The controversial NSW coal reservation policy may force Mt Arthur Coal to close before 2030, the mine's owner BHP has warned.
The state government imposed a domestic coal reservation and price cap direction in December last year. It requires all thermal coal producers in NSW to reserve a percentage of their coal production for domestic markets so it can be supplied to power stations within the state at a capped price of $125 per tonne.
The direction has been widely criticised by the mining industry, which says it was blindsided by the announcement.
BHP estimates the policy would require about 1.5 million tonnes of coal from Mt Arthur to be re-directed and sold at a reduced price.
In a letter sent to Mt Arthur's 2000 employees last Friday, BHP NSW Energy Coal Vice President Adam Lancey said the company had been forced to review its operational plans and existing commitments for the mine.
"In light of these directions, we are actively reviewing operational plans and existing commitments to understand their implications. And, while I would like to avoid this scenario, the findings of this review may lead to a reassessment of our Pathway to 2030 plan," Mr Lancey said.
"We have written to the NSW government to make our position clear and I am actively engaging with government representatives to convey our concerns in person."
BHP, which had been seeking an extension of the mine's life until 2045, announced in June last year that it was bringing forward the closure date to 2030 after failing to find a buyer for the mine.
The mine's current approval expires in June 2026, however, the company indicated it would seek a four year extension.
Mr Lancey said the company's primary concerns related to the potential impacts on Mt Arthur Coal's operations and business model, including what to do if production costs increase to above the price cap.
It was also seeking to understand the potential impacts on local communities and infrastructure, such as the rail network, as well as long-standing commercial partnerships and the company's ability to meet its obligations to customers and the energy market.
"While we support affordable energy prices for NSW households and businesses, we have doubts about the directions' ability to achieve this. As a general point, BHP is opposed to market interventions because short-term measures can have negative long-term impacts: in this case businesses may think twice about investing in NSW," Mr Lancey wrote.
The closure announcement sent shockwaves through the Upper Hunter community with many being forced to contemplate life after coal mining for the first time.
The company is in the early stages of a consultation process on how to best rehabilitate and reuse the land post-mining.
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