P R I M E R
Climate Action Moreland
June 2015
2 REPLACE HAZELWOOD PRIMER
P R I M E R
• TheVictorianGovernmenthasexpressedadesire(thoughitdoesnotyethaveapolicy)forasignificantexpansionofrenewableenergyinVictoria.Thishaswidespreadcommunitysupportandmustbedonequicklyandatalargescalebecauseclimatechangeisalreadydangerous.ScientistswarnthattwodegreesCelsiusofwarmingcouldoccurinjusttwodecades,sopreservingasafeclimateandahealthyfuturerequiresrapidde-carbonisation.
• Expandingrenewableenergyrequirescoal-generatingcapacitytoberemovedfromthemarketbecauseoversupplyiscrowdingoutandpreventingnewinvestment.TheAustralianenergymarketoperatorsaysthereareabouteightgigawattsofsurplusgeneratingcapacityacrossthenationalmarket,equivalenttofiveHazelwoodpowerstations.Thisincludesupto2.2gigawattsofbrowncoalgenerationthatisnolongerrequiredinVictoriain2015,whichisgreaterthanHazelwood’scapacity.Powercompanieshavebeenlobbyinggovernmentforcapacitytobereduced,andseniorVictorianenergydepartmentbureaucratsareawareof theneedtoclosecoalpowerstationsinordertorolloutrenewables.
• TheVictorianGovernmenthascommittedtobeingaleaderonclimatechange.Closingdownexcesscoalgenerationisakeytestofthegovernment’sclimatecredentials.Coal-firedpowerstationsaretheworld’slargestsourceofplanet-warmingcarbondioxideemissions.VictoriacannotmakethenecessaryemissionsreductionswithoutaddressingtheoperationsofHazelwoodand/orYallournpowerstations.
• Hazelwoodpowerstationisold,unsafeanddirty.
Basedonemissionsintensity,itisthethird-dirtiestcoalpowerstationintheworldandthedirtiestinAustralia,releasingaround16milliontonnesofgreenhousegasesannually,almostthreepercentoftotalAustraliangreenhouseemissions.TheHazelwoodmajorityowner,Engie(formerlyGDFSuez),ownsthethird-mostpollutingcoal-powerstationfleetintheworld.Thefull–healthandcarbonpollution–socialcostsofHazelwoodtotalling$900millionperyeararebornebythecommunity,ratherthantheplant’sowners.
• AsteadystreamoflocaljobscanbecreatedintheLatrobeValleywiththerehabilitationofminesanddecommissioningofplant,whichwillrequireasignificantworkforcestretchingwelloveradecade.TheLatrobeValleyneedsastrongjobspackageandaneconomictransitionplanandnewindustriesbecausethemovefromcoaltocleanwindandsolarrenewableenergyisnowbothurgentandinevitable.
• Hazelwoodpowerstationandmineareahealthhazardtolocalresidents,exemplifiedbytheautumn2014minefire.TheownersofHazelwoodhaveabusedtheirsociallicenceandforfeitedtherighttoprofitfromapowerstationthatisnowamajorhealthhazard–bothtolocalpeopleandtoallpeopleswhofacetheuncertaintiesoflivinginahotterandmoreextremeclimate.
• InJuly2010,theVictorianLaborgovernmentpromisedtostartshuttingHazelwoodandpassedclimatelegislationprovidingthereservepowertoregulateemissionsfromexistingbrowncoal-firedgenerators.Restoringthegovernment’scapacitytoregulateemissionswouldbecomplementarytoactionsbeingtakenbyothergovernments,includingintheUnitedStatesandEurope.
SUMMARY
ReplaceHazelwoodPrimeriswrittenbyDavidSprattandproducedbyClimateActionMoreland.www.climateactionmoreland.orgwww.facebook.com/groups/climateactionmorelandThankstoJohnEnglartforphotos.June2015v1
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HAZELWOOD POWER STATIONHazelwoodPowerStation(HPS)wasbuiltbetween1964and1971,andcomprises1542megawatt(MW)ofcapacityovereightgenerators.ItwasprivatisedbytheVictorianLiberalPartyKennettgovernmentin1996for$2.35billion.
