2002 Victorian coal allocation

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In October 2001 the Victorian Government held a "brown coal tender" to allocate 15 billion tonnes of coal from four sites in the Latrobe Valley for so-called "clean coal" projects. These projects were supposed to demonstrate more sustainable ways to utilise brown coal in exchange for receiving billions of tonnes of coal. Three companies received coal allocations. However, none of the projects have since been developed. In some cases the developers have sold their projects to others, making million of dollars out of coal allocations granted by the state government.

Tender announced

In a media release issued in early October 2001 the Minister for Energy and Resources, Candy Broad boasted that the "scale of the exploration opportunities on offer will create interest in both the international and domestic markets and will help the Latrobe Valley attract potentially massive new investment. The tender is being widely advertised and provides industry with the chance to present new, leading edge technologies for the use of brown coal in an environmentally acceptable way as a transition fuel to a fully sustainable future." The tender, Broad stated, was a result of the deliberations of the Latrobe Valley Taskforce "a special Bracks Government ministerial committee".

In her announcement Broiad stated that the areas being opened up for tender covered 764 sq kms and were located at Driffield/Narracan, Flynn/Gormandale, Traralgon/Yinnar and Tyers/Maryvale. "This is the first time since the 1920’s that tenders have been called for brown coal exploration in Victoria, the media statement announced. "“One of the most stringent criteria for the tender will require the use of the brown coal in such a way as to dramatically lower Victoria's overall greenhouse emissions," Broad stated.

The announcement concluded that "no future development will be successful unless it has been subjected to the most stringent environmental assessment ever undertaken in Victoria's history."  

Coal allocated ... but nothing happened

Three companies received coal allocations from the Victorian government in 2002 -- Australian Power and Energy Limited (APEL) and its later incarnation Monash Energy, HRL Developments Pty Ltd and Loy Yang Power.

AEPL the Minister stated "proposes to use a number of known technologies to produce low sulphur liquid fuels and to generate 500 MW of electricity. Undergrounding (Geosequestration) of carbon dioxide produced in the process is proposed. In stage one, 52,000 barrels per day of high quality low sulphur fuels, mainly diesel, as well as the electricity will be produced." The annoucement stated that HRL "proposes to use integrated drying gasification combined cycle technology in the construction of a commercial power station. Its proposal also includes the construction of a demonstration scale plant as an intermediate step to the construction of a commercial power station" and that Loy Yang Power had been "provided with additional brown coal reserves for a proposed new 1000 MW power station using less greenhouse intensive technology and to re-power its existing plant to reduce greenhouse intensity."

When announcing the allocations in July 2002, Candy Broad stated that "for projects to proceed to mining stage, they will need to meet specified greenhouse emission targets that are 33 to 79 per cent better than current Victorian best practice and 24 to 76 per cent better than international best practice." The government media release quoted Broad stating that "if all the proposals are successful it is estimated they could generate $7 billion in new investment and create 4000 direct jobs in the construction phase."

According to the media release the tenders were "for exploration only and any future mining proposals will require detailed environmental assessment and regulatory approval. Future development proposals in relation to new innovative energy generation will also face stringent environmental assessment. 'A full, comprehensive, environmental impact assessment, which would consider all issues including environmental, native title and rehabilitation issues would have to be undertaken,' Ms Broad said."

Coal into Gas: APEL-Monash Energy

In 2002 Australian Power and Energy Limited (APEL), a project-specific company, proposed to build a $6 billion power station to turn coal into gas. Some of this gas would be used to manufacture 50,000 barrels of diesel a day, while the rest would be burnt in turbines to generate electricity, with the carbon dioxide being buried underground via geosequestration. APEL claimed its electricity generator would produce only 25 percent of the greenhouse gases released into the atmosphere by existing brown coal power stations. (The CEO of the company at the time was Pearce Bowman, a former head of Generation Victoria and a former WMC senior executive.

In 2004 APEL, with its value now greatly increased due to the licence it received from the government, sold the company to Anglo American for over $100 million. Founder and majority shareholder, Allan Blood, reportedly profited significantly out of the sale. Anglo then went into a joint venture with Shell to form Monash Energy. Prior to the full purchase, Anglo had been a minor shareholder.

