Australia state poll, reef risks cast shadow over Adani, GVK ventures

By Sonali Paul

MELBOURNE (Reuters) - A shock state election result in Australia's coal-rich Queensland state and heightened pressure to protect the Great Barrier Reef have thrown new doubts over plans by Indian firms to build two huge mines.

Queensland saw a voter backlash against the conservative government's plan to sell A$37 billion ($29 billion) of assets to cut debt and fund coal infrastructure at the election. This included money for a rail line and port planned by India's Adani Enterprises for what would be Australia's biggest coal complex, in the Galilee Basin, a remote outback area.

In a policy reversal, the victorious Labor Party has ruled out asset sales or using taxpayer cash for a coal rail line or water pipe, and said it wouldn't allow dredge spoil to be dumped in wetlands near Adani's Abbot Point port, adding to costs.

"The prospects of public investment in the main part of the rail and port project have declined to zero," said John Quiggin, an economics professor at the University of Queensland.

Tim Buckley of the Institute for Energy Economics and Financial Analysis, which opposes new coal developments, estimated at least A$1 billion in subsidies had been taken off the table, though this is hard to independently verify as the government had never publicly said how much it was providing.

The Queensland Resources Council, an industry body, said the rail subsidy would have been about A$300 million.

A failure to launch the projects, already struggling to raise financing as coal prices languish, would hit plans to raise Australia's coal exports by 70 percent to more than 300 million tonnes this decade. It would, however, be a win for environmentalists worried about damage to areas such as the Great Barrier Reef off Queensland's coast and the impact on carbon emissions.

ADANI AND GVK

Adani's Carmichael coal mine, rail and port project is one of two projects in the Galilee Basin owned by Indian firms. It is due to produce 60 million tonnes a year.

An Adani spokesman said a decision on whether to build the $7 billion mine, which it says would deliver 10,000 jobs and A$22 billion in taxes and royalties to Queensland, would be based on the project's costs and not the poll result.

The other is the Alpha project, owned by the GVK conglomerate and Australian billionaire Gina Rinehart, which with a nearby project aims to produce 62 million tonnes a year.

"We've based our planning on getting no government funding at all," Josh Euler, a spokesman for the GVK Hancock joint venture, said.

REEF RULING LOOMS

While green groups have raised a string of legal challenges against the coal projects, they are stepping up their campaign ahead of a UNESCO decision on whether to put the Great Barrier Reef on its "in danger" list.

If UNESCO's World Heritage Committee in June deems the reef to be in trouble, that could result in big restrictions on ports and shipping in the area around the reef.

The government said that it should not be deemed in danger as no reef species have become extinct, and some, like humpback whales and loggerhead turtles, have recovered from big declines.

WWF-Australia CEO Dermot O'Gorman disputes this and said claims by authorities to be doing enough to protect the reef were "undermined by the clear picture provided by the science".

Faced with possible UNESCO action, the federal government reversed a decision to allow the dumping of sand, dredged from expanding Abbot Point port, near the Great Barrier Reef, so that it will now have to be dumped on land, a more expensive option.

To ease costs for Adani and GVK, the outgoing Liberal-National party had pledged to buy dredge spoil.

"We cannot afford to have the Great Barrier Reef put on the 'in danger' list," Queensland Resources Council CEO Michael Roche said.

(Additional reporting by Rebekah Kebede in PERTH; Editing by Ed Davies)