Federal Environment Minister Greg Hunt has given the go-ahead to the expansion of the Abbot Point Coal Terminal near Bowen in north Queensland, making it one of the world's largest coal ports.

Key points: The expansion will make it one of the world's largest coal ports

The expansion will make it one of the world's largest coal ports Approval has been granted with strict environmental conditions

Approval has been granted with strict environmental conditions Conservationists lobbied hard to have port project rejected, saying it puts the Great Barrier Reef and surrounding environment at risk

The controversial project involves dredging 1.1 million cubic metres of spoil near the Great Barrier Reef Marine Park, which will then be disposed of on land.

The approval has been granted with strict conditions, the Federal Government said.

Abbot Point is located about 25 kilometres north of Bowen on the north Queensland coast, about 400 kilometres from the vast coal reserves of the Galilee Basin.

The expansion would enable coal to be shipped from proposed mining projects in the Galilee Basin, like Adani's $16 billion Carmichael mine.

The Carmichael mine is Australia's biggest mining project and consists of six open-cut pits and up to five underground mines, and will supply Indian power plants with enough coal to generate electricity for up to 100 million people.

Adani is one of the proponents of the Abbot Point terminal, as it plans to ship coal that would potentially come out of its Carmichael mine.

The Abbot Point port expansion was proposed because there was the expectation that there would be millions of tonnes of coal to go offshore.

Strict environmental conditions imposed

There have been a number environmental concerns with the port's expansion, particularly surrounding its location and the proximity to the Great Barrier Reef.

The terminal is on the edge of the reef, about 19 kilometres from the closest coral.

There had been approvals that were given and reneged upon, and the project had been submitted in different forms to gain approval.

When the new State Labor Government came into power earlier this year, it said the plan to dredge and dump spoil would not go ahead.

It put a new proposal forward to the Federal Environment Minister, which outlined plans to dump that spoil on land, rather than go back into the ocean.

On Tuesday, Mr Hunt approved this proposal, which allows the port expansion to proceed.

Mr Hunt has put strict environmental conditions on the expansion, such as monitoring the water quality around the area, monitoring ship movements, and making sure that dredge spoil does not go back into the ocean.

In a statement, Adani welcomed today's announcement by Mr Hunt.

"The expansion of Abbot Point, the lifeblood of Bowen, is key to Adani's plans to deliver 10,000 direct and indirect jobs and $22 billion in taxes and royalties to Queensland," the statement said.

"Adani welcomed and willingly supported the move to an onshore disposal of dredged material last year, when a site not previously available became a viable option for proximate, well-managed disposal of dredged material.

"This is the third time a well-managed, strictly regulated, science and evidence-based expansion approval has been the subject of a state and federal government approval process since 2010.

"The approval given by Minister Hunt to the Queensland Government mirrors the approvals given to Adani's mine at Carmichael and North Galilee Basin Rail projects, in that they reflect the strictest, world's best practice environmental safeguards.

"Adani, working with the Queensland Government, is confident that the strict conditions placed on this project will enable the jobs and economic benefits that will flow from the expansion of this vital port for exports from our state to proceed."

But Queensland Premier Annastacia Palaszczuk said the expansion would not go ahead unless Adani could afford it.

"Once again I have made it very clear that this is a private company and the private company Adani must get the finance independently if they're going to go ahead," she said.

"There will be no State Government, no taxpayers' money, going towards this project."

Ms Palaszczuk also said the State Government would be attaching a number of strict environmental conditions.

"That is a matter that the state Environment Department is currently assessing at the moment - we must protect our iconic Great Barrier Reef," she said.

WWF fear for wildlife in 'high conservation area'

Supporters have said the expansion would provide thousands of jobs and pump millions into the local economy.

Local federal MP George Christensen tweeted the approval was "good news" for central and north Queensland, adding that it delivered "coal for Christmas".

Queensland Resources Council chief executive Michael Roche said in a statement the latest approval was another important step in the creation of thousands of jobs in the region.

"This environmental approval with strict conditions, which follows an extensive public consultation process, paves the way for the construction of a second terminal at Abbot Point for exports to a coal-hungry India," he said.

"The conditions also align with the Reef 2050 plan that ensures protection of the iconic Great Barrier Reef."

But conservationists had lobbied hard to have the project rejected, saying it would put the reef and surrounding environment at risk.

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Conservation groups said they were disappointed with the latest decision.

World Wildlife Fund spokeswoman Louise Matthiesson said the port was in a delicate environmental area.

"Abbot Point is on the edge of the Great Barrier Reef World Heritage area," she said.

"We know there are turtle nesting beaches, there are dugongs, there are snub fin dolphins, there are thousands of endangered birds.

"This is a very high conservation area and it's not an appropriate site for dredging or a coal port development."

Greenpeace reef campaigner Shani Tager said in a statement the approval to dredge was irresponsible for the reef.

"It's illogical to expand the port to make capacity for the proposed Carmichael mine, because it is a dead-end prospect," she said.

"Adani hasn't got the $16 billion [for the Carmichael mine] - no-one's lending it to them and coal prices are tanking.

"Even the International Energy Agency (IEA) is questioning the project.

"Queensland Labor promised at the last election not to proceed with Abbot Point unless the Carmichael mine achieved financial closure.

"The mine has not found any backers, and the IEA has declared it is not likely to be operational by 2020, if ever."

Adani's credit rating may be downgraded to 'junk status'

At the same time as the Federal Government approved the port expansion, a leading credit rating agency threatened to downgrade Adani's credit rating to junk status.

Global ratings agency Moody's had warned Adani it was considering downgrading debt associated with the Abbot Point coal terminal.

Adani's Abbot Point Coal Terminal is on the lowest rung of investment grade ratings.

A downgrade would see its debt rated as junk, forcing the company to pay a higher interest rate on any future debt raisings.

"The rating action reflects the increasing downside risk for AAPT's credit profile, a consequence of the financial pressures facing the company's coal mine counterparties from challenging coal market conditions," Moody's analyst Mary Anne Low said.

Moody's said plunging global coal prices had raised the risk that some of the coal loader's supply contracts could be terminated early, or not renewed.

It added the terminal owner "no longer [had] sufficient financial flexibility under its existing capital structure to manage these escalating risks".

While Moody's acknowledged the terminal owner had the right to raise prices to compensate for a supplier going under, other transport operators possibly would take the same action.

Should that occur, the agency concludes remaining coal mine owners might not be able to afford across-the-board price hikes, placing a question mark over the coal loader's ability to maintain its revenue stream.

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