BHP to open new coal mine in Borneo amid concern for orangutans

Date of publication: 
22 July 2015

If you thought Shenhua and Adani had raised hackles with their plans to develop new coal mines in controversial parts of Australia, you ain’t seen nothing yet.

In a move likely to enrage environmental campaigners, BHP Billiton quietly flagged on Wednesday that it would soon start production of coal at the Haju mine in Indonesian Borneo.

Haju will initially produce about 1 million tonnes of coal a year, which is pretty small compared to the coal mines BHP already operates in Queensland.

But Haju could be the start of a much larger coal project for BHP in Indonesian Borneo known as IndoMet, which is believed to have potential to produce around 5 million tonnes of coal per year, if it is ever fully developed.

That remains a big “if” given the depressed prices for coal, but Wednesday’s confirmation that first production will begin within 12 months will be a blow to environmental campaigners who have lobbied BHP and its joint venture partner Adaro Energy for the best part of a decade to abandon the project.

“That is devastating news for the climate and for the local people who have been rejecting this project for years,” said Friends of the Earth campaigner Cam Walker on Wednesday.

In the province of Central Kalimantan, the project will see thermal and coking coal barged for hundreds of kilometres down a tropical river to the Java Sea.

The proposal has concerned local communities, whose lifestyle is built on the forests and rivers of this biodiversity-rich region.

Opponents claim that IndoMet is close to a significant orangutan population in the Upper Barito Basin. According to WWF that population has declined by more than 50 per cent over the past 60 years, and its habitat has been halved over the past two decades.

BHP insists that no orangutans have been found on its leases, but the miner has relocated 280 orangutans found nearby to other parts of Kalimantan.

Numerous other endangered and exotic species also live in Central Kalimantan, but the orangutans tend to get the publicity.

“If BHP continues with its plans for open-cut mines it will be a disaster for my people and it will be a disaster for these fragile ecosystems. The Barito watershed is a home and source of life for thousands of traditional landowners. We simply can’t afford to allow our rivers to be polluted and our forests cleared and see the profits go overseas,” said Arie Rompas, a resident of Central Kalimantan and Friends of the Earth campaigner, in an opinion article published by ABC in 2013.

The fact the proposed development is a coal mine and therefore inevitably linked to the great climate change debate has only turbocharged the opposition.

Campaigners have regularly raised concerns about IndoMet to BHP directors at the company’s annual general meetings in recent years, and the start of the Haju mine this year will likely elevate the issue much higher in the pecking order, particularly at BHP’s London AGM where environmental campaigners tend to dominate question and answer sessions.
Reputational risk

Few mining companies care about their reputation more than BHP. Its global headquarters on Melbourne’s Collins Street house environmental scientists and anthropologists as well as the geologists and chemical engineers one might expect, and the company has long known that Haju and IndoMet would cause both a ruckus and a reputational risk.

BHP announced plans to develop Haju, discovered shortly before 2000, in June 2008, describing it as one of the company’s three “world class” coal provinces.

The acreage houses both thermal coal and coking coal, but it was the latter that attracted BHP.

The arrival of the global financial crisis saw the project deferred and positioned for divestment, but BHP sold only 25 per cent of it to an Indonesian partner, and soon resumed plans for development.

How keen BHP’s management truly is to develop the mine today amid depressed coal prices is unclear; sometimes the world’s biggest miners go to great lengths to maintain control of controversial projects to avoid them falling into less responsible hands who may tarnish the reputation of all parties previously involved.

Rio Tinto has recently illustrated this at the Ranger uranium mine near Kakadu National Park, where it has virtually demanded closure and rehabilitation, rather than profiting by selling its 69 per cent stake.

In 2009 the operator of an orangutan rehabilitation centre in Borneo claimed BHP had told her the Indonesian government would likely give the IndoMet coal leases to other companies that would be less environmentally responsible.

The fact that BHP is starting with a relatively small development at Haju could support the theory that BHP is doing the bare minimum to retain control of a lease that the Indonesian government wants developed.

In a statement on Wednesday, BHP said none of its mining leases crossed over “protection forests”, and most of them overlapped with land licensed for logging by the government.

BHPB has approached the development of IndoMet in a cautious manner. In doing so we have adhered to our world-class environmental and governance standards and practices. We have maintained respectful and committed engagement with local communities,” said a spokeswoman for the company.

“Our approach to operating in a sustainable manner can make a positive contribution to the region and we will only proceed with a development that is consistent with our sustainability commitment.”

The company has put the usual environmental precautions in place, including underpasses and overpasses into its haul road to help wildlife avoid crossing busy roads.

But such measures are unlikely to silence their critics.

When asked about whether its coal presence in Borneo would expand beyond Haju, BHP said: “We continue to evaluate the potential for larger-scale developments.”

BHP is not the only company proposing development in Indonesian Borneo. Other miners are already profiting from the region’s geology, including London-listed Asia Resource Minerals, which famously caused headaches for Nat Rothschild when it was working under its previous name, Bumi Resources.

More than 420 million tonnes of coal were exported from Indonesia in 2013.

Palm oil producers have rapidly expanded their plantations in Borneo in recent years, and agriculture and forestry are also advancing.

But BHP is likely to be the highest-profile corporation working in the region, and for that it may pay a price.