IfHPShadstayedinpublichands,itwouldlikelyhavebeendecommissionedin2005,butin2004theBracksLaborgovernmentextendeditsoperationstill2031,allowingHazelwoodtomovearoadandarivertoaccess43milliontonnesofbrowncoaldepositsinarealignmentofthemininglicenceboundaries.Theownershavea30-yearmininglicencedueforrenewalin2026.
HPSandthelandonwhichitoperatesareownedbytheHazelwoodPowerPartnership.Since7June2013,thefourpartnershavebeensubsidiariesofInternationalPower(Australia)HoldingsPtyLtd.ThiscompanyisinturnjointlyownedbysubsidiariesofEngie(formerlyGDFSuezSA)(72percentownership)andMitsui&CoLtd(28percentownership).EngieisaglobalenergycompanywithcorporateheadquartersinFrance.Mitsui&CoLtdisaglobaltradingcompanywithcorporateheadquartersinJapan.
CurrentlyHPSproducesmorethan10,ooogigawatthours(GWh)ofenergyannuallyandissuppliedwithupto18milliontonnesofcoaleachyearfromtheadjacent
Hazelwoodmine,releasingaround16milliontonnesofgreenhousegasesannually.TodayHPSprovidesapproximately21percentofVictoria’sbaselineelectricitysupply.
POLLUTIONEmissions intensity:In2010,HPSwaslistedbyTheClimateGroupasbeingthesecondlargestpowerstationemitterofcarbonpollutioninAustraliabytotalvolume,butwiththehighestemissionsintensity.1TheClimateGroupestimatedthatin2010HPSemitted15.7milliontonnesofcarbondioxideequivalentgreenhousegases,whichis2.8percentofAustralia’stotalcarbondioxideemissions,and9percentofAustralia’stotalcarbondioxide(CO2)fromelectricitygeneration.ArecentenvironmentalreportreleasedbytheEUEnergyCommissionfoundthatbasedonCO2emissionsperunitofoutput(asof2013),Hazelwoodisthethirdmostpollutingthermalpowerplantintheworld.2HPSwaslistedastheleastcarbonefficientpowerstationintheOECDina2005reportbyWWFAustralia,withCO2intensityof1.58tonnesofcarbondioxidepermegawatt-hour(t/MWh),makingit“themostpollutingofallpowerstationsoperatingintheworld’smajorindustrialisedcountries”.3Morerecently
Photo: John EnglartPhoto: John EnglartPhot
os: J
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CLIMATE CHANGE AND COAL EMISSIONSAustraliaistheworld’slargestpercapitaemitterofgreenhousegases.
AccordingtothePitt&SherryCedexreport,carbonemissionsfromAustralia’smainelectricitynetworktotheendofFebruary2015hadincreasedbyanannualrateof4.1milliontonnescomparedwiththeendofJune2014,whentheAbbottgovernmentscrappedthecarbonprice.Overthesameperiod,theshareofblackandbrowncoalintheenergymixoftheNationalElectricityMarketincreasedto74.9percentcomparedto72.9percentinJuly2014,andisclosinginonthe75.1percentshareheldbeforethecarbontaxbeganinmid-2012.4
Recentresearchhasdemonstratedthattheglobalcarbonbudgethasexpiredifwewishtokeepglobalwarmingto2degreesCelsius(2C°),itselfadangerouslyhightarget.5Thatis,noadditionalemissionsarerequiredtopushtheplanetto2C°ofwarming,assoonastwodecadesfromnow.6InAustralia,2C°ofwarmingwouldresultinthesalinationofKakadu,thelossoftheQueenslandwettropicsrainforestsandthelossoftheGreatBarrierReef,aswellasasea-levelriseinthetensofmetres.2C°ofwarmingisconsideredtobetheboundarybetweendangerousandverydangerousclimatechange.
Globalactionatemergencyspeedisessentialtodrivearapidtransitionfromdirtyfossilfuelstocleantechnologiesandrenewableenergy.Replacingthefossilfuelindustryisnowapressingpriority.Thetidemaybestartingtoturnagainstcoalandfossilfuels,butprofitableexistingcoalinfrastructuresuchasAustralia’sbigbrown-coalgeneratorswillnotclosethemselvesdown.
theAustralianEnergyMarketOperator(AEMO)hasstateditsemissionsintensityat1.52t/MWh.7PollutionfromHazelwoodincreased2.7percentfrom1998to2004,despiteinvestmentin“cleaningup”thefacility.
