The dirty business of coal in NSW
Beck Pearse
Coal is dirty business in New South Wales. Coal campaigners and locals residents whose homes are perched near or above the states' coal reserves know first-hand how difficult it is to resist the spread of coal and coal seam gas developments across rural and urban centres. They know how trifling community consultation processes can be, how difficult it is to resist compulsory access to or acquisition of property in the boundaries of mining developments. More generally, they understand the state government policy for the resource sector routinely privileges market expansion over social and environmental protection.
However even the most cynical participant in state energy and mining politics would be shocked at revelations from within the NSW state government. The Independent Commission Against Corruption (ICAC) is currently conducting an inquiry into the alleged conflicts of interest behind former minister Ian Macdonald's decision to open up the Bylong Valley for coal exploration in 2008, the same site where former minister Eddie Obeid and associates invested. The investigations have brought out incredible tales of the misuse of state power by a small group of sitting MPs and their associates. At the centre of this tale is a sub-faction of the ALP right wing led by Eddie Obeid.
Eddie Obeid and the Terrigals
Former Labor MP and right-wing power broker Eddie Obeid served in the NSW Upper House from 1991 to 2011 and served as Minister for Fisheries and Minister for Mineral Resources from 1999–2003. He lives in a $10 million Hunters Hill mansion and drives a $400,000 Mercedes. Through a network of trusts and family companies, Obeid and his relatives own a large number of properties in Sydney, the Bylong Valley, Terrigal, Port Woolwich, Hunters Hill, and Lebanon.
Obeid never gave a speech in Parliament, but enjoyed enormous influence as factional boss in the 'Terrigal Group', a powerful right-wing sub-faction which exerted near total control over the Right and the NSW ALP. Their name comes from the beachfront house owned by Obeid where the group of MPs and union officials would routinely meet.
Nathan Rees when he resigned from his position as Premier of NSW famously said: ''Should I not be Premier by the end of this day, let there be no doubt in the community's mind, no doubt, that any challenger will be a puppet of Eddie Obeid and Joe Tripodi.'' Rees had crossed the faction when he was granted consent from the NSW ALP National Conference to choose his own Cabinet. Rees had demoted Jo Tripodi and Ian Macdonald in late 2009. They organised a vote of no confidence against Rees in a caucus meeting, Kristina Kenneally was installed as Premier in December that year. This drama was a repeat of former premier Morris Iemma's disposal the year before.
Put simply, the power and influence of the Terrigal Group has been a defining feature of the NSW ALP for 10 years. Eddie, 'He Who Must be Obeid' and his faction have had an incredible amount of influence over the parliamentary party, including what positions are held by whom.
Coal connections
Obeid, his family and their associates stood to profit by up to $100 million through investments made in the Bylong Valley, 100 kms west of Muswellbrook in the NSW Hunter Valley. In late 2007, Obeid's family company Locaway Pty Ltd, trustee for the Moona Plain Family Trust, bought the lavish Cherry Dale property for $3.65 million in the Bylong Valley ($1.02 million cash, $2.63 million as a vendor loan). Most of the property was within the boundaries of what would become a new exploration lease called Mount Penny. The planned open cut mine at this site will produce 101 million tonnes of coal at a rate of five million tonnes per year over 21 years.
The Obeid family and their mates allegedly invested in the valley on the basis of inside knowledge provided by Ian Macdonald, then NSW minister for Primary Industry and Resources. The Cherry Brook property trebled in value after exploration tender opened. In September 2008 Ian Macdonald announced that the Bylong Valley would be opened up for coal exploration. An ICAC inquiry called "Operation Jasper" was set up to investigate the circumstances surrounding Macdonald's decision and whether confidential information was leaked to Obeid or his family members involved in the acquisition of millions of dollars in property and share options (the inquiry has widened to a series of other mining leases announced by Macdonald).
The ICAC hearing revealed that Obeid secured $17 million for an option for the Cherry Brook property – a profit of $13.35 million for the Obeid family from an outlay of $1.02 million. Two additional properties nearby also bought by Obeid family interests were optioned for profits of $900,000 and $3.5 million. Further, the benefits from the coal tender it seems extend beyond these property sales.
A new company called Cascade Coal won the tender process and was awarded the exploration licence for Mount Penny in July 2009 for $1 million. A group of wealthy businessmen self-titled the "Magnificent Seven'' reinvented an events company in order to form Cascade Coal at the time the Obeid family and friends were buying property in the Bylong Valley. Cascade Coal is a private company set up by Brian Flannery and Travers Duncan, John McGuigan, John Atkinson, Richard Poole and John ''Kingy'' Kinghorn. A seventh investor was Macdonald's close friend and V8Supercar promoter Greg Jones. Jones kept his investment in Cascade secret. So did the Obeids. An ICAC hearing revealed that the Obeid family had a secret 25% stake in Cascade Coal, part of which they later sold for $60 million.
In another twist, the strategy was to then sell Cascade Coal to publicly-listed firm White Energy for $500 million. This would have produced huge profits for the men involved. However the plan went awry when a Mitch Geddes, a White Energy investor and an independent director of the company Graham Cubbin asked the ASX to investigate the transaction. It turns out there is considerable overlap between the boards of White Energy and Cascade Coal.
Coincidences?
Counsel assisting Geoffrey Watson claims there are 39 'coincidences' that suggest Ian Macdonald assisted the Obeids and friends in securing profits from the coal development. For instance, confidential government maps of coal deposits in the Bylong area were found in offices of the Obeid family in Birkenhead during an ICAC raid in 2011. The Obeids claim no knowledge of how they got there. However, when Moses Obeid took the stand at the ICAC hearing in January this year it was revealed he was in contact with Macdonald about the status of the coal exploration licenses three months before the tender was announced in 2008.
In February a handwritten note by Greg Jones was presented at ICAC stating that $35,000 was transferred to Macdonald in cash and gifts, as well as a loan for $195,000 that was never repaid. He was also to receive $4 million from the sale of Cascade Coal.
Obeid and Macdonald deny the allegations against them. Commissioner David Ipp will deliver his findings in July 2013 for the Bylong case and a second related inquiry into licences issued by Macdonald for Doyles Creek (also in the Hunter). Ipp's report will contain recommendations, potentially including charges. If so, court proceedings could go on for years.
Beck Pearse is a member of Friends of the Earth, Sydney.