Consulting giant Ernst and Young has been accused of overvaluing a coal mine project by hundreds of millions of dollars. 

British mining company SIMEC brought in Ernst and Young (EY) in 2019 for an economic assessment of plans to expand the Tahmoor coking coal mine south-west of Sydney.

The Independent Planning Commission (IPC) is considering the plan to extend the life of the mine until 2032.

EY’s analysis found the expansion would bring economic benefits of up to $664.9 million.

But experts at The Australia Institute say the assessment methodology EY used has been discredited, and dramatically inflated the value of the project.

"It is very clear to anyone who has been watching coal in the New South Wales planning processes in the last 10 years, that the economic case for the Tahmoor mine has been wildly overstated by its consultants," says Australia Institute research director Rodney Campbell.

“They estimate that [the project] is probably worth more than $600 million, but at least $450 million is based on calculations that are unorthodox and the NSW Land and Environment Court has said are 'plainly wrong’,” he told the ABC. 

The Australia Institute has made a submission to the IPC that alleges several key omissions from the assessment.

“When local environmental impacts and the future of the coal market are considered this value is likely to be negative,” the submission states.

“We recommend against approval and urge the IPC to make a strong statement about the need for higher standards of economic assessment in the NSW planning process.”

EY claims its assessment was fully compliant with guidelines set by the NSW Department of Planning, Energy and Environment (DPIE).

“The analysis presented in the economic impact assessment of the Tahmoor South Coal Project follows a logical framework in accordance with The Guidelines,” EY said in response.

“The calls for key components of the analysis to be excluded, in our view, should be viewed with caution by the IPC.”

The EY report was produced by consultant Steve Brown, who also evaluated an application for the Rocky Hill open-cut coal mine in Gloucester. 

That plan was struck down by Chief Judge Brian Preston in the NSW Land and Environment Court in 2019, who found that the economic assessment of the project was flawed and did not meet DPIE guidelines.

“Mr Brown sought to inflate the benefit to workers by adopting a different methodological approach to that required by the Economic Assessment Guidelines,” Justice Preston said.

“Contrary to the comparison required by the Economic Assessment Guidelines, Mr Brown incorrectly compared the average coal mining wage to the weighted average non-mining wage.

“Mr Brown assumed that there was no disutility of working in the mining sector and there were no additional skills needed to work in a mine compared to an average job.

“These assumptions are not only at odds with the Economic Assessment Guidelines …  they also lack evidentiary foundation.”

The Australia Institute says it is the same approach Mr Brown used for his assessment of the Tahmoor South Expansion project.

Consultants and analysts are working to standardise approaches to economic assessments.