Victoria's Brown Coal Boondoggle


While Tony Abbott has most of us expecting to wake up this Sunday to a blood-red sky and service station managers running out of numerals to add to the petrol price, there are some who have genuine cause for concern as the calendar ticks over to July.

I’m thinking in particular of the Victorian coal technology company HRL, who have until the end of June to justify to the Commonwealth why they deserve to keep hold of a $100 million grant they have had access to for over five years now.

HRL have now missed their deadline to meet the conditions of their Commonwealth grant four times, the last of which was 31 December 2011.

The grant, along with another $50 million from the Victorian Government, was awarded back in 2007 under the Howard government’s Low Emissions Technology Demonstration Fund. It would allow HRL to build a new brown coal power station that uses technology to lower its carbon intensity to that of a standard black coal power station. Welcome to the 20th Century.

Back in January, as we awaited an announcement from the Government on the status of HRL’s grant, I wrote in New Matilda about why cancelling the grant was a bloody good idea for everyone. Livid after Martin Ferguson decided in February to give HRL yet another extension to their deadline, I wrote why that was a rubbish idea.

So why, when the Government has developed a very dirty habit of giving repeated extensions to this coal grant, should we expect anything different this time?

Earlier in the year, HRL’s legal right to build their power station was under a major cloud. Both HRL and environment groups were contesting the EPA’s decision to give partial approval to the power station — HRL wanted full approval, everyone else wanted it rejected. If HRL got full approval, all they would need to do is to reach financial close and they would have a strong case for keeping hold of their grant.

HRL won the case but the ruling came with a stipulation: that construction could only begin on the power station when clear arrangements had been made to retire at least the same amount of existing brown coal capacity. It’s a hitch that seems to have stuffed HRL who were left in no position to tell prospective investors when the project would be built and, ergo, when it would start making money to provide returns.

HRL’s subsidiary company Dual Gas, which was set up to run this project, made a statement on 16 April that they would freeze design and pre-construction work on the project. That’s not the sort of thing you do when trying to convince already dubious investors that your project is worth sinking money into.

HRL’s next move was curious, going on the offensive over the carbon tax they claimed could cause hundreds of job losses at their Energy Brix Power station. It was a different story than what appeared in their official financial statement, which lists low electricity prices as a main reason for their financial woes and a $28 million cash compensation package from the carbon price as a key revenue stream to get them through the next financial year.

In fact, with the Energy Brix Power station included as part of the Government’s Contracts for Closure Program, it means the taxpayer is paying for a morbidly unsustainable company to both operate and close the same power station.

Bizarre? You betcha. But for HRL to come out and berate a Government who has given them every chance to get their project off the ground for five years is unlikely to win them any friends.

And then there’s the acknowledgment in last month’s Senate Estimates (pg 117) by Energy Department Secretary Drew Clarke that there would be no more extensions offered to HRL.

Come Sunday, there will also be a somewhat different environment in which to make announcements about major new carbon polluting projects. We can expect a lot of debate about what the effects of the carbon price and key for the government will be to show that we are indeed heading for a clean energy future. To announce continued support for a new dirty coal-fired power station just days after a carbon price takes effect will make many ask what it was all for.

Launched in 2004, New Matilda is one of Australia's oldest online independent publications. It's focus is on investigative journalism and analysis, with occasional smart arsery thrown in for reasons of sanity. New Matilda is owned and edited by Walkley Award and Human Rights Award winning journalist Chris Graham.