How an unsolicited email brought an Australian coal dream to Southland

Saturday, 18 July 2026

One Saturday night last year, Allan Blood sat down in Perth and composed an email.

The veteran coal entrepreneur was writing to two New Zealand politicians he had never met: Finance Minister Nicola Willis and Resources Minister Shane Jones. He opened with an apology. This was not, he admitted, the proper protocol.

Then he made his pitch.

Blood had spent the better part of three decades trying to build a factory that would turn low-grade coal into fertiliser. After all that time, it still existed only on paper. The closest he had come was in Victoria’s Latrobe Valley, where his plans, he said, collided with a state government afflicted by a “pathological hatred” of coal.

New Zealand, he had heard, was “open for business” — and Southland happened to possess the resource his factory needed in extraordinary abundance.

The email worked. Jones’ office directed Blood to Invest New Zealand, the government agency charged with facilitating foreign investment. A week later, Jones wrote back personally. He would follow the proposal “with interest”, he said, given what it might do for the regional and national economy.

That exchange began nine months of contact between Blood and the minister’s office, including at least three meetings in person. Records released under the Official Information Act trace an increasingly warm conversation between a coal promoter with a history of grand, unbuilt projects and a government eager to prove New Zealand was ready to develop its natural resources.

The proposal was enormous: a new coal mine, a factory, hundreds of jobs, a domestic fertiliser industry and a solution to the carbon emissions produced along the way.

Everything, however, depended on that final claim.

The pitch

On paper, the appeal was easy to understand.

Beneath Southland and Otago lie billions of tonnes of lignite, a soft brown coal formed from ancient vegetation compressed beneath the earth. It is one of New Zealand’s largest remaining fossil-fuel resources, and almost all of it remains underground.

Lignite is abundant but poor fuel. It is high in moisture and low in energy, meaning it burns inefficiently and produces large volumes of greenhouse gas emissions. As New Zealand gradually replaces coal-fired industrial heat with cleaner alternatives, the resource has little obvious future unless someone finds another use for it.

Blood’s answer is to pull the coal apart and rebuild it into something more valuable.

The process, known as coal gasification, heats lignite under pressure to produce a synthetic gas. Hydrogen extracted from that gas becomes ammonia. Ammonia, combined with carbon dioxide, becomes urea, the fertiliser used on New Zealand’s farms.

The chemistry is well established. The ambition lies in the scale. Blood proposes mining about three million tonnes of lignite each year to produce roughly 1.5 million tonnes of urea — enough, he says, to supply much of New Zealand’s demand and export the remainder to Australia.

For a government committed to regional development and extracting more value from New Zealand’s mineral wealth, the political appeal was clear: a new mine, hundreds of jobs and a domestic source of a fertiliser the country currently imports.

It helped that Blood and Jones spoke the same political language. Both believed environmental politics had become hostile to industry and dismissive of the communities that depended on it.

Over the following months, Blood occasionally sent Jones’ office newspaper columns criticising renewable energy. He forwarded a report of his own attacking the “champagne ideologists” who were “steamrolling” net zero onto society.

Throughout, the size of the project remained fluid. What began as a $2 billion proposal rose to $4b, then to $4b-plus — “and it may be a big plus” — before returning to $3b and later “$3b-plus”. There would be so many jobs, Blood wrote, that he wondered if New Zealand had enough qualified workers to fill them.

He was similarly confident about the project’s importance to the Government.

Blood sought a meeting with Agriculture Minister Todd McClay, only to be referred elsewhere. He said he was “intrigued”, given the proposal would likely represent “one of the largest, if not the largest, single investments in the history of New Zealand agriculture”.

He had expected McClay would want to be briefed personally, particularly “in the event that the media become aware of it”.

Jones, meanwhile, required little persuasion. In January, one of his staff recorded that the minister remained “very interested in the project”.

Blood responded in kind: he wrote that he hoped the project would be advanced enough prior to the election so that Jones “may be able to use it to show the New Zealand public one of the achievements of your government”.

But the decisive part of Blood’s proposal was not the mine, the jobs or the fertiliser. It was the carbon.

Making fertiliser from coal is a dirty business. Left unmanaged, a plant of this scale could become one of New Zealand’s largest industrial polluters. The country would be trading imported fertiliser for a dirtier version made at home.

Blood insists his plant would do the opposite. It would be low emissions and could possibly reach net zero.