In 2006, Monash Energy re-announced what was essentially the original proposal: a new coal mine, drying and gasification plant, carbon dioxide capture and storage and a gas-to-liquids plan, to be operational by 2008. Where the company had claimed the project would be 50,000 barrels of diesel a day in 2002 by 2007 they were claiming it would produce 60,000 to 70,000 barrels a day of "transport fuels, particularly an ultra-clean, virtually zero-sulphur synthetic diesel." Anglo Americans interest in the project was the the development of a new brown coal mine based on the Flynn field in the Latrobe Valley. The company stated that the mine would produce 25-30 million tonnes per annum.

In 2009, with none of the plans yet coming into fruition, an anonymous company source was quoted in The Age as saying the project is "not commercially viable".

Despite expired deadlines and unmet promises, the state government has upgraded Monash’s exploration license to a mining license. At the outset of the tender process the government was adamant that mining licenses would not be considered until successful tenderers had completed all the research and development required as a condition of the exploration license. Documentation demonstrating that Monash Energy has met these conditions, or otherwise, is not available to the public.

On July 19th, 2005 Monash Energy had lodged two Mining Licence Applications with the Victorian Government. According to the company, on September 21 2006, "the Minister for Energy and Resources approved one of the two Mining Licence Applications, MLA 5462, and granted Monash Energy a Mining Licence (“ML”) with a duration of 50 years." In a media release the company stated that "for Monash Energy gaining a mining licence over the coal resource is an important step in the development of the Monash Energy coal-to-liquids project. Security over the coal resource gives confidence to proceed with the investment program, including the local application of clean coal technologies."

In a late 2007 report Monash Energy stated that the reason for the granting of the mining licence was that "after recognising that further capital and technological investment hinged on obtaining an early mining licence, the Victorian State Government granted the licence to the project in 2006."

The APEL-Monash Energy 2002 coal allocation project commitments have not yet materialised, while entrepreneurs have been gifted hundreds of millions of dollars worth of coal resources for no public benefit.

In August 2012 The Age reported that in December 2011 the Victorian government had quietly cancelled the company's 50 year coal licence for failing to comply with project milestones.

Exergen - exporting Victoria's brown coal

In 2009 Exergen proposed a $1.5 billion scheme to mine, dry and export 12 million tonnes of brown coal a year to be burned in Indian power stations. India does not currently have an emissions reduction target. The plan included the construction of a 150-kilometre underground pipe to carry the dried coal from the Latrobe Valley to an expanded port at Hastings on Western Port.

In October 2009 Victorian Government documents positively assessing the plan, and also considering the broader allocation of the remaining 13 billion tonnes of unallocated coal in the Latrobe Valley, were leaked to The Age. The subsequent public outcry and a strong community campaign opposing the establishment of an export coal industry in Victorian or further coal allocations, saw State Cabinet and Energy Minister Peter Batchelor shelve the Exergen plans – for the time being. A spokeswoman for Batchelor, Emma Tyner, told The Age that "the Government has no plans to allocate coal to Exergen or to any other company outside of a competitive tender process." "There are no immediate plans for a competitive coal allocation," she told AAP.

Exergen continues to spruik its project both locally and internationally. While strong community campaigning by Environment Victoria and others led to the coal allocation and export plans being shelved in an election year, there is no doubt that the coal industry will continue to push for further coal allocations.

A detailed 2007 study for the State Government by consultants Firecone found that there was no case for a further coal allocation in Victoria. The report found “the Government should not allocate all available coal now, as has been suggested. Private companies already have coal allocations well above their medium term requirements”.

O'Brien pronounces the 2002 coal allocation a 'dud'

After The Age reported in early 2012 new coal allocation plans by the Baillieu government, the Victorian Minister for Energy and Resources Michael O'Brien extolled the virtues and potential of borwn coal. However, he sought to distance the Baillieu government from the previous Labor government's coal allocation process. O'Brien described the 2002 coal allocation process as a "bit of a dud" as "at the time as part of its allocation had no requirement to actually develop the resource, to actually invest."

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