You can't eat coal - but you can benefit

SOME of my farming neighbours are sympathetic to a slogan commonly used by protesters objecting to coal and gas exploration - “You can’t eat coal” - which implies that coal and natural gas should take second place to food.

While the slogan is literally true, a few inconvenient facts undermine it. Australia produces three times as much food as it requires. A large amount of farm land could be laid to waste before we would ever run short.

Furthermore, mining dominates our economy in a way that agriculture has not done for a century. It pays for schools, hospitals, roads, the ABC, car subsidies and baby bonuses. Mining also saved Australia from the GFC and is the reason our economy is holding up compared with Europe and the US.

The slogan typifies the tug of war between farming and mining, increasingly becoming a zero sum, winner-take-all contest. Governments and the public are being asked to choose a side.

Not a lot of the opposition to mining is based on objective concerns. If it was, there would be pressure to scientifically evaluate fracking chemicals and explore alternative technologies, such as propane gel. Rather, the demand is for agricultural land to be protected from mining and exploration entirely.

This is an unwinnable expectation. No responsible government could deny its citizens the enormous economic benefits of coal and coal seam gas. Moreover, no national government can ignore the fact that coal seam gas may free Australia from reliance on imported oil, which now exceeds local production. Energy security is a much more pressing concern than food security.

In a truly market-based environment, all this would sort itself out. Where land was more valuable for farming, mining would not occur. If mining generated more profit, it would take priority. If food production fell, prices would rise and encourage production in other areas. And in many cases a combination of farming and mining, with due consideration for each other, would yield the highest overall profits.

The reason the market cannot operate freely is that around 150 years ago state governments passed legislation claiming mineral rights for themselves. Landowners merely own the surface of their properties.

Prior to that, under common law, landowners owned the minerals beneath their land except for gold and silver. That remains the situation in the US, where mining companies compete to negotiate terms with landowners for exploration and extraction rights. Not surprisingly, US farmers have no interest in “You can’t eat coal” campaigns, and it is no accident that the US has half of all the world’s oil wells and its coal seam gas industry is considerably more advanced than ours.

Our state governments are never going to side with the farmers and their cheerleaders who want to block mining exploration and development. Nor will they ever relinquish the right to charge royalties. However, they might be persuaded to create a system of predictable incentives for farmers to accept and benefit from mineral extraction, assuming people like my neighbours adjust their expectations.

I am certainly willing to set an example on my own farm. Naturally, in my view, it is prime agricultural land. Nonetheless, I would allow a mining company to explore for minerals and, recognising that exploration involves a lot of costs with no guarantee of success, all I want is for any damage to be rectified and access tracks and creek crossings to be upgraded.

And if minerals are found that are worth extracting, I would expect to be paid a royalty based either on a small percentage of gross value or a somewhat higher percentage of gross profit.

Given that, I couldn’t see any reason to beat them. We’d both make money and I’m happy to join them.

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Agribuzz with David LeyonhjelmCommentary, news and analysis with agribusiness consultant David Leyonhjelm. Email David at reclaimfreedom@gmail.com

COMMENTS

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