That remains the least settled part of the plan.

The problem underground

Blood acknowledged the difficulty in his correspondence with Jones’ office.

Coal gasification, he wrote, “emits a lot of CO2 unless technically dealt with”. The issue had to be resolved because “the naysayers will be out in droves”.

He had faced the same issue in Victoria. For that project, Blood commissioned a report which concluded the factory could achieve a negative carbon footprint. He sent the executive summary to Jones’ office.

That conclusion rested on three assumptions: the plant would run on renewable electricity; its fertiliser would contain an additive that reduced emissions on farms; and most of the carbon dioxide produced would be captured and permanently stored underground.

In Southland, the first two assumptions were already uncertain.

Blood told Jones’ office the cheapest — and therefore preferred — way to power the factory would be coal-fired boilers rather than renewable electricity. That could require overturning a rule restricting the installation of new coal boilers. (Blood says no power source has been finalised, and that he was only naming coal as the cheapest option.)

The fertiliser additive presented a different problem. Blood wrote that it might leave residues in milk, potentially making it unsuitable for use on New Zealand farms. (He now says its chemical formulation could be changed to be used in New Zealand.)

That leaves underground storage carrying much of the environmental claim.

One handwritten note in the ministerial records identified the problem succinctly: “CCS won’t work as Sthlnd no reservoirs.”

Carbon capture and storage involves compressing carbon dioxide and injecting it into deep geological formations. It is technically possible, but expensive and heavily dependent on suitable geology and infrastructure.

New Zealand has no operating carbon-storage industry and no proven reservoir near the proposed factory. It is still developing the law needed to regulate one.

Professor David Dempsey, a University of Canterbury expert in carbon dioxide removal, says deep saline aquifers beneath Southland might eventually prove suitable. Establishing that would require years of exploration, testing and development.

“It would be expensive,” he says. “Who would pay for it? Overseas, you do sometimes see governments investing in these projects, but I'm doubtful there’s the appetite to do the same here.”

Blood has suggested other uses for the carbon, including growing algae or greenhouse crops and producing synthetic fuels. These might reuse some emissions, but they would not store them permanently. Massey University Emeritus professor Ralph Sims says that based on his understanding, the suggested alternatives did not appear to be “technically or economically viable”.

Blood told The Press work on the issue was continuing. “The final carbon management strategy has not yet been determined and will be based on the technical, commercial and regulatory assessments completed during project development.”

For now, then, the project is being described as low-carbon before the means of preventing its emissions has been established.

Without carbon storage, the consequences would be substantial. A previous examination of Southland lignite suggests a factory of this scale could produce about 2 million tonnes of CO2 a year before capture, placing it among New Zealand’s largest individual industrial emitters.

The project is being presented as low-carbon before anyone knows how most of its carbon will be managed.

A familiar message

This is not the first time Blood has tried to bring a project of this scale to fruition.

For nearly three decades, he and companies linked to him have pursued variations of the same idea: turning low-grade coal into fuel or fertiliser while capturing, storing or otherwise managing the carbon dioxide produced.

None has yet resulted in an operating plant.

Blood first attracted public attention in 1998, when he founded Australian Power & Energy about a proposed $5b coal-to-fuel development in Victoria. The company secured an exclusive state coal licence and drew interest from major corporations. It was sold into a joint venture involving Shell and Anglo American.

After the sale, the Australian Financial Review declared Blood “Australia's first carbon geosequestration millionaire”.

The new owners could not make the project work. By 2009, well after its expected opening, it was described as “not commercially viable”. The coal licence was later cancelled. Blood says he had left the project long before its collapse, and the new owners changed the technology and let costs run away.

A company linked to Blood later pursued a similar development in Montana, in partnership with the indigenous Crow Nation. It promised thousands of construction jobs, hundreds of permanent positions and the capture and sequestration of its carbon emissions.

It was supposed to open in 2016. Instead, the venture came apart, the New York Times reported. The company and the tribe sued each other. Blood attributed the failure to Democratic-led states which, he says, had opposed the transport of the coal-derived product for export.

Back in Australia, another Blood-linked company, Latrobe Fertilisers, announced plans in 2008 for a coal-to-urea factory. It would turn Victoria’s brown coal into fertiliser while capturing and storing the carbon dioxide produced.

Years passed. No factory appeared. In 2013, after the original opening date had passed, Blood announced an agreement with a state-owned Chinese company to manufacture the plant and ship it to Victoria. Even then, he chose his words carefully.

