Bulli Seam Operations Environmental Impact Assessment - Book Report/Review Example

? Bulli Seam Operations’ Environmental Impact Assessment College: Evaluation Report on Bulli Seam Operations’ Environmental Impact Assessment for BHP Billiton Pty. L Introduction Bulli Seam operations intends to launch its planned mining project that includes extraction of over coal in the southern. The Project involves the continuation of longwall mining at the Appin Mine and West Cliff Colliery, located approximately 25 kilometers north-west of Wollongong in New South Wales (NSW), for 30 years, including the production of up to 10.5 million tonnes per annum (Mtpa) of run-of-mine coal and up to 9.3 Mtpa of product coal. Apart from the excavation, the project will involve various activities including the processing, transportation, disposal of coal wastes, and the environmental-rehabilitation. These mining operations are expected to have a significant impact not only on the environment but also to the community living in this locality. This company has prepared a report that comprehensively covers the environmental impact assessment as a compliance requirement for project accreditation as stated in the environmental impact assessment law. In this report, a critical and analytical evaluation review of the socio-economic assessment of the project will be presented for BHP Billiton Pty. L, to facilitate its participation in the NSW Planning Assessment Commission. This report provides a thorough coverage of the benefit cost analysis and the decision making path BHP has applied in its environmental impact assessment plan. Additionally, a review of the choice modeling technique employed by this organization is provided and matters arising from this EIA plan are mentioned and analyzed in this report. Key issues in Socio Economic Assessment Review The purpose of this report is to provide is to provide information on the possible economic and environmental impacts that are expected if this project is approved. From the BHP standpoint, three vital features of the development implementation are likely to emerge after the scheme is commissioned. In this case, the report will represent the economic costs and benefits that the project will have after the project is implemented. Secondly, this report provides the regional economic impacts that the project will have. From the non-market value approximations, the local community is expected to benefit direct or indirectly from the project either by provision of jobs and infrastructural developments. The importance of covering this information is to make the public aware of the benefit they are likely to have and hence help them evaluate the worthiness of the project in this community. Lastly, this report provides the distribution of impacts between stake holder groups. From this perspective, the BHP Billiton provides the assessment of the social impacts of the project to the main stake holders that include the government and the local communities. Moreover, the environmental impact of this project to land, water swamps and the natural environment are assessed in this report. Benefit Cost Analysis Economics Benefit cost analysis Benefit Cost Analysis is a superior procedure that seeks to evaluate the costs and the returns of a project and to make a decision on the worthiness of a project based on its results. According to Brent (2007, p. 5), cost benefit analysis is an evaluative tool that seeks to weigh the benefits and the costs of implementing one project and avoiding to risk in another. This author recognizes that any project has its own advantages and disadvantages and that the best project is one whose benefits far much outweigh its demerits. Economic costs The implementation of this project comes along with numerous opportunity costs. First, the opportunity cost of land at the site of production is approximated at $3.1 million at East and Appin, while land at West cliff is assumed to have less market value as this land has not been utilized by the community for any economic activity. The opportunity cost that is expected to for utilizing the ICHPL plant rather than selling it is estimated to be $393M. The capital cost of the project is expected to cover environmental management, monitoring evaluation, the activities of at the West Cliff coal preparation plant, cost or marketing, transport and other cost overheads. Annually, the project is estimated to consume a capital cost of approximately $535 Million. Over the entire life of the project, the project is expected to generate loyalties of about $3.8billion, which forms a critical part of the operating cost of the project. Other costs that are expected during the implementation of the project are the decommissioning and rehabilitation costs of surface facilities at the end of the project. This charge is likely to be in the order of $25 million on higher end. Economic benefits of the project Economic benefits of this project are expected to come from the direct sale of coal to the target customers. The production is expected to be at 7.5Mta of coal for the first year of production and is expected to be 10.5Mta in the subsequent years. The economic benefits are dependent on the market conditions and the plea of coking coal and thermal coal. The target customers for thermal coal is electricity producing companies while coking coal has steel production companies as the main customers. The demand of coal is expected to rise in countries such as china and India that are experiencing massive industrial growth and this is expected to benefit this mining project. The prices are expected to fluctuate depending on the variation of the global economic trends. The price of coal is expected to be between $90 and $100 by the year 2015 and the company expects to benefit from these rather stable prices. External Costs and Benefits The environmental and social impacts of the mining project are expected to bring about external costs and benefits. First, the project is expected to extend the impacts that have already been experienced in Appin Mine and West Cliff Colliery