Acting on recommendations from the corruption watchdog New South Wales Premier Barry O’Farrell will move to cancel the exploration licences for Doyles Creek, Mt Penny and Glendon Brook.
The coal licences have been at the centre of recent investigations carried out by the Independent Commission Against Corruption which found the then mining minister Ian Macdonald and a number of associates acted corruptly when issuing the tenements.
“This draws a line under this sorry saga of Labor politics and corruption in NSW,” O’Farrell stated.
The New South Wales Government said it will not be allocating any compensation for the cancellation of the licences.
“The legislation will indemnify the taxpayer from any possible claims relating to the issuing or cancellation of the licences,” O’Farrell stated.
Cascade Coal currently holds the Mount Penny licence and NuCoal holds both the Doyles Creek and Glendon Brook licences.
NuCoal chairman Gordon Galt said the company is extremely shocked and disappointed by the decision.
“There has been no consultation at all in regard to this matter,” he said.
With no compensation deal on the table, Galt hit out at the legislation saying it is “grossly unfair”.
Under the new legislation all exploration data on the tenements must be provided to the State Government and current licence holders will remain responsible for any necessary rehabilitation works.
“It is unacceptable that a Government considers that it has the right to take – with no compensation – the results of all the detailed exploration results NuCoal paid for,” Galt said.
NuCoal has maintained it was unaware of the corrupt conduct when it made the purchase and last year revealed it is gearing up to launch legal action against both Macdonald and the State Government.
“The circumstances of the corrupt conduct as reported by the Commissioner were not, and could not have been, known to NuCoal at the time NuCoal purchased DCM,” Galt said in a letter to shareholders.
“NuCoal is nothing but an innocent party in this matter,” he said in a separate letter.
Galt said the company will take “whatever action is necessary" to protect its shareholders’ interests.
“As a result of this decision, the reputation of NSW is further damaged and significant questions of sovereign risk in regards to investment in the resources industry under this Government have been further confirmed.”
In August the ICAC found Macdonald and former union boss John Maitland guilty of engaging in corrupt conduct, referring the matter to the Director of Public Prosecutions.
It found Maitland made millions of dollars from the licence approval and called on the DPP to pursue criminal charges against Macdonald, Maitland, Newcastle businessman Craig Ransley, and others.
Located in the Hunter Valley, the Doyles Creek exploration licence was granted as a closed tender to Maitland and Ransley for a training mine in 2008.
Maitland and other investors purportedly made $84.74 million profit when NuCoal bought the licence in 2010.
In a submission made to the State Government three working days before the exploration licence was revoked, NuCoal accused it of aiming at the “wrong target”, adding that cancelling the Doyles Creek licence will inflict “unjustified pain and penalty” on the company.
It went on to say that acting on ICAC’s recommendations “would retard the potential of NSW to reap the fruits of a highly valuable asset” which has been subject to extensive exploration efforts over the past four years”.
NuCoal’s submission to the state Government this week warns expunging the licence will open the state up to litigation.
“NuCoal’s claims for compensation would be in the order of $500 million,” the company stated.
Proposing a solution the miner suggests the NSW Government removes “the taint of corruption” from the Doyles Creek authority, imposes appropriate legal sanctions on guilty individuals, and protect the interests of the innocent.
In a separate letter Galt said “it is difficult to believe that the decision to pursue the course announced by the Government was made with an [sic] mind open to persuasion and not pre-set”.
“The submission could not have been given genuine consideration having regard to its length, the arguments raised in it and its technical detail.”
Following extensive investigations the ICAC handed down its recommendations last October, saying corruption was possible because of policy and regulation floors which lack clear objectives, independent oversight, transparency, and allows for a high level of ministerial and bureaucratic discretion.
“Within this opaque environment, valuable state assets and rights were transferred to private entities,” the ICAC said.
“It is the Commission's view that, with so many risks and opportunities for corruption, it was almost inevitable that corruption would occur at some point.”
The report, titled Reducing the opportunities and incentives for corruption in the state's management of coal resources, outlines 26 corruption prevention recommendations to tighten up the process for managing the state's coal resources is an effort to prevent the recurrence of corrupt conduct that was exposed in its Jasper and Acacia investigations.
Taking notice the State Government passed powers to cancel corrupt coal licences in November.
Before the bill was introduced the Mining Act contained no general power to cancel a mining exploration licence if the circumstances where the granting of the licence or the licence holder is somehow tainted by corruption.
At the time a Cascade Coal spokesperson said the government's decision to consider cancelling the Mount Penny licence was ''neither fair nor good for the reputation of the state'' and flagged potential legal action.
Operation Jasper investigated allegations former NSW mining minister Macdonald rigged a coal tender process in 2008, awarding an exploration licence in the Bylong Valley which benefited the family of former Labor powerbroker Eddie Obeid.
In July ICAC handed down its verdict on Operation Jasper, finding Macdonald, Eddie Obeid, his son Moses Obeid and others had engaged in corrupt conduct in the issuing of the Mt Penny licence.
Cascade Coal is yet to make a public comment.