Water:In2005,1.31megalitresofwaterwasconsumedpergigawatt-hourofpowergeneratedatHazelwood.Thataddsupto27billionlitresayear,whenwaterusedinthemineisincluded.8
Pollutants:Ina2012-2013report,theNationalPollutantInventory(NPI)measuredthepowerstation’sannualpolychlorinateddioxinsandfuransemissionsat0.0016kg;arsenic,cadmiunandcompounds95kgs;mercuryandcompounds450kgs;hydrochloricacid8millionkgs;oxidesofnitrogen25millionkgs;sulphuricacid13millionkgs;particulatematter2.5μm550,000kgs;andboronandcompounds110,000kgs.9
Asbestos:A2001VictorianStateGovernmentstudyfoundtherateofpleuralandperitonealmesotheliomaamongpowerindustryworkerswasseventimesthenationalaverage.LatrobeValleypowerindustryworkersdie15yearsyoungerthanthenationalaverage.ThepowerstationsoftheLatrobeValleyusedasbestoswidelyintheirconstruction.ThesubstancewasbannedinVictoriain2003.However,it’sestimatedthat146,000employeesandcontractors,whoworkedinStateElectrictyCommissionofVictoria(SECV)plantsfrom1921tothe1980s,wereexposedtoit.Between1976and2008,$52.6millionwaspaidtoformerSECVemployeesbytheStategovernmentinsuranceauthority,anditisexpectedafurther$369millionwillpaidoutbytheVictorianManagedInsuranceAuthoritytoformeremployees.InJune2010,theEPAconfirmeditwasinvestigatingreportsoneofHPS’ssmokestackscontainedasbestos.10
Breaches:InNovember2009,EnvironmentVictoriareleasedInternationalPower’s2009Statement of
Complianceinwhichthecompanyrevealedthatithadbreachedfourofthe22conditionsofitsEnvironmentProtectionAuthoritylicence.Thegroupalsoreportedthatthecompanyhadbreacheditslicenceconditionsin2007and2008.EnvironmentVictoriasaidthebreaches:
relatetowaterqualityindischargesfromtheplant’scoolingpondtotheMorwellRiver;dustandparticulatelevels.Thereportsalsooutlinethatenvironmentaltargetsrelatingtogaseousemissionsfromthesmokestacks,includingcarbonmonoxide,sulphurdioxideandsulphurtrioxidewerealsoexceeded.
EnvironmentVictoriaaddedthat:“onseveraloccasionswhentheplantexceededitslicencelimits,theEPAgrantedthecompanyanemergencyapprovaltopollute,protectingInternationalPowerfromprosecutionunderenvironmentallaws.”11
SOCIAL COSTThefullsocialcostofHazelwood–healthandcarbonpollutioncosts–is$900millionperyearaccordingtoarecentlyreleasedreportfromHarvardUniversityresearchers.12ThesecostsarebornebytheLatrobeValleycommunity(health)andglobalcommunity(carbonpollution),ratherthantheplant’sowners.
Theresearch,promptedbythehealtheffectsofthe2014Hazelwoodminefire,calculatesthesocialcostsforeachelectricitygeneratorinVictoriaandhighlightstheimportanceofaccountingfortheseexternalisedcostswhenconsideringtheState’sfutureenergymix.Thereportconcludesbynotingthatafailuretopricetheenvironmentalandairpollutioncosts“isdistortingthemarketandpreventingashifttocleanergeneration.”
Thereportsauthorssay:
ThehistoricaldominanceofbrowncoalgeneratorslikeHazelwoodinVictoria’senergymarketisbasedontheirverylowprivatecosts,drivenbycheapandplentifulfuel
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EXCESS CAPACITY IN THE ELECTRICITY MARKETAEMO,theAustralianEnergyMarketOperator,reportedinits2014Statement of Opportunitiesthatthereispotentiallybetween7650MWand8950MWofsurpluscapacityacrosstheNationalElectricityMarket(NEM)in2014–15.Approximately90percentofthisisinNewSouthWales,QueenslandandVictoria.Itsaysmorethan7500MWofgenerationcapacitywouldneedtoberemovedfromthemarkettoaffectsupplyadequacyin2014-15.15
ThisisequivalenttoaroundfiveHazelwoodpowerstations.AEMOhasidentifiedupto2200MWofbrowncoalgenerationthatisnolongerneededinVictoriain2015.
