Solid Energy and the country’s environmental watchdog are at loggerheads about the viability of proposed lignite developments in Southland.
Dr Jan Wright, the parliamentary commissioner for the environment, released a report today in strong opposition to large-scale lignite developments.
Both state-owned enterprise Solid Energy and the L&M Group are investigating lignite developments over thousands of hectares in Southland and Otago.
Dr Wright said that Solid Energy's lignite-to-diesel plants would produce extra greenhouse gas emissions “likely to cost hundreds of millions of dollars a year”.
She argued that much of that cost would be borne by the taxpayer unless changes are made to the emissions trading scheme (ETS) to ensure that lignite industries are unable to receive free carbon credits.
She also argued that lignite developments would derail future clean-tech industries.
“The sheer scale of investment and production involved in significant use of lignite are likely to lock us into using lignite for decades which would make it harder to move to cleaner technologies.
Solid Energy new energy general manager Brett Gamble denied any suggestion that the company will be looking for free carbon credits.
“Solid Energy is committed to taking full responsibility for the greenhouse gas emissions in all our lignite developments," he said in a release.
"We have factored in the full cost of carbon into the life of each proposed lignite conversion project and we aim to deal with our carbon emissions through a range of approaches and technologies.”
One technology is carbon capture and storage – which Solid Energy chief Dr Don Elder told NBR in October is at a sufficiently advanced stage to develop alongside its lignite projects.
Dr Wright’s report takes a more sceptical view. “CCS technology does have long-term potential to mitigate carbon dioxide emissions in Southland or Otago."
“But it would be irresponsible to make decisions now that rely on CCS becoming both practical and economic.”
Other options to offset emissions include sequestering carbon in forest plantings.
Solid Energy has proposed a pilot lignite briquetting plant, as part of an agreement with US-based GTL Energy, and a lignite-to-transport fuel demonstration plant.
Solid Energy has also agreed to investigate building a coal-to-urea fertiliser plant as a joint venture with agricultural supplier Ravensdown.
Mr Gamble said today that the likely benefit to NZ of the proposed urea plant alone would be an annual increase in GDP of up to $377 million, based on today’s world urea price of $US265 per tonne.
He argued that any discourse around large-scale lignite developments needs to include economic as well as social and environmental considerations.
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