Shenhua cancellation clause puts government in powerful negotiating position

AFTER eight years of community outcry about the Shenhua Watermark coal mine on the Liverpool Plains, the government finally has a get out of jail free card – a cancellation clause.

In the fine print of Shenhua’s exploration licence, it says the NSW government can cancel the licence if the company had not commenced “substantial development” of a mine on the site within eight years.

The issues that have been brought up time and time again – the impact on the water table, flood plain, black soil, koalas, Aboriginal sacred sites – can all be addressed in one fell swoop.

But will the state government have the courage to play that card?

Shenhua has applied for an exemption of the cancellation clause, which would come into effect on October 22. The government is considering the application, something community groups have called madness.

The government is also negotiating with the company to “excise parts of Shenhua's mining title that encroach onto the strategic agricultural land” of the Liverpool Plains.

In layman’s terms, the government wants to reduce the size of Shenhua’s licence and restrict the mine to the ridges of the plains, which it says would protect the fertile black soil – however many have pointed out it would not address the other issues.

The cancellation clause puts the government in a powerful, but delicate, negotiating situation.

Shenhua is a Chinese-owned company, backed by the state – cancelling the licence could damage international relations with one of Australia’s biggest trading partners and an emerging superpower on the world stage.

The NSW government also set a precedent when it paid BHP Billiton $300m to walk away from its Caroona mine, just over the ridge from the Shenhua site.

While the Caroona payout was a win for the community, financial experts said BHP was over paid for a stranded asset and the compensation package was “extremely generous”. The government set itself a difficult precedent to follow, and it was estimated that if it was to follow that example, it would cost $500m to buy back the whole licence.

While cancelling the licence may not be done for political reasons, the clause could be used as a powerful negotiating tool to force Shenhua to accept a fair compensation deal to walk away from the whole development, not just part of it.

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