Rehabilitation bonds paid by the owners of Victoria's three enormous brown coal mines are inadequate and should be increased by tens of millions of dollars, an inquiry into the devastating 2014 Hazelwood mine fire has recommended.
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In its latest, and last, report the inquiry also outlined several technical concerns about the owners' plans to turn the mines into lakes when they are eventually closed, in particular uncertainty over where the water needed to fill the coal pits will come from.
The final report from the Hazelwood fire inquiry board, which was released by the Andrews government on Thursday, focused on whether the state was properly preparing for the closure of the three brown coal mines in the Latrobe Valley.
The open cut mines – Hazelwood, Yallourn and Loy Yang – are each several kilometres wide and have the similar footprints as nearby towns such as Traralgon and Morwell. They feed four large and greenhouse gas intensive power plants.
As security that they will clean-up the mines once closed, the owners are required to pay bonds to the state government. The owners of Hazelwood (GDF Suez) and Loy Yang (AGL) have paid $15 million each, while $11.5 million has been deposited by Yallourn's owners, Energy Australia.
But the expected costs of rehabilitating the mines are many times larger. And in its findings, the inquiry board questioned why successive state governments had failed to increase the bonds to reduce the risk that taxpayers could one day be left to foot the bill.
The mine owners estimate that the clean-up will cost $73 million in Hazelwood's case, up to $91 million for Yallourn and up to $112 for Loy Yang. Independent estimates by consultants AECOM that were presented during the inquiry hearings found it would be significantly more.
Although the inquiry board said it was unable to make a final judgement on the likely cost of rehabilitation – it had doubts over both sets of estimates – it recommended the state government consider lifting the bonds on an interim basis while a wider bond review plays out.
The board proposed the new interim bond be set at half of the mine owners' estimates of the rehabilitation costs, with an option to raise them later if that was deemed insufficient.
It also recommended two trusts be established to cover long-term monitoring costs and help with social and economic upheaval in the Latrobe Valley from mine closures. The state government and mining companies would contribute to both funds.
In other findings, the inquiry accepted advice that the only viable option to rehabilitating the mines was to turn them into some form of lake. However the board said the evidence before it showed it was not clear whether sufficient water would be available to do this.
Another uncertainty is how the mine owners would maintain water quality in the pit lakes and how much this would cost. The inquiry board also raised concerns that not enough technical work had been done to know whether the proposed pit lakes would be stable.
The inquiry board, which was headed by former Supreme Court judge Bernard Teague, recommended the mine owners establish a decade-long research program to address the technical uncertainties of their rehabilitation plans.
It also called on the state government to reform state mine rehabilitation laws and establish a new authority by 2026 to oversee mine clean-up in the Latrobe Valley.
The state government said it would respond "shortly" to the recommendations of the rehabilitation report, and others made in earlier reports by the inquiry.
GDF Suez says it plans to close Hazelwood in 2033, and Energy Australia says it will shut Yallourn in 2032. Loy Yang is due for closure in 2048.
But concerns about climate change and an oversupply of power in the energy market could mean closure of some of the power plants earlier than anticipated.
Environment Victoria campaigner, Nicholas Aberle, welcomed the inquiry's recommendations for increased bonds, but said they fell short of the independent costing of rehabilitation.
"Current government policy requires that bonds cover the full cost of rehabilitation, but this has never been properly implemented," Dr Aberle said.
"With question marks over the future of both Hazelwood and Yallourn as Australia moves to clean up its energy supply, it is important that the Victorian public isn't exposed to a massive rehabilitation bill," he said.
Wendy Farmer, president of community group Voices of the Valley, called on the Andrews government to implement all the recommendations of the mine fire inquiry reports, in particular pointing to past findings that a special health zone be established in the Latrobe Valley.
The head of the Minerals Council's Victorian division, Megan Davison, said simply raising rehabilitation bonds failed to understand the complexity of the issue and could result in unintended consequences.
"For example, using bank guarantees can result in in the locking up of funds that could be otherwise used for ongoing rehabilitation work," she said.
Rehabilitation bonds paid to the Victorian government
CURRENT BOND PROPOSED INTERIM BOND
Hazelwood $15m $37m
Yallourn $11.5m $34m
Loy Yang $15m $56m
Estimated cost of rehabilitation
OWNER ESTIMATE AECOM ESTIMATE
Hazelwood $73m $264m - $375m
Yallourn $46m - $91m $167m - $262m
Loy Yang $112m $221m - 319.m
* Source: Hazelwood Mine Fire Inquiry Report 2015/2016 Volume 4
