The agency responsible for the Southland region's economic development says farmland being sold by Solid Energy to help offset its massive debt will attract plenty of buyers.
The state-owned enterprise is in crisis talks with the Treasury and its banks over its $389 million debt and is restructuring despite cutting hundreds of jobs.
The struggling company is abandoning plans for a multibillion-dollar lignite industry in Southland to turn low-grade lignite coal into diesel, fertiliser and burnable briquettes.
Solid Energy is starting to sell off some of the 3800 hectares of farmland in the region it had intended to use for the project.
Venture Southland spokesperson Steve Canny said the region's economy will not suffer as the land will be put to good use for dairy farming instead of the proposed lignite extraction.
Mr Canny said the state-owned coal miner will get at least $27,000 to $30,000 a hectare and he expects the land to be in demand for dairying, particularly in the Mataura Valley.
Poor governance blamed
Business commentator Rod Oram said the sale of the land would not have been necessary if Solid Energy had been better managed by the Government and the company's board.
Mr Oram said poor governance during the past six years was responsible for excessive salaries and a shift in focus from the company's core business of specialised coal production.
The company's decision to not extract lignite in Southland has been welcomed by the Coal Action Network environmental group. Spokesperson Kristin Gillies said the coal is the dirtiest and lowest grade energy available.