The ticking time bomb exposed by Hazelwood fire

Successive Victorian governments have turned a blind eye to the inadequate measures in place to address the need to clean up old coal mines. The smoke billowing over weeks from the Hazelwood coal mine illustrates the costs and risks the community is exposed to from lax regulators.

A fire that took hold in a disused part of the Hazelwood power station coal mine continues to burn several weeks later, severely polluting the surrounding environment. Consequently people are starting to ask how this can happen and what needs to change.

In doing so it has revealed the lax regulation the Victorian Government applies to power station operators to remediate their mines. Successive Labor and Coalition Victorian governments have turned a blind eye to the need for Victorian coal power stations to make adequate provisions to clean up their mines when they are finished. This is exposing future taxpayers to a potentially substantial financial liability if powers station operators were to go bankrupt and walk away from their clean-up obligations.  

The fire took hold in a part of the mine which was no longer being mined, and where fire-fighting equipment had been removed. However, the mine had only been partly - and clearly, inadequately - covered by soil such that the coal seam was still exposed to the risk of catching fire.

Environment Victoria and the Environmental Defenders Office have obtained the mining license governing the Hazelwood coal mine. In section 15 (extract below) it clearly states that the power station operator, GDF Suez, should be progressively remediating the sections of the mine which are no longer being used.

Graph for The ticking time bomb exposed by Hazelwood fireEven if an arsonist started the fire (something yet to be confirmed) which ultimately crept into the mine, the reality is that proper remediation should have meant that the coal seam was not exposed such that it could catch fire. 

Thinking beyond the immediate concern of this fire, there is a bigger issue about whether the Victorian Government is doing enough to ensure power station operators will meet their obligations to remediate mines should they fall into financial difficulties. This potential liability is supposed to be covered by the government, requiring mining operators to provide a bond to the government which they surrender if they fail to adequately remediate the mine. This is much like how someone renting a house provides a bond to cover an event where they damage the property.

To help understand the dimension of the remediation task, below is a picture of the Hazelwood coal mine courtesy of Google Earth. The town of Morwell, accommodating 14,000 people, is the blocks of houses to the north that could almost be swallowed by the mine, such is its size. To provide some further perspective, you can just make out a golf course in the top right of the picture which would make up a small fraction of the mine.

Hazelwood Coal Mine with town of Morwell to north and power station station at bottom

Graph for The ticking time bomb exposed by Hazelwood fire

Now guess how much the Victorian Government has required as a bond to cover the risk of having to clean up this several kilometre wide and very deep hole - $15 million.

Should we be worried that the Victorian community might be left with the cost of cleaning up a gaping wide flammable hole that could burn for months making Morwell unliveable?

Well, over the last few years the operator of the Hazelwood Power Station, previously International Power and now GDF Suez, has made an artform out of painting catastrophic outcomes resulting from government attempts to reduce carbon emissions that would reduce their profits. 

One particular tale they told governments was that if carbon pricing was to be introduced without them receiving lots of free permits, they would have to default on their debts and the lights would go out. Smarter government officials would usually curiously ask, ‘why wouldn’t the banks keep it operating and sell it onto someone else given its operating costs, even with a high carbon price, would still be lower than the price of electricity?’

At this point the mine remediation costs would be invoked as being so great that no one would be interested in buying the asset.

EnergyAustralia, who owns a similarly sized mine to the north of Hazelwood, has also been out making claims that they are under so much financial stress that abrupt closure of generators are imminent if the Renewable Energy Target is not watered down.

We should probably take these claims with a hefty grain of salt. But it illustrates that the Victorian Government might be wise to require a lot more than $15 million set aside to cover the risk that these companies might walk away from their mine clean-up obligations.

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