surface facilities. Other external effects will be experienced in the environment as a result of increased coal transport and visitors arriving to the mines. On the other hand the community is expected to benefit from 2,389 job vacancies that are expected to arise after the project is implemented. Other contributions to the regional economy include $1,484 Million business turn over, $8773 in annual regional value added and $217 in annual household income. Choice Modeling In choice modeling, organizations strive to design the decision path by measuring possible non-market value benefits that may come along with the implementation of a project. According to Louviere et al., (2000, p. 35) points out that choice modeling enables companies and organizations to make the measure of non-market value of their project and hence facilitates the choice of one project from another. In choice modeling, a questionnaire was used to measure the non-market value aspect of the mining project. With 70% of the population online, BHP Billiton considers it important to involve not only the local communities but also the entire state in the evaluation of the impact of the mining project. In this survey, 24, 960 e-mails were sent to out and 2, 917 responses and 1, 771 screened responses were collected giving an 18.7% response rate. Majority of the sampled audience were females the survey cut across all citizens aged between 18 and above years. From the study, values of $4.73 per km of stream protected, $0.90 per ha of native vegetation protected and $5.15 per aboriginal heritage site protected were obtained. Analysis of the Socioeconomic Assessment To evaluate the effectiveness of the decision making path used by this organization, it is crucial to focus on the various tools used by the BSO in designing the business path and making investment decisions. The Cost-Benefit Analysis Advantages BSO used cost benefit analysis to measure the market value aspect of implementing the project in this region. By using this approach, the organization enjoys the benefits of an easy and result oriented model that is significantly viable in measuring the financial worth of a business. The advantage of this method is that it takes a comparative approach and introduces the aspect of opportunity cost that is the firm basis of identify the superiority of one project other than the author. Secondly, the organization uses a risk assessment procedure by calculating the net present value that is vital in approximating the amount of risk that can be anticipated in a project (Hanley & Barbier, 2009). On this ground, the organization has a firm ground on which to make a judgment of the economic worthiness of the project both in the short and the long run. Disadvantages Numerous demerits of the cost benefit analysis model can be identified and their impact on project worth measurement is sensitive in the decision making process. One disadvantage of the process is in its inability to quantize and measure the economic worth of some project aspects. For instance, the method cannot measure the value of the environmental effects on the community that are useful in environmental impact assessment (Farrell, 2013). Consequently, its reliance on the approximation and use of inaccurate figures makes its final results an approximation rather than a factual figure. Economists have criticized this model on the ground that it is unable to quantize all the factors that are relevant in a project. In essence, this method is ineffective as it introduces subjectivity while attempting to quantify Another disadvantage of this procedure is the use of the net present value of measurement of the risks that are expected in this project. Net present value assesses the risk as a figure rather than a percentage and this is rather hard to interpret as compared to the internal rate of return ratio that expresses risk as a percentage of the total sale of an organization (Farell, 2013). In a typical project, risk forms a very crucial part of market factors that are likely to form the business success (Vining and Greenberg, 2010). Consequently, there is need to have a fair expression or a measure of the risk that is expected to influence the project path. The Choice Modeling BSO employs a qualitative approach in choice modeling through the use of a qualitative research and focus group brainstorming to assess the non-market value of the project. While this method is superior in gathering the opinion of the community regarding the benefits of the project to the organization, various weaknesses can be pinpointed from this method. The weakness of this approach of choice modeling can be translated to weakness in the SEA. In addition, the qualitative questionnaire employed in decision making could be a source of weakness for the formulation of the SEA plan. The organization does not provide any logical proof that the material facts of the project were made aware to the public. For proper decision making, the community is supposed to receive a full disclosure of the benefits and the losses that would come along with the project (Fresno, Hill and Chen, 2009). In addition, the understanding of the material facts about the community would influence their decision making process. On the other hand, the understanding of the community about these issues is influenced by their literacy level, which is beyond the control of the company. The community is inclined to be biased on the issues that benefits more and neglect the information that does not matter to them. For instance, the community may consider the employment opportunities and infrastructure more beneficial and neglect the ill effects of the project to the environment that do not have a direct impact on their lives (Bennett & Blamey, 2001). Consequently, the qualitative research introduces community bias in the SEA that tends to favor the project implementation. Recommendations First, there is a need to supplement the cost approximation values and the risk assessment procedures. The future risk factors need to be quantified and used in the model to ensure that the