ElectricityconsumptionintheNEMisforecasttodeclineoverthenextthreeyears,followinganaverageannualdeclineof1.8percentthatoccurredbetween2009–10and2013–14.TherehasbeenreducedresidentialandcommercialconsumptioninmostNEMregionsduetostronggrowthinrooftopphotovoltaic(PV)systeminstallations,ongoingenergyefficiencysavings,responsestohighelectricitypricesoverrecentyearsandretirementofsomeenergy-intensiveheavyindustry.In2013-14,rooftopPVresultsina2.9percentreductioninconsumptionfromthegrid.16
ReplacingHazelwoodwouldreduceexcesscapacityandhelprestoreinvestorconfidencetobuildnewcleancapacity,accordingtoRogerDargavilleoftheEnergyResearchInstituteatUniversityofMelbourne:
Hazelwoodrunsatanaverageofaround85percentcapacity,or1.4GW.Sothe1GWdecreaseindemandisclosetothetotalcontributionofHazelwood.Turningitoffwouldmoreorlesstakeusbacktothesupplyanddemandbalanceof2008.Thiswouldhavetheeffectofincreasingwholesaleelectricitypricesbyaround2c/kWh–returningpricestothelevelsseenbefore2008,andrestoringsomeinvestorconfidencetobuildnewandcleanercapacity.Evenwithoutnewcapacity,theeffectofshuttingdownHazelwoodandtheslackbeingtakenupbyexistinggeneratorsthathaveonaverage30percentloweremissions,wouldreduceCO2emissionsby5Mtperyear,orthreepercentofAustralia’selectricitysectoremissions.17
andlowoperatingcosts.However,thisisonlypartofthepicture,ignoringthesignificantexternalcoststhatthesegeneratorsimposetohumanhealth,theenvironment,climatechangeandpublicinfrastructure.InthispaperweestimatetruecostofHazelwoodin
bothprivateandsocialterms.Asexpected,wefindverylowprivateshortrunmarginalcosts,intheorderof$3/MWh.Wealsofindveryhighexternalcosts.Ourcentralcaseestimatesoftheexternalcostsofcarbonemissionsandairpollutantsare$64/MWhand$8/MWhrespectively.Thisgivesasocialmarginalcostof$75/MWh,andsocialaverageunitcostof$87/MWh,wellabovethecurrentVictorianwholesaleelectricitypriceof~$30/MWh.ThismeansHazelwoodimposesanexternaleconomiccostonAustraliansintheorderof$900millionperyear,andover$2.5billioninourhighcaseestimates.13
DrNicholasAberleofEnvironmentVictoriacommented:
Ithasbeenknownforalongtimethatburningcoalcauseshealthandenvironmentaldamage,butthisisthefirsttimeresearchhasattemptedtoquantifythatcostinVictoria.Themodellingshowsthatthelarge
powerstationsintheLatrobeValleyareresponsibleforcostsbetween$500mand$1.2beachinhealthandenvironmentaldamageeveryyear.”
