On Jonathan Moylan and the Whitehaven coal hoax

The latest in a long line of Aussie hoaxes was perpetrated to great effect this week though its creator might yet pay a penalty of 10 years and half a million bucks. Anti-coal activist Jonathan Moylan is in trouble for putting out a press release in the name of ANZ Bank on Tuesday. The release said the bank was divesting its $1.2b loan to Whitehaven Coal for its Maules Creek Coal Project. If true, it was an important announcement. In Whitehaven’s own words, Maules Creek was “one of only a few remaining tier 1 undeveloped coal assets in Australia. It is also one of the largest coal deposits in Australia with 362 Mt of recoverable reserves.”

Before it could be exposed as a hoax, the news triggered a stock market collapse for the coal company. While almost all losses were recovered before the day was out, Moylan’s actions raised serious political as well as ethical and legal issues. Using dubious means, he focussed attention on the important question about whether we should be investing in major coal projects in a time when fossil fuel emission is the biggest issue on the planet.

Maules Creek is in the heart of NSW’s rich Gunnedah Basin. NSW and Queensland produce 97 percent of Australia’s black coal. It is an industry in decline with Australia producing 405 million tonnes of raw black coal in 2010-11 down from 471 Mt. in 2009-10. Australia remains the world’s fourth largest coal producer and the world’s leading exporter with markets in Japan, South Korea, China, India and Europe. Coal fired generators are leading contributors (20 percent) to a greenhouse effect as heavy-grade emitters of carbon dioxide and methane into the atmosphere.

The Centre for Climate and Energy Solutions acknowledges fixing the coal issue will be difficult. Coal is cheap, important for energy needs in developing countries, and has good lobby groups in countries like the US, which is the “Saudi Arabia of coal.” Coal-fired generators could still play a role if carbon capture and storage (CCS) technology ever takes off, possibly 10-15 years away. There would also be a need for a carbon market, priced at around $30 a ton of CO2 and a way of retrofitting CCS into existing technology. An ANZ that truly considered its customers interests would ensure such boxes were being ticked. But it has no plans to do so and there is no scrutiny of whether such interests are considered.

Instead, the argument focussed on Moylan dividing people on whether his hoax ends justified the means. Supporters like Bob Brown called it necessary civil disobedience to expose ANZ’s investment in coal. The coalition’s Eric Abetz turned it into an attack on Lee Rhiannon and the Greens’ “extreme political tendencies.”

Moylan planned his attack well. He put together a fake ANZ press template, a website and dummy email inbox. The press release was perfect managerial language to frame an argument quite unusual and brave in an Australian business context. Moylan used the voice of ANZ Corporate Communications to announce the bank would not support the project. Toby Kent, “Group head of corporate sustainability” was quoted to say the company wouldn’t invest in coal projects that cause “significant dislocation of farmers, unacceptable damage to the environment, or social conflict.” The decision was made after “a careful analysis of reputational risks and analysis of the returns on this mine in the current climate of high volatility in the coal export market.” It concluded with the statement ANZ was undertaking “a review of coal and gas investments on productive agricultural lands and areas of high biodiversity.”

The release was quickly picked up by AAP Newswire who failed to conduct basic identity checks. At the bottom of the emails are phone numbers for Toby Kent and Joanne McCulloch “Media Relations Advisor” which would have quickly exposed this email as a hoax. A quick check of ANZ’s database of media releases would also have been enough to dispel, or at least doubt, the information.

Instead AAP swallowed the news and provided it directly to the markets. When traders in the Australian Stock Exchange saw the newswires shortly after midday Tuesday, they went ballistic. Whitehaven bore the brunt as 85% owners of Maules Creek Coal. Maules Creek is 18km north-east of Boggabri on the Kamilaroi Highway between Narrabri and Gunnadah. It is 16km from the railway line servicing the coal terminals at the Port of Newcastle, 360km south-east. Maules Creek’s current resources are expected to support a large open cut mining operation for 30 years at an average saleable coal production rate of 10.8 million tonnes per annum (Mtpa). Subject to approvals, the first coal production will commence in mid 2013, with saleable production exceeding 10Mtpa from 2016.

It was a dead duck without ANZ’s investment, and within minutes Whitehaven shares plunged from $3.52 to $3.21. Whitehaven Coal lost more than $276 million in market value. It capped off a bad year for the company since it merged with Nathan Tinkler’s Aston last April giving him 19.4 percent ownership. The share price has lost over half its value with CEO Tony Haggarty and the board blaming it on Tinkler’s financial woes. Tinkler returned fire on Haggarty saying he wanted to increase his holding not decrease it.

That plan may now be in tatters. The price did not recover until the real ANZ responded with a media release (pdf) entitled “Fraudulent media release regarding Whitehaven Coal”. This release (which looked remarkably like the fraudulent one) said ANZ remained “fully supportive of Whitehaven Coal.”

At the end of trading, Whitehaven was 2c down on the day reflecting other issues with the project. The damage to Tinkler was estimated between $50m and $180m (assuming it wasn’t him who picked up the shares when they were on the rebound).

Moylan will suffer significant collateral damage. There is a strong prima facie case his actions were illegal according to Section 1041E of the Corporations Act 2001 (Cth). It an offence if a person makes a knowingly false statement likely to make people dispose of shares. The maximum jail term for individuals is 10 years, with fines of up to $495,000. Organisations face fines to $4.6 million.

The Australian Securities Investment Commission said it would investigate whether there had been a breach of Corporations Act rules on false or misleading statements. According to dean of law at the University of Western Sydney Michael Adams the legislation on corporate fraud imposes a high penalty on false or misleading statements about traded securities on the ASX. Adams believes a successful prosecution will hang on the difference between a public nuisance and civil disobedience. “A protest normally provides publicity for a cause and brings the matter to the general public’s attention, but causes little harm to the community,” Adams said. “A fraud – and in particular one that impacts on the share market – has huge consequences”.

Research fellow on ethics Edward Spence picked up on Abetz’s argument about ends and means. Spence said Moylan’s ethical failings were harmful to the “integrity of the digital informational environment”. Its trustworthiness, Spence said “we all rely on to conduct our legitimate informational transactions.” We are not only biological beings, he said, but increasingly informational beings. “When the informational environment is harmed we are also harmed.”

Spence may be right but he doesn’t excuse AAP not doing its job properly. Nor did the rest of the media use the hoax to expose ANZ’s dealings with the coal industry. Why didn’t anyone ask the bank if they would do “a review of coal and gas investments on productive agricultural lands and areas of high biodiversity”. Why is it acceptable for the bank to invest in projects that cause “significant dislocation of farmers, unacceptable damage to the environment, or social conflict?”