project is designed to counter these risks and to reduce such risks if they happen to exist. To do this, alternative methods such as internal rate of return ratio should be used to estimate the percentage risk anticipated during the project implementation. With IRR procedure, the amount of risk is expressed as a percentage and hence easier to make conclusion from. This will guarantee that the risk is assessed more accurately and that contingency plans are designed to mitigate this risk (Dalley and Hess, 2013: Neilsen, 2000). Secondly, the assessment of the community attitude should be facilitated through intensive population training. By training the communities on the benefits and the demerits of the project will facilitate their decision making and help them understand how they can benefit from the project. Although there are numerous benefits to the society, the community should be made aware of the dangers that exist and the risk that the environment would experience as a result of the project. In doing this, the choice modeling would be more effective and the community would be satisfied with the knowledge of the details of the project. In the development of the choice modeling, BHP would have considered a greater involvement of the local people. For instance, the educational characteristics of the population would have been considered as part of the evaluation procedure. While BHP Billiton was able to recognize the educational characteristics of the population, it failed to conduct an analysis based on this ground. Research has proven that the educational characteristics of a population are vital in decision making; the learned people in the society will tend to make more rational decisions and such decisions will shape the project evaluation process. Additionary, there the use of online survey was a source of weakness for the choice modeling in this mining project. While conducting an online survey, it is important to consider full disclosure of the material facts that are relevant in decision making. The matter being sensitive to the nation, the questionnaires e-mailed to the sample population should have provided more information of the subject matter to help shape their decision making process. For instance, the information that was provided in the questionnaire was biased towards the benefits of the organization without paying attention to the negative impacts of the same. Consequently, the public response was quite biased, and hence the choice modeling was ineffective. It would be recommendable for BHP Billiton to improve the online survey response. The 18.7% response is rather low and cannot be validated a successful survey. While an online survey is superior in gathering response from a wide sample of population, it has a low coverage of local communities due to the barriers of communications that exist within disadvantaged societies. Those respondents who have little computer knowledge would not contribute to the choice model and this is a serious issue in the decision making process (Bennett & Blamey, 2001). Therefore, the organization should consider backing up the choice model by conducting a manual survey in the local environment. This will ensure that the population that is likely to experience the greatest impact from the project is covered in the research process. Finally, the contingent valuation procedure would be an ideal non-market value procedure to estimate the use and non-use values in the biophysical system. Quantizing of the non-market values would have a significant impact on the choice modeling strategy of the community. Conclusion From the BHP Bhilliton standpoint, the socioeconomic assessment of the BSO has demonstrated an effective integration of non-market and market value parameters in its effort to justify the project worthiness (Bernanke, B., Olekalns, N. & Frank, 2011). The project, if approved, would benefit the community in its locality by providing employment and infrastructure development, which are crucial economic benefits. At the same time, the community is bound to experience air, sound and land pollution in their environment. The computation of the cost benefits and the net present value provide that the project would be worth implementation and the society is expected to gain more than it would lose. Bibliography Australian Bureau of Statistic ABS, 2008. Socioeconomic Indexes for Areas (SEIFA) 2006– Technical Paper, cat. no. 2039.0.55.001, Canberra: ABS. Bennett, W., 1999. Some fundamentals of environmental choice modeling. Canberra: School of Economics and Management, University College, The University of New South Wales. Bennett, J., & Blamey, R., 2001. The choice modelling approach to environmental valuation. Cheltenham, UK: Edward Elgar. Bernanke, B., Olekalns, N. & Frank, R., 2011. Principles of macroeconomics. North Ryde, NSW: McGraw-Hill Australia. Dalley, A. and Hess, S., 2013. Choice Modelling: The State of the Art Desing. London: Edward Elgar Publishing. Farell, R., 2013. Advantages and Disadvantages of Cost Benefit Analysis. Available through < http://smallbusiness.chron.com/advantages-disadvantages-cost- benefit-analysis-10676.html> [accessed on 22nd Oct, 2013]. Frino, A., Hill, A., & Chen, Z. 2009. Introduction to corporate finance. Frenchs Forest, NSW: Pearson Education Australia. Garrow, A., 2010. Discrete Choice Modelling and Air Travel Demand. London: Ashgate Modelling. Hanley, N., & Barbier, E. 2009. Pricing Nature: Cost-benefit Analysis and Environmental Policy. Cheltenham, UK: Edward Elgar. Louviere, J. J., Hensher, D. A., Swait, J. D., & Kuklys, W. (2000). Stated choice methods: Analysis and application. Cambridge: Cambridge University Press. Neilsen, J., 2000. The Use and Misuse of Focus Groups. Available through: < http://www.nngroup.com/articles/focus-groups/> [accessed on 22nd Oct, 2013]. Plotnick, R., 2000. "Applying Benefit-Cost Analysis to Substance Abuse Prevention Programs". International Journal of the Addictions 29 (3): 339–359. Vining, R. and Greenberg, D., 2010. Cost-Benefit Analysis: Concepts and Practice. London: Prentice Hall. Read More