Leave lignite in the ground, says environment commissioner

Photo / Greg Bowker

State-owned coal miner Solid Energy's plans to turn low-grade Southland lignite coal deposits into massive new industries "make no sense" and the coal should "remain in the ground", says a report on the proposals from the Parliamentary Commissioner for the Environment.

The commissioner, Jan Wright, is particularly scathing of lignite-to-diesel production plans, because of its very high carbon emissions compared to other options, and says Solid Energy's plans rely on massive taxpayer subsidies through the Emissions Trading Scheme.

At Solid Energy's projected production rate of 35,000 barrels of diesel per day and a carbon cost of $50 per tonne, the cost to New Zealand taxpayers through the ETS would be almost $275 million a year.

If plans for two such plants eventuated, the cost would double and could represent an indefinite taxpayer subsidy.

However, Solid Energy is defending its plans to ramp up lignite conversion from around 2015, saying it planned to take responsibility for all resulting carbon emissions "through a range of approaches and technologies."

"Our lignite projects will deliver significant value and jobs for New Zealand," said Solid Energy's new energy general manager, Brett Gamble, with potential to add $377 million a year to economic growth, assuming a world urea price of US$265 a tonne - a price lower than that achieved between 2006 and 2008.

Diesel from lignite could act as an "insurance policy" for New Zealand if, as expected, oil prices rise dramatically over coming years.

However, Wright says next year's ETS review should end the potential for major new carbon-emitting industries to be automatically eligible for the free carbon credits that existing heavy emitters are issued to help smooth the introduction of carbon pricing to combat climate change.

"It makes no sense that the ETS rules would lead to taxpayers subsidising...new investment in outdated dirty technology,"

says Wright, who says large scale lignite industries would also compromise the environmentally pure image that New Zealand uses to sell its tourism and agricultural products to the world.

"New Zealand's lignite should remain in the ground, at least until subsidies for its large scale exploitation are ruled out and mitigation options are proven sufficient and reliable."


The 49 page report, which was held back from release on November 23 out of sensitivity following the Pike River coal mine disaster four days earlier, says the plans by Solid Energy and L&M Energy to convert lignite variously to diesel, urea and exportable briquettes "would take the country in the wrong direction."

The report says diesel from lignite has an emissions intensity factor of 5.8 per thousand litres, compared with 3.1 when manufactured conventionally from crude oil.

If made from renewable wood, diesel could be produced at an emissions intensity of just 0.3, making wood a more attractive option, says Wright.

However, the report also suggests that urea and briquette production would be relatively benign, compared to diesel production, although both would inevitably raise NZ's carbon footprint since both would be new industrial developments.

Lignite-to-urea has an emissions intensity of 1.3 per tonne, compared with a weighted average for urea used in NZ of 1.2.

Such urea is currently supplied from the Kapuni natural gas field by Ballance Agri-Nutrients and imports from Arabian Gulf states.

Briquettes from lignite have a lower carbon intensity at 1.7 per tonne versus 2.1 per tonne of sub-bituminous coal.