“I don’t want to give false expectations and false hopes that I’ve been accused of contributing to before,” he said. “The bottom line is we’ve got a long way to go.”

The plant was never built.

The Southland proposal is, in essence, the Latrobe project moved across the Tasman under a new name. Blood has presented the relocation as a response to Victoria’s hostility towards coal, an explanation that has found a receptive audience in Australia.

In a widely shared Sky News clip, Blood told presenter Andrew Bolt he had moved the project to New Zealand where the Government had “welcomed us with open arms”.

Asked by The Press to identify the specific barriers he encountered in Victoria, Blood confirmed his company had never lodged a formal consent application, and never sought government funding. In a strict regulatory sense, nothing had been refused.

Rather, Blood says Victoria’s policies made it clear a coal-based development had no realistic prospect of approval. Elsewhere, he said the private company meant to supply the coal allowed their agreement to lapse, and that the state government declined to intervene.

Asked directly about his record, Blood acknowledged he had never personally delivered a project of this scale.

“The strength of this project lies in the experience of the broader management team,” he says. “Members of our team have delivered major international energy and resource developments ranging from approximately US$2b to US$14b in value.”

Blood has also pointed to BlackRock, the global investment manager, as one of his company’s roughly 450 shareholders. It is technically correct. A recent portfolio disclosure shows BlackRock holds shares in Blood’s company. The disclosed value of the investment is about $86.

Blood says he has never claimed BlackRock’s involvement extends beyond that of a shareholder.

“As to their internal procedures for valuing long term investments that have not yet come to fruition, I have no idea, it is none of my business,” he says.

“I would think that the fact that there is an investment on their books for which prudent accounting methods have been applied, but that the project is still regarded as current, is pertinent.”

A licence beside a wetland

For now, there is no fertiliser plant, or even an application to build one.

What does exist is an application to explore for coal beside one of Southland’s most significant ecological sites.

In January, Pacific Fertilisers, a company linked to Blood, applied for a permit to explore for lignite on land bordering the Awarua-Waituna wetland complex, north-east of Invercargill. The application is under consideration.

Awarua-Waituna was the first New Zealand wetland recognised as internationally significant under the Ramsar Convention.

It is one of the largest surviving remnants of a landscape once dominated by bogs, peatlands and swamps, and provides habitat for threatened species including the nationally critical Australasian bittern. Farmers, councils, iwi and conservationists have spent years trying to restore its degraded water quality.

An exploration permit would not authorise mining. But if the resource is confirmed and the project proceeds, this is the land Blood has in mind.

The company’s confidence is evident. In an April update to shareholders, chairman Stephen Straughan wrote that the application was being “given priority by the Government”. “In other words,” he added, “this will be our coal”.

Chelsea McGaw, Forest & Bird’s Otago-Southland regional conservation manager, said the proposal could place further pressure on a wetland already struggling.

“We’re quite fortunate to still have it, and it’s protected for a reason,” McGaw says.

“Any kind of degradation above what’s already happened there would be concerning.”

Blood intends to seek approval for the wider development through the Fast-track Approvals process. The process places greater weight on regional and national benefits than ordinary consenting and allows less scope for public participation, although applications are still considered by expert panels and assessed for their environmental effects.

Jones told The Press this was the appropriate route, and he would not stand in the way. The project’s use of coal, he predicted, would “bring the environmental zealots out in boils”.

In his view, criticism of the proposal before it had entered a formal regulatory process was unjustified.

“What I resent is that a bloke comes up with an idea, makes an application, and before matters of mitigation, technical and scientific information is put before a panel, it’s already stigmatised and demonised,” he says.

“Such matters are easily weaponised, jobs never materialise and all these wokeishorthodoxies are used to undermine regional development. Our party [NZ First] doesn’t like those sorts of capers.”

If the project proceeds as Blood envisages, it would bring hundreds of jobs and a new export industry to regional Southland.

McGaw offered a different way of seeing it.

Southland, she says, risked becoming a place where developments with lasting environmental consequences were approved by people who would never have to live with the results.

“You would think that Southland’s wanting to improve the environment and to not be known as the place where you go and throw a development where it’s out of sight, out of mind,” she says.

“There are people that live in Southland, despite what maybe some people in Auckland think, and there are some really important values that we need to protect.”