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Proposed $2.9bn Urannah dam in Queensland could return as little as 26c per dollar

The dam’s benefits have been overstated and the business case does not take environmental costs into account, economist says

The Urannah dam project near Mackay has been supported by about $15m in federal grants since 2016. New economic analysis has questioned the value of the proposed 1.5 trillion-litre dam.

A 1.5 trillion-litre north Queensland dam proposal backed by both the federal and state governments could return as little as 26c for every dollar invested, an economic analysis has found.

The $2.9bn Urannah dam near Mackay has been awarded coordinated project status by the Queensland government. Studies and preliminary planning work have been financed with about $15m in federal grants since 2016.

A Guardian Australia investigation in September found $12m in federal funding announced in the past two years ultimately flowed to a firm run by prominent Queensland Liberal National party figures and donors.

A preliminary business case for Urannah, submitted to the state government in 2019, claimed the project would return a benefit of $1.70 for every dollar invested.

In each of five scenarios modelled by Buckwell, the project was measured as having a net social cost to the community. In the worst-case scenario, the total benefit of Urannah was equivalent to about a quarter of the cost.

“From an economic perspective, the construction of the Urannah Dam should not be supported,” the report concludes. “It will come at a net social cost to the community.

“From a policy perspective, the construction of the Urannah Dam should not be supported. It will not achieve the stated goals of cost recovery from water users.”

The preliminary business case for Urannah claimed as a benefit the $700m “avoided cost” of not building a different project – an additional pipeline to take water from Burdekin Falls Dam to Moranbah. Such a proposal has no formal approval or funding.

The Queensland Department of Natural Resources, Mines and Energy previously warned the proponents that this “fundamental assumption” could lead to “overstating the viability of Urannah Dam”.

Buckwell’s report says simply removing the “problematic” assumptions about the alternative pipeline from the business case – in line with the department’s formal advice – reduces the total benefit of Urannah to about 54c for every dollar invested.

While much of the public discussion about Urannah has focused on how the project might boost local agriculture, the bulk of any water transported to Moranbah would be used for coalmining.

Documents submitted by the dam’s proponent, Bowen River Utilities, to the federal government for environmental assessment show they have consulted major coalmine operators in the Bowen Basin about buying water from Urannah.

“Community and stakeholder consultation has been targeted and conducted at a regional level as part of the feasibility studies for the project,” the referral document says.

“The focus of stakeholder engagement, to date, has been on water infrastructure and potential customers of a large-scale water solution. Consultation with the following stakeholders has been undertaken … Rio Tinto, Glencore, QCoal, New Hope, BMA, Peabody, Anglo American, Stanmore, Fitzroy Resources.”

Peter McCallum, from the Mackay Conservation Group, said the proponents of Urannah assumed there would be significant demand for water in the Bowen Basin in future.

“There is no certainty about that,” he said.

“Eungella Dam has water available, but mining companies have so far seen no need for it. If there was significant demand then that water would have already been snapped up.

“There is also uncertainty about the long-term future of coalmining. Big companies like Rio Tinto and BHP are reducing their coal interests in Queensland.”

He said the preliminary business case for Urannah did not examine the cost of purchasing biodiversity offsets, the cost of runoff to the Great Barrier Reef and emissions of greenhouse gases from flooding forests.

“Those costs can be quantified using accepted valuations. The proponent should have included them in the business case so that people know the real value of this project.

“We are also concerned about the lack of clear information about long-term markets for water from the dam. If the dam fails to make a profit, the private owners may walk away and leave Queensland taxpayers paying the maintenance cost for a dam that nobody wants.

“This dam will destroy some of the most ecologically valuable and beautiful river landscape in central Queensland for a project that makes no economic sense.”

The proponent, Bowen River Utilities, was contacted for comment.

This article was written by Ben Smee and published in The Guardian on 18 November 2020

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  • Ben Smee
    published this page in Blog 2020-12-10 10:16:31 +1000