InanopinioncolumninThe Age in2010,“WrongtodismissthedirtonHazelwood”,ProfessorintheSchoolofEarthSciencesattheMelbourneUniversityDavidKarolyestimatedthatsincetheHPSbeganoperatingin1971ithasemittedapproximately600milliontonnesofcarbondioxideandwouldcontributeafurther320milliontonnespriortoitscurrentlyscheduledclosuredateof2031.Karolyestimatedthatthisonepowerstation:
willcontribute0.01percentoftotalglobalemissionsfrom1970to2100.Giventhedirectlinkfromemissionsofgreenhousegasestoclimatechangeandsealevelrise,theemissionsfromHazelwoodcanbepinpointedasapartialcontributortofuturesealevelrise.Sincetheriseisconservativelyexpectedtoaffect100millionpeopleby2100,Hazelwood’s0.01percentcontributionwillcausetheannualfloodingofmorethan10,000peoplesomewhereintheworld.14
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Excess generation capacity in Australian (left) and Victorian (right) elecricity markets. AEMO data
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THE MINE FIRE AND REHABILITATIONAfirecommonlyreferredtoastheMorwellcoalminefirestartedindisusedandpoorlyrehabilitatedsectionsoftheHPSopen-cutmineon9February2014andwasofficiallyconsideredcontrolledon10March2014.After45daysitwasdeclared“safe”.TheChiefOfficeroftheCountryFireAuthoritydescribedthefireas“oneofthelargest,longestrunningandmostcomplexfiresintheState’shistory.”ThemineandthefirewereextremelyclosetoresidentialareasofMorwell.18
TheStategovernmentanditschiefmedicalofficerwerereluctanttoactquicklyanddecisivelyinthefaceofverysignificantthreatstohealthofthe12,000residentsofMorwell,andinresponsetocompellingevidencecompiledbyresidentsandunions.Men,womenandchildrencomplainedofheadaches,bleedingnosesandbloodyeyes,coughing,breathingdifficulties,insomnia,lethargy,skinirritations,throat,eyeandearinfections,depression,agitationandanxiety.Somesymptomshavepersistedsincethefire,andthereconvenedroyalcommissionwillexamineconcernsaboutlong-termhealthimpacts.
Oneextensivestudy,publishedintheBritish Medical JournalinFebruary2014,foundthatatinyincreaseinannualexposuretoPM2.5fineparticulates(whichMorwellresidentsbreathedin)increasesriskofaheartattackby13percent,accordingtoresearcherDrGuiliaChiseroni.19
PM2.5particulatesduringthefireweremeasuredatlevelsupto28timesthesafestandard.
Twenty-threefirefighterslodgedclaimswithWorkCoverasaresultofattendingtheHazelwoodfire,while15receivedhospitaltreatment.Fourteenofthose15weretreatedinhospitalforcarbonmonoxidepoisoning,aswellas12HPSstaff.
Thereport20oftheinquiryintothefire(ABoardofInquiryintotheHazelwoodCoalMineFire,appointedon21March2014andreportingon29August2014)concludedthat:
ThecostbornebytheVictorianGovernmentforfiresuppressionactivitiesalonewasapproximately$32.5million,nottakingintoaccountthevalueofvolunteerlabourandcostsincurreddirectlybythecommunity.ThissumdoesnottakeintoaccountcostsincurredbytheEnvironmentProtectionAuthority,DepartmentofHealth,DepartmentofHumanServices,DepartmentofEducationandEarlyChildhoodDepartmentorLatrobeCityCouncil.TheCFAmayseektorecoversomeofitsfirefightingcostsfromGDFSuez.TheBoardestimatesthetotalcostbornebytheVictorianGovernment,localcommunityandGDFSuezexceeds$100million.
Theinquiryheardthatthegovernmentregulatorhadnocontactwiththeminemanagersaboutrehabilitationworksinthefiveyearsleadinguptothefire.
Theinquirygaveadamningassessmentofthemine’sfirepreparednessandresponse:• “GDFSuezwasnotadequatelypreparedforafireof
thekind,severityandcomplexityoftheHazelwoodminefire”;
• “insteadofplanningfortheworst,minemanagementhopedforthebest”;
• “allofthefactorscontributingtotheignitionandspreadofthefirewereforeseeable…yetitappearstheywerenotforeseen”;
• managementfailedtounderstandcomputermodelson8February2014showingsignificantfirethreattothemineand“failedtofullyappreciatetherisksfacing
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Carbonintensityofelectricitygeneration. Thegreyshading
indicatesthezonearoundthe0.6t/MWhthreshold.EU27isthe27memberstatesoftheEuropean
Union. DatafromEnergy
Technology Perspectives 2014: Harnessing
Electricity’sPotential(IEA,2014).http://www.iea.org/Textbase/npsum/ETP2014SUM.pdf
themine”;• theinitialresponsetothefirewas“inadequate”and
therewasafailuretoactivatethemine’sEmergencyResponsePlanuntilmorethananhourafterthefirewasfirstreportedandmanagementfailedtoliaisewithemergencyservices,ortonotifytheCFAorrequestCFAresourcesforseveralhours;
• themine“lackedreadilyavailableequipment”;• “firefightingwassignificantlyimpededbythefact
thatthereticulatedfireserviceswatersystemor‘fireservicenetwork’didnotextendtolargesectionsoftheworkedoutareasoftheHazelwoodmine”;
• “firefightingeffortswerefurtherimpededbyfiredamagetothetwoSPAusNet66kVpowerlinesthatrunacrossthenorthernbattersofthemine”resultinginpowerlosstothetwomajorwaterpumpingstations,triggeringasignificantdropinwaterpressureinthefireservicenetworkandhamperingtheabilitytofillupfiretankerswithwater;
• “therewerenointernalback-uppowersupplygeneratorsattheHazelwoodmine”;and
• therewere“difficultiesanddelaysintryingtoaccessandnavigatethemine”.
