The New South Wales (NSW) Government in Australia has signed an agreement to pay $170m to BHP Billiton to buy back the Caroona coal exploration licence located in prime farmland.

The licence was issued by issued by the former labour government in 2006 for underground coal mining covering about 344km² in the Liverpool Plains.

BHP Billiton has agreed to halt progression of the Caroona coal project by cancelling exploration licence (EL) 6505.  

"The Caroona Coal Project was studied extensively and developed cautiously for almost ten years."

BHP Billiton Minerals Australia president Mike Henry said:  “While we believe that Caroona would have been developed responsibly, we accept the Government’s decision and appreciate its willingness to work with us to agree an acceptable financial outcome for the cancellation of our exploration licence.

“The Caroona Coal Project was studied extensively and developed cautiously for almost ten years.  We carried out extensive planning to ensure there would be no mining under the black soil plains, consistent with the conditions contained in our exploration licence.”

Scientific research proved that the project could have been developed in an environmentally sustainable manner.

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NSW Premier Mike Baird said: “After careful consideration, the NSW Government has determined that coal mining under these highly fertile black soil plains, as proposed by Labor, poses too great a risk for the future of this food-bowl and the underground water sources that support it.

“This decision guarantees the future of the state’s most productive and fertile farming land, providing confidence for local farmers to invest in an industry that has the potential to be one of the food bowls of the world.”

NSW’s decision to buy back the Caroona licence was in line with advice from the Planning Assessment Commission, which recommended the government ban mining on the black soil plains.

Baird further added: “The Liverpool Plains black soil is one of our most precious resources and today we have taken this major step to secure its long-term future.”