Minerals Council pushes back after BHP’s threat to quit

The Minerals Council vows to stay active in the energy and climate debates “on behalf of all its member companies”.

The coal loader at Newcastle Coal Infrastructure Group's new terminal on Kooragang Island, Newcastle.

It’s been a rough few months for the Minerals Council of Australia, with its biggest member, BHP Billiton, flexing its financial muscle over the influential lobby group’s role in the climate debate.

But it appears the council is pushing back, in a small way at least, as BHP’s public dressing down of the peak industry group rankles other members (although not to the extent where they have gone public).

Simmering tensions between BHP and the council became obvious in late September, when the big miner pressured chief Brendan Pearson to step down over his spirited lobbying for coal-fired power and opposition to the now abandoned clean energy target.

Now, after a review of industry association energy policies spurred by activists, BHP this week called on the Minerals Council to refrain from lobbying on energy policy wishes that differed from those of the miner.

If it failed to do so, BHP said, it would reconsider its membership.

The lobby group has taken the BHP onslaught, which is understood to have rankled other big members, on the chin, offering little response and no indication of whether it will cede to BHP’s calls.

But yesterday it vowed not to disappear from the energy debate, something BHP had called for industry groups to do if there was no industry consensus.

“The MCA will continue to be an active participant in energy and climate policy debates on behalf of all its member companies,” a council spokesman said.

In a 22-page review of industry associations and their climate change positions, released this week, BHP included principles for membership of industry organisations that stated:

“In climate and energy policy areas where no broad industry consensus exists, associations should generally refrain from advocacy in those areas, with individual members being best placed to outline their views independently.”

BHP has not called specifically on the council to abandon climate policy advocacy. But it wants the lobby group to stop doing so on issues where its views differ materially from those of BHP.

These are: advocating for energy policy that favours cost and reliability over the other problem in the “energy trilemma”, emissions, and pushing for policy that favours new coal plants.

Whether “no broad industry consensus exists” among the MCA’s 18 other members is hard to gauge, particularly on the first point of focusing on cost and reliability.

That view is in step with other big power-using groups, including Manufacturing Australia, and it is the line federal Energy Minister Josh Frydenberg is taking.

It has also been a position advocated by the MCA’s two other big members, Rio Tinto (in its submission to the Finkel Review) and Glencore, in public statements.

Part of the problem with BHP trying to publicly direct Minerals Council climate advocacy, having obviously failed to do so behind closed doors, is that it has much less exposure to rising east coast energy prices than most other council members. In fact, it is a net beneficiary of higher east coast energy prices and lower domestic coal demand, thanks to its 50 per cent share in the big gas fields of Bass Strait. BHP’s east coast mining operations have an average electricity load (demand) of 309MW per annum (or about 1 per cent of National Energy Market demand), according to BHP’s submission to the Finkel Review.

This would take about 20 petajoules of gas to provide in a gas-fired power station.

That volume pales next to the 165 petajoules of gas, or more than 10 per cent of the east coast domestic market’s gas needs, that is forecast to be BHP’s share of Bass Strait gas production this calendar year.

Rio and Glencore are both big net east coast power users who have warned plants could close if energy costs continue to rise.

This is not to suggest that BHP’s climate arguments are not well considered or that it has no desire for lower-cost, more reliable power. But it is clear the miner, with its big domestic gas exposure, does not have as much as stake from surging power prices as the rest of the industry.