Aswell,from1994–2007,“degradedorleakingpipeworkwasprogressivelyremovedfromthefireservicenetworkinworkedoutareasoftheHazelwoodmine”andhadnotbeenreplacedpriortoFebruary2014.Thisandothershortcomingsmeantthatthere“wasnopreventivemeasureinplacetoprotecttheworkedoutareasfromemberattack”.
Theinquiryreportsays:
ThestrongestcriticismtheBoardmakesofGDFSuezisitsfailuretoundertakeafireriskassessmentoftheworkedoutareasofthemine,includingacost/benefitanalysis.NotundertakingthisriskassessmentwascontrarytoarecommendationmadeafterthefireinthemineinSeptember2008.
Theinquiryconcludedthat:
InnotproperlyidentifyinghazardsassociatedwithafireintheworkedoutareasoftheHazelwoodmineandtheriskstotheMorwellandsurroundingcommunities,GDFSuezfellshortofitsobligationsunderOHSlaws.GDFSuezalsofailedtoadoptreasonablypracticableriskcontrolmeasurestoeliminateorreducethehealthandsafetyrisksassociatedwithafireintheworkedoutareasoftheHazelwoodmine.
Inaddition,atgovernmentleveltherewas“agapinregulationoftheHazelwoodmineinrespectoffireriskswiththepotentialtoimpactonMorwellandsurroundingcommunities,suchasthatwhichmanifestedin2014”.TheHazelwoodminefirewas“aforeseeableriskthatslippedthroughthecracksbetweenregulatoryagencies”andgovernmentagencies“didnotintervenedespitethesekindsofrisk[tothecommunity]beingentirelyforeseeable.”
InMay2015,thenewLaborgovernmentreconvenedtheinquirytolookatthreespecificissuesandtoreportbackontheAngleseacoalmineclosureandfirerisksby31August2015,healthandincreasedmortalityissuesassociatedwiththeMorwellfireby2December2015, andLatrobeValleyminerehabilitationoptionsby 15March2016.21
OTHER INCIDENTS TherehavebeenseveraldisastersintheHazelwoodandYallourncoalminessince2006,whichunionrepresentativeLukevanderMeulensaysare‘’allbecauseoflaxornon-existentregulation’’.22
Intheperiod2001–2008,fivesignificantHazelwoodfireeventswerenotifiedtotheMiningRegulator,anddetailedatpage213oftheinquiry’sreport.
Majoreventsinclude:• 2006October:AlargefireattheHazelwoodmine
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triggeredbyequipmentfailuredamagedconveyorsandcausedalossofgeneratingcapacity.Aninvestigationfoundthatasignificantfactorinthe“escalationofasmallfireintoanuncontrollablefirewithinashorttime[was]duetoextremeweatherconditionsandthedelayin[themineowners]provingsufficientresourcestocombattheinitialfire”.Inaddition,theinternalauditoffireservicesfacilitieshadnotbeencompleted,andfiretrainingfortheseasonhadnotbeencompletedbecauseOctoberwasnotdesignatedaspartofthefireseason.Thelevelofdamagewasestimatedat$28,830,000bytheCFA.AccordingtoProfDavidCliff:“Thepreviousfirein2006shouldhavetriggeredareviewofthesafetymanagementsysteminaccordancewiththerequirementsofAustralianStandardAS4804andtheOHSregulations.Thecontrolsbefore2006andimplementedasaresultofthateventareclearlynotadequate.”23
• 2007:TheLatrobeRivercollapsedthroughYallournmine’snorthernbatters,floodingthemine.24
• 2008:Hazelwoodminesouthernbattersfire.• 2011:MorwellRiverdiversioncollapse,closingPrinces
FreewaybetweentheHazelwoodmineandMorwellresidentialareasforsevenmonths.25
• 2012-13:LatrobeRiverdiversioncollapsed,floodingYallournmine.26ThewaterwasstillbeingpumpedfromthemineinJune2105.
