World’s Largest Mining Firm: ‘In A Carbon Constrained World, Coal Is Going To Decline. And Frankly It Should.’

One of the world’s biggest mining firms says that extreme weather caused by climate change is already impacting some of its assets, thus forcing the company to re-evaluate its investments in the coal sector.

Speaking to investors and analysts on Monday, the Chief Executive of BHP Billiton’s coal division explained how the company is reinforcing infrastructure around its coal export terminal in Queensland, Australia because of increases in extreme weather that threaten the facility.

BHP Billiton is one of the largest producers of aluminum, copper, thermal coal, metallurgical coal, nickel, silver and uranium. The Australian company also owns and operates the Hay Point Services Coal Terminal, a coal facility that makes up a large portion of the biggest coal port in the world.

And now that facility is under threat from intensifying extreme weather, says BHP executive Marcus Randolph. His comments were reported in the Australian Financial Review after the company’s presentation on its sustainability strategy:

“As we see more cyclone-related events . . . the vulnerability of one of these facilities to a cyclone is quite high,” he said. “So we built a model saying this is how we see this impacting what the economics would be and used that with our board of directors to rebuild the facility to be more durable to climate change.”

Mr Randolph said the decision was taken after cyclone Yasi hit further north in Queensland in February 2011. “If cyclone Yasi had hit Hay Point, we would have lost that facility,” he said. “So it is a recognition that as these cyclones become more severe, we need to have facilities that are more able to withstand them.”

Simply reinforcing a coal export facility with extra jetties to withstand an increase in extreme weather caused by carbon pollution from the coal that the company wants to continue exporting isn’t exactly a ringing endorsement for sustainability. But this plain-spoken admission that climate change is having a measurable impact now — without trying muddle the science — is very unique for a coal company.

“You couldn’t ask for a more surprising source for our basic message: coal causes climate change, climate changes creates more extreme weather, more extreme weather will force us to make huge new investments in trying to protect ourselves,” said Carl Pope, former executive director of the Sierra Club, in an email.

In his presentation, Randolph made another stunning comment about the need to address carbon pollution by clearly stating that there is an “absolute ceiling” on emissions that can be pumped into the atmosphere:

BHP’s internal target over the next four years is to maintain its greenhouse gas emissions below 2006 levels, adjusted for material acquisitions and divestments. Mr Randolph said the target would stay even if a future government repealed the carbon tax.

“If you look at the targets . . . there is not a qualifier saying it is okay to emit more greenhouse gases if the carbon tax is eliminated,” he said. “An absolute ceiling is an absolute ceiling. Even if there isn’t a carbon tax, it still needs to be an issue we devote a lot of attention to.”

Just one month before, Randolph — the chief executive of the company’s coal division — told the Australian Financial Review that he believes the market for coal is going to decline because of environmental constraints, and that “frankly it should”:

“In a carbon constrained world where energy coal is the biggest contributor to a carbon problem, how do you think this is going to evolve over a 30- to 40-year time horizon? You’d have to look at that and say on balance, I suspect, the usage of thermal coal is going to decline. And frankly it should.”

Mr Randolph said it was positive that investment was being made in examining clean coal technology but he had his doubts that would be enough to make coal a good choice for power generation in the longer term. He said the rapid rise in shale gas production in the United States, which this year lowered demand for thermal coal in that country, had caught the world by surprise.

“We’ve been cautious in our energy coal investments,” Mr Randolph said. “There are a couple of reasons for that: the cloudy future, the general return on investment that is available in the industry and there are some structural reasons why it is the way it is. And it is also the availability of better returns on other projects that exist in the broader [BHP] portfolio.”

In 2009, as a member of the American Council on Clean Coal Electricity (ACCCE), BHP was swept up in a scandal around the U.S. climate bill then being considering in Congress. A lobbying firm that worked for ACCCE was caught sending fake letters to members of Congress asking them to vote against the bill. At that time, BHP was a prominent member of the coal lobby; however the company is no longer listed as a member on the coalition’s website.

So while one of the world’s largest mining companies makes these stunning admissions about the reality of coal’s contribution climate change, the U.S. coal lobby continues to smear the climate science, target state renewable energy targets, and organize fake campaigns to make it look like the industry has wide public support.

12 Responses to World’s Largest Mining Firm: ‘In A Carbon Constrained World, Coal Is Going To Decline. And Frankly It Should.’

  1. Joan Savage says:

    Those Billiton “projects that exist in the broader portfolio” include potash mining operations. Why add to climate change when they are shifting to control of an even more sought after commodity?

    As Jeremy Grantham’s op/ed piece in Nature pointed out, “Then there is the impending shortage of two fertilizers: phosphorus (phosphate) and potassium (potash). These two elements cannot be made, cannot be substituted, are necessary to grow all life forms, and are mined and depleted. It’s a scary set of statements. Former Soviet states and Canada have more than 70% of the potash. Morocco has 85% of all high-grade phosphates. It is the most important quasi-monopoly in economic history.”

    See Climate Progress’s reprint Nov 18, 2012

  2. Mike Roddy says:

    Do we really need to wait for our daddies’ (fossil fuel companies) approval before we can slow down coal combustion?

  3. Mulga Mumblebrain says:

    Because they own the politicians.

  4. Mulga Mumblebrain says:

    Don’t trust this twaddle. BHP Billiton like all capitalist enterprises is required by law and the pathopsychology of capitalism, to pursue profit maximisation. For humanity to survive, an aim to which all capitalists are indifferent (at best) if it threatens profit maximisation, coal mining must not dwindle-it must cease entirely as fast as possible. That means BHP writes down tens of billions in assets and the Board sacks the management and gets in someone who knows how to act properly, capitalist-style.

  5. Mike Roddy says:

    This can lead to the wrong conclusion. BHP is a huge ocmpany, and coal is one of many activities. This is not the case for Peabody, and Arch, who will try to mine and burn every piece of coal they can.

  6. Joan Savage says:

    Several states in the US allow incorporation of benefit corporations, B-corps, that may some other serve purposes besides pure profit, as directed by shareholders. It’s a hopeful development.

  7. Joan Savage says:

    Sorry, that would be “serve some other purposes”

  8. Gillian King says:

    While it’s nice to see these comments from Randolph, he is on the record as saying that he expects BHP’s Queensland coking coal production capacity to grow by 50 per cent by the end of 2014.

    Maybe BHP is downscaling in other locations while ramping up in Queensland, Australia?

  9. Mark Shapiro says:

    Why own politicians . . .

    . . . when you can rent them so cheaply?

  10. Mark Shapiro says:

    (Couldn’t resist.)

  11. ToddInNorway says:

    I suspect BHP will learn the lessons of other global cartels, that is, you can make lots of profits by producing less than the market demands. Work less, earn more. I would not call this a good example of a market-based solution, but it might just bring coal consumption down in the near term.

  12. quokka says:

    Randolph’s comments were about thermal coal (coal burned for electricity production), not coking coal. I believe that a lot of exported Queensland coal has historically been high quality coking coal used in iron and steel making. I’m not sure what the situation with the new mines is.