies will step in, won't they?

Mr Barlow : Not in the areas we are talking about I do not believe. It is the emissions from the deposits we have got, not from other areas of the industry.

Senator CAMERON: Mr Hillman goes on to say Australia will dominate. There will be growth in the Australian coal industry most likely according to the projections of the Australian Bureau of Agricultural and Resource Economics and Sciences. Do you know what these ABARES projections are?

Mr Barlow : No, I do not have them.

Senator CAMERON: You do not look at those things?

Mr Barlow : No, I do not.

Senator CAMERON: So they are not important to you. Do you agree with that proposition from Ralph Hillman that Australia will continue to dominate in areas?

Mr Barlow : I am not aware of the proposition he made.

Senator CAMERON: Mr Hillman also says, 'Look, if China keeps going, if global demand for coal keeps going, it could well be that Australian coalmining will continue to expand.' That is correct, isn't it?

Mr Barlow : The issue is the cyclic nature. I recall that back around 2003, when I was working in the Australian coal industry, we saw coal prices for thermal coal of around $23 per tonne out of Newcastle and $80 per tonne for metallurgical coal. Today we see prices much higher than that.

Senator CAMERON: How much higher?

Mr Barlow : Prices for metallurgical coal peaked a year or so ago at $300. They are well back from that now. Unfortunately I cannot talk about today's prices because that is market sensitive information.

Senator CAMERON: Today's coal prices are market sensitive information?

Mr Barlow : I am talking about the prices from Anglo American's point of view.

Senator CAMERON: Why would that be a secret? There is a market price out there that people know. You would not be substantially below the market price would you? I am not asking you for the exact price, but you would not be selling substantially below, would you?

Mr Barlow : We make arrangements with individual contracts, but you would not expect that we would sell markedly below the market price.

Senator CAMERON: So you would expect that your prices would be around about the market price, and that is not a secret, is it?

Mr Barlow : There are people out there talking about what market prices are.

Senator CAMERON: And that would be roughly where you are; that would be the reality, wouldn't it?

Mr Barlow : In that order.

Senator CAMERON: Citigroup have done an analysis on the carbon price in the coal sector. Have you seen that analysis?

Mr Barlow : I am aware of it, but I cannot recollect the details of it.

Senator CAMERON: They say, 'the overall net profit after tax impact on BHP, Rio and Wesfarmers appears barely material to shareholders.' What have you told your shareholders in your annual reports in South Africa and London about the impact of the carbon price?

Mr Barlow : I am not aware of what is in that report but I can make that report available to you if you would like.

Senator CAMERON: So you do not know whether you have even made any statement about carbon pricing. Do you read your annual reports?

Mr Barlow : I have not read the last annual report.

Senator CAMERON: Did you read the one before that?

Mr Barlow : I did not work for this organisation then.

Senator CAMERON: Ms Stevens, do you read the annual reports?

Ms Stevens : Not thoroughly, no.

Senator CAMERON: Even in an unthorough reading did you see anything in your report about the carbon price?

Ms Stevens : No, I did not.

Senator CAMERON: I am being wound up. I have got plenty more. I will put a whole range of questions on notice to you.

Senator MADIGAN: How much money does Anglo American spend on infrastructure, sourcing steelwork et cetera, in Australia?

Mr Barlow : The major sourcing that we would have for steel is new projects, building and the like. Once we are in operation, the majority of our capital is associated with replacing trucks and underground equipment and things like that. So it would be for new projects. It really would get down to the proposed spend in the projects going forward, rather than looking at what the existing ones would be.

Senator MADIGAN: I will rephrase it: what percentage of money do you spend in Australia on your projects? Do you have a target for steelwork?

Mr Barlow : We have a target for local supply, both in the local area where the mine site is and also state and Australia wide. I do not have those figures on hand but I can provide them to you if you would like.

Senator MADIGAN: Yes, I want specifically inputs into steelwork or fabrication of machinery on Australian shores.

Mr Barlow : I do not believe that we have a specific target for a single commodity like that. We deal with it in terms of our total spend.

Senator MADIGAN: Okay. Are any of your shareholders Australian shareholders? I heard you say that you are listed on the South African and British stock exchanges.

Mr Barlow : Without knowing any details, I can assure that some of our shareholders are Australian shareholders because I know people that actually own shares in Anglo American. I could not tell you the percentage.

Senator CAMERON: They should sell, shouldn't they? You have got so many problems.

CHAIR: Senator Cameron, you had your go. Senator Madigan, you have got the call.

Senator MADIGAN: I am done, thank you.

CHAIR: Senator Fifield.

Senator FIFIELD: Mr Barlow, I think one of the issues that is not widely appreciated is that global companies do have choices, as you have touched on, and that a particular country that might be attractive at one point in time is not necessarily always so. There can be surprises over time as to which countries are attractive and which are not. Could you just tease out a little more the process that a company such as Anglo American goes through when it is looking at completing bids from within the organisation, from different arms of the operation in different companies? As I said at the outset, I think people often tend to think in terms of national silos rather than the truly global perspective that a company such as yours brings. Could you tease out a little more the process that is gone through and the factors that are taken into account?

Mr Barlow : A company like Anglo American would have a strategy which would identify a number of commodities which we would see as preferred commodities for growth reasons. That is one of the first filters. We look at where we want to be investing our money in commodities because we are a global company. What would then happen is that we would look at the various projects that people have as well as working at acquisitions and the like and where opportunities are for those commodities. Some of those may be within our own portfolio such as the four projects that we have in Australia now. Others may be in other countries and places that other people hold that we think maybe of interest.

At the end of the day it gets down to return on investment. That is fundamental. There is a country risk to be applied to each of those investments to determine what sort of risk would be involved to suggest that you might need a greater return on investment because of the risk you are taking. We do detailed work on each of these projects to determine what return will be there over the life of that mine. One of the differences in mining compared to some other industries is that it is a heavy capital intensive industry. For example new underground mines in Australia cost around $1½ billion each. That does not get paid off in one, two or three years after you take into account that capital spend. Typically, the payback period is 10 years or beyond. So you have to take a position on future commodity prices and future changes in regime in terms of taxes or operating costs. If you believe it is a labour environment where there is going higher inflation—all those factors go into a decision about whether this is a good investment. Finally it comes down to the value that is going to be generated for the shareholders and the value that we can add to that country as well.

Senator FIFIELD: There is no emotion involved. It is purely return on investment, where you get the best bang for your buck.

Mr Barlow : In general terms, yes.

Senator FIFIELD: Are you able to give us any examples of projects which were in contention in particular nations where circumstances changed and Anglo American decided that given the tax regime has changed there that you would look at projects elsewhere? You may be portraying commercial-in-confidence considerations. I do not want you to do that obviously, but are there any useful examples that you can give us to show that this is not just theoretical, this actually happens?

Mr Barlow : The example that I could probably give, and I cannot name countries, is that there are specific countries that we have made a decision not to invest in no matter how attractive those deposits are because we think that the risks are too high. Those risks may be personal risks for our employees that are there or risks in terms of achieving the return because of changes in the rules that occur.

Senator FIFIELD: And the reason you cannot name countries is that it is not good business practice to do so?

Mr Barlow : Correct. We are a global company. We talk to lots of different countries about what we do. We have lots of customers throughout the world and we do not want to offend anyone.

Senator FIFIELD: Obviously you are publicly canvassing here the potential of investment not proceeding in Australia if the carbon tax as currently designed comes into effect. Have Anglo American found themselves in a similar situation before where a government is seeking to change the tax treatment in such a way that the company has had to go public to express its concerns?

Mr Barlow : Unfortunately I am not aware. I have only been with Anglo American for less than two years. In that time I am not aware of any, but I am not sure before that.

Senator FIFIELD: Would you be able to take on notice—let us say, go back 10 years—about where there might be—

Senator CAMERON: Back to the dark days of the Howard government.

Senator FIFIELD: parallel instances. Just picking up Senator Cameron's interjection, I am talking about not Australia specifically but globally, where there may be an equivalent sort of situation that Anglo American has been in. That would be helpful, thank you.

Senator THISTLETHWAITE: Mr Barlow, I just noticed a media release from Anglo American earlier this year which indicates that your half-yearly profit for this year was $5.9 billion. Is that correct?

Mr Barlow : I believe that is Anglo American across the world, globally.

Senator THISTLETHWAITE: Yes. And you agreed earlier with a question from the chair that the cost to the company of the government's scheme would be about $95 million in your Australian operations?

Mr Barlow : Thereabouts.

Senator THISTLETHWAITE: I work that out at roughly less than 0.16 of a per cent in terms of costs as a percentage of your profits.

Mr Barlow : The vast majority of those profits were not generated in Australia.

Senator THISTLETHWAITE: But you have just said, and Senator Fifield put it quite eloquently, actually, that you are a global corporation; you operate on the global stage.

Mr Barlow : Correct, but every project has to live and die on its own merits. We are not in the position of subsidising from one project across to another in the long term. So, given that the earnings you referred to were across the world, Anglo American Metallurgical Coal was a part of that, no question, but it was a much, much smaller part than the whole.

Senator THISTLETHWAITE: You have made a submission here that what the government is attempting to do will potentially cost jobs and reduce profitability. The coal sector is going very well in Australia and companies are making record profits. The average Australian would adopt the view, would they not, that what you are putting is a bit of a stretch, really, isn't it?

Mr Barlow : I think the average Australian could understand that right now we are going through a high part of the cycle in terms of coal price and it is not sustainable in the long term.

Senator THISTLETHWAITE: Would you agree that, on studies of the industry, there are 68 coalmining projects awaiting approval in Australia? That would tend to indicate that things are looking pretty good for investors.

Mr Barlow : I think the numbers that you may be quoting are not coalmining projects; they are probably mining projects. But I am simply referring to—

Senator THISTLETHWAITE: No, they are coalmining projects.

Mr Barlow : Okay. My apologies, Senator. I am specifically referring to what we have knowledge about about the emissions from the Anglo American projects. I cannot speak for the other projects; I can only speak for the four that we have in front of us where we know the details of what the emissions are and what the impact will be on those projects from what is proposed.

Senator THISTLETHWAITE: It is true, isn't it, that there are companies eyeing off Macarthur Coal at the moment? There is talk in the markets about potential buyers of that company. That is true, isn't it?

Mr Barlow : It is true that is in the newspaper, yes.

Senator THISTLETHWAITE: And it is true that Anglo American is one of those potential buyers, isn't it?

Mr Barlow : It is true that the newspapers are quoting that may be the case.

Senator THISTLETHWAITE: These facts just do not stack up in terms of your argument that the government's pricing scheme is going to put a big dampener on the coal industry, given what is going on.

Mr Barlow : I think the facts that I have been aware of in terms of the economic studies that I have seen do show that there is a reduction in jobs and do show that there is a reduction in investment.

Senator THISTLETHWAITE: No, no. I put it to you that the studies show that there is a reduction in the growth in jobs and the growth in investment but there is not a reduction in the actual numbers. You would agree with that, wouldn't you?

Mr Barlow : There is a closure of existing mines and there is a reduction in growth. I have seen both numbers reporting that.

Senator THISTLETHWAITE: What modelling are you referring to?

Mr Barlow : Modelling done through the Australian Coal Association and the like.

Senator THISTLETHWAITE: Who did that modelling?

Ms Stevens : ACIL Tasman.

Senator THISTLETHWAITE: You mentioned earlier the risks about investing in other countries and that your organisation does not invest in other countries because of those risks. Can you tell us what some of those risks are?

Mr Barlow : The risks, as I mentioned before, are about safety. In some countries there is a level of corruption that you have to deal with, which is against our values—we will not deal with that. There is the potential in some regimes of changing the rules that you have. All those are factors that need to be taken into account when you make those decisions.

Senator THISTLETHWAITE: And none of those risks are present in Australia?

Mr Barlow : Those risks, in all honesty, are present in every country—it is the degree of them.

Senator THISTLETHWAITE: They are not present in Australia to the degree that it does not justify not investing?

Mr Barlow : At this time we are at that point of making investment decisions and we are evaluating that.

Senator THISTLETHWAITE: Do you advise shareholders , because of a carbon tax , that base should be selling shares in your company?

Mr Barlow : W e do not advise shareholders w hether they should buy or sell shares in our company.

Senator THISTLETHWAITE: The real difficulty I have is that I am thinking on behalf of the average Australian worker who is on $50,000 or $60,000 a year and struggles to make ends meet. Sure, they are worried about carbon pricing; they are also worried about their environment and the environment their kids are going to inherit. They understand the argument that companies that are polluting our environment should pay for that and the right to do that and that this carbon pricing mechanism will factor that in an d ensure that they do pay for that right. You are in an organisation that is recording a half - yearly profit of $5.9 billion and you come here and say to us that it is going to destroy jobs and potentially destroy investment opportunities for your company. It just does not stack up to me. You are doing very, very well as an organisation.

Mr Barlow : Senator, I too am concerned about the environment and the future for my children. We believe that there should be action taken on the impact of climate change and to reduce emissions. That was very, very clear in my statement.

Senator THISTLETHWAITE: Yes, I appreciate that.

Mr Barlow : W e just believe that this p articular proposed carbon pricing mechanism is not the right one that is going to achieve that and still maintain economic prosperity, which I also want for my children.

Senator THISTLETHWAITE: Y ou have said that you support an ETS as long as there is phased - in auctioning of permits.

Mr Barlow : We believe that a permitting system can be seen as an appropriate way to be a cost-effective and efficient means of reducing emissions. It is all about the phasing - in over a time period to allow people to develop and implement the technology to make the environmental changes that we would all like to see.

Senator THISTLETHWAITE: Perhaps you can answer this, Ms Stevens. Has your organisation had a look at the Liberal Party's alternative—the direct action model?

Ms Stevens : We have, but at this stage some of the questions we had around the detail is not in that policy at this stage.

Senator THISTLETHWAITE: Have you asked those questions of the Liberal Party?

Ms Stevens : We have met with them and asked them questions, yes.

Senator THISTLETHWAITE: Have they provided you with any answers?

Ms Stevens : No, because they are the opposition and do not have that much detail around their policy at this point in time.

Senator THISTLETHWAITE: I completely agree with you. I have nothing further.

CHAIR: Thank you very much for your contribution to the committee today. It is very much appreciated.