MINE REHABILITATIONMinerehabilitation(coveringexposedcoalseamindisusedpartsoftheminewithtopsoilandoverburden,followedbyrevegetation)isakeyissuebecausethefailuretodosocontributedtothescaleofthe2014andpreviousfires.Themine’sworkplanincludessomerehabilitationbuttheassociatedtimelineisflexible,anditisacostthatdoesnotinanyimmediatewayincreaseprofitability,sotheownersseemintentondoingtheminimum.Governmentoversightoftheworkplanhasbeenpoor.
Thecurrentrehabilitationbond–setatan“interim”
valueof$15millioninthemid-1990s–innowayreflectsrehabilitationcostsshouldtheownersabandonthesite.GDFSueztoldtheinquirythatcoststocompleterehabilitationwouldbelessthan$100million,orabout“$80-somethingmillion”.
EnvironmentVictoriasubmittedtotheinquirythat:
FinancialassurancecalculationsinQueenslandminessuggestbondsofasmuchas$483millionwouldbemoreappropriateforHazelwood.ThesevereunderestimationofrehabilitationcostsandthelevelofthebondpotentiallycreatesamassivefinancialinabilityforVictoriantaxpayers…
TheCFMEUaskedtheinquiry:ifadequatefirefightinginfrastructurewasintroducedtounusedsectionoftheminebutrehabilitationwasnotcarriedout,then:
whowillpayfortheindefiniteinstallation,maintenanceandoperationofthisinfrastructurelongaftertheprivatepowercompanieshaveabandonedthesemines?Inourassessment,rehabilitationisthebestandonlylong-termworkablesolution….therearemanyfineexamplesofrehabilitationintheLatrobeValleywherebattershavebeeninfilledwithoverburdenandtopsoil…
EnvironmentVictoriahasproposedraisingrehabilitationbondstoappropriatelevels(andbeingheldascashbondsratherthanbankguarantees)withinterestpaymentsusedtosupporttransitioninitiatives,andtoraisetherateofcoalroyalties,withtheproceedsbeingusedforrehabilitationworks.Theirreportestimatestotalrehabilitationcostsatupto$200millionforeachofthethreemajorminesintheLatrobeValley.27
InJanuary2015,PremierAndrewsannouncedthere-openingofthe2014inquirytolookintoareportedspikeindeathsandimplementationofnewfiremanagementrules:
Andifanyonedoesn’tcomplywiththisregime,anymineoperator,welltheydofacepenaltiesrangingfrombeingbreachedandhavingtostopworkatthemine,rightthroughtosubstantialfinancialpenalties,finesandultimatelylosingtheirlicences.28
Theupdatedtermsofreferenceexplicitlyincludeminerehabilitationandbonds,andLaborwillrequirecoalminestoreportannuallyonrehabilitationprogress.Theenergy
A view of the Hazelwood mine. The pit is 100 metres deep. Photo: John Englart
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ministermayrequirethelicenseetoenterintoafurtherbondduringtheoperationofthelicence,iftheministerconsidersthattheexistingbondisinsufficient.
EnvironmentVictoriaresponded:ThefirstHazelwoodinquiryheardclearevidenceofthebenefitsofrehabilitationworksinpreventingminefires,andrehabilitationmustbeakeyfeatureofnewfirepreventionplans.Itisessentialthatthere-openedHazelwoodMineFireInquirymakesfirmandclearrecommendationstospeeduprehabilitationworksinbrowncoalmines.29
AccordingtotheNSWAuditor-General,asof30June2012therewereabout573derelictminesitesinNSW(includinggoldandotherminerals,aswellasformercoalmines).Andonlyasmallfractionofthosederelictmineswerebeingrehabilitated.30
Apollinlate2014foundthatlarge-scaleandacceleratedminerehabilitationprogrammehascommunitysupport.On13November2014,theLatrobe Valley Expressreported:
MorethanhalfofLatrobeValleyresidentswouldswingtowardsacandidateadvocatingforacceleratedrehabilitationoftheregion’sageingcoalminenetworkatthegelection.Anautomated‘robopoll’conductedbyEssentialResearchinlateOctoberonbehalfofEnvironmentVictoriafound57percentofMorwellvotersand52percentofNarracanvoterswouldbe“morelikely”tosupportacandidatewhostronglysupported“apolicytospeeduprehabilitationworkatcoalmines”.Samplingmorethan400residentsineachelectorate,thepollingalsofound91percentofMorwellvotersweresupportiveofrehabilitationasamethodtotransformminesintosafeandusableenvironments.31
UnionleaderssaytheStategovernmentcouldunlockjobcreationintheLatrobeValleyifitforcedoperatorstofast-trackrehabilitationofdisusedmines:32
ConstructionForestryMiningandEnergyUnionminingandenergy[division]presidentLukevanderMeulenhascalledonbothmajorpoliticalpartiestoconsidertheeconomicandemploymentbenefitsassociatedwiththelargescaleexcavationprojects,opportunitiesforwhichare“plentiful”and“ripeforthetaking”.“Thesejobsarethererightnow.”“We’vegotthepeopleandthetechnologyandthe
know-how,butitneedstostartrightnowbecauseit’sgoingtotakealongtime.”MrvanderMeulensaidifrehabilitationtimelineswere
fast-tracked,theLatrobeValleycouldenjoyaconstantstreamofjobcreationsimilartothelevelsofemploymentseenduringtheeight-kilometrediversionoftheMorwellRiveraroundthewesternendoftheHazelwoodopencut.“Therewerehundredsandhundredsofpeopleworkingonthatjobforyears,itwassimplymassive;it’slandscapingonamassivescale,”MrvanderMeulensaid.“Rehabilitationisexactlythesame,ontopofallthe
bulldozers,frontendloadersandexcavators,there’stherevegetationpart–there’streereplanting,re-grassingandgettingtheecologicalhealthbackintothesite.“It’sonlymorallyrightforthistypeofworktogo
tolocalworkers,sotheywouldhavetobegivenfirstpreferenceforthejobs.There’snopointingovernmentsthrowingmoneyintoaregionjustforsomeonetocomeoutofMelbourneandsnatchitup,”[GippslandTradesandLabourCouncilsecretaryJohn]Parkersaid.“Wearealwaystalkingabouttransitionindustriesof
thefuture,butthisisalegitimatetransitionopportunityfortheLatrobeValleyrighthereandrightnow.It’sabouttimeLaborand[theCoalition]stoppedblamingeachotherforwhattheydidn’tdowhiletheywereinpower,andtellushowtheyaregoingtofixthisplace,”hesaid.“Thisisamajorworkthatneedstogetdone,andwill
createalastinglegacythatgenerationscanenjoy–ifwedothesethingswecanstartputtingvaluebackintotheLatrobeValleyenvironment,whichpeoplecanonedayappreciateagaininsteadofitbeingaderelictwasteland.”
WHO PAYS FOR REHABILITATION?ThelicenceconditionsforHazelwoodpowerstationincludearequirementfortherehabilitationofthemine.Muchofthatworkhasnotbeendone,andthecurrentrehabilitationbondof$15million(beingreviewedbythereconvenedminefireinquiry)ispaltrycomparedtothecost.In2010,anexternalauditputtotalclose-downandrehabilitationcostsat$350million.
Nowthecompanyistellingthegovernmentthereisaveryreallimitonhowmuchrehabilitationitcanaffordbywayofbond.Theyhavetoldunionsthatthelong-termelectricity-productioncost(includingpropermaintenance,depreciationandinterest)isover$30/MWh,whichhasbeenhigherthanthewholesalepriceforconsiderableperiods.AsmaintenancecostsarereducedandtheHazelwoodworkplacerisksincrease,onemessagethecompanyseemstobesendingisthatitcannotaffