Fugitive emissions calculations for open-cut coal mines are changing. The Federal Government has already begun reform of the calculation methodology, involving phasing out Method 1 for fugitive methane emissions1 from open-cut coal mines covered by the Safeguard Mechanism. From the 2026-27 reporting year onwards, all open-cut coal mines that are Safeguard facilities are prohibited from using Method 1 to calculate their fugitive emissions under the NGER scheme, regardless of their scale of production. These updates could transform the way open-cut coal miners operate, as new measurement approaches, technology investments, and risks management costs become increasingly important considerations. Read on to understand the impact and what you can do to stay ahead of the curve. 

What are the differences between Method 1 and 2? 

Estimating emissions from extraction of coal under Method 1 is a relatively trivial task – it requires multiplication of the Run-of-Mine (ROM) coal by a state-based emission factor. However, this simplicity comes with a major drawback – inaccurate estimations, typically underestimated emissions. It is therefore no surprise that a clearer, more accurate view of large emission sources is being sought through the implementation of higher order Methods.  

Method 2 requires a significantly greater quantity of information than Method 1. It firstly requires the development of a mine-specific model to estimate the in-situ methane in place prior to extraction. The model of in-situ methane is used to estimate the fugitive emissions of methane and carbon dioxide each year when extracting coal from the open-cut mine; the model adjusts the in-situ methane to account for methane lost through combustion, flaring, venting or transfer off site. 

Furthermore, to produce estimates for the model of the coal seam gas content, core samples of the gas bearing strata must be collected. Core sampling must meet strict requirements as outlined in the National Greenhouse and Energy Reporting (NGER) Determination, mostly referencing specific requirements in the Australian Coal Industry’s Research Program (ACARP) Guidelines.  

Notably, for calculating fugitive emissions from open-cut coal mines, Method 3 is identical to Method 2; the only difference is that the sampling of gas bearing strata is to be collected in accordance with two further industry standards under Method 3.  

Even though open-cut coal miners covered by the Safeguard Mechanism will soon move to using Method 2 (or 3), as part of the NGER scheme’s ‘forward work program’ the requirements for Method 2 are likely to change. The Government will be seeking feedback on whether Method 2 is fit for purpose and is based on the best available science, technologies and practices. Many items are tabled for discussion; these include matters such as the number of boreholes required, specifics of gas model development, peer review processes, auditing, and various other sampling and modelling considerations.

What does this mean for businesses? 

As the regulatory landscape evolves, businesses will need flexibility to adapt their compliance and operational strategies when changes arise. Open-cut coal mines covered by the Safeguard Mechanism should consider three key areas to help manage reporting compliance, reduce risk and identify strategic opportunities.  

Are your operations technically ready for the transition?  

Shifting from Method 1 to Method 2 or 3 requires extensive technical capability, including practical advice on appropriate instrumentation that meets the relevant standards, appropriate and adequate strata sampling, robust strata gas modelling, and emissions quantification. ERM's in-house mining specialists bring decades of experience supporting coal operations to understand where your operations and processes will require adjustments needed to implement these changes.  

Does your Safeguard baseline require adjustment?  

Following the change in Method, as per Section 26 of the Safeguard Rule many Safeguard Mechanism-covered open-cut coal mines may require a variation of their facility-specific emissions intensities to calculate suitable baselines. If you require support in determining whether these requirements apply to your operations, we have extensive experience in supporting some of Australia’s largest emitters with assessing their Safeguard baseline.  

Does your business strategy position you for long-term success?  

With the likelihood of increased emissions and abatement obligations under Method 2, the business’ compliance strategy will also require adjustment to minimise regulatory risk and compliance costs. Consideration of the interplay between decarbonisation opportunities, offsetting strategies, and ACCU market dynamics are areas we can help you navigate to help you meet your compliance needs, reduce costs and realise new opportunities.  

With our combination of strategic advisory, technical quantification, carbon market and mining expertise, ERM brings together the capabilities that can help your business navigate complexity, manage compliance and unlock opportunities across the entire business. Please get in touch with us if you have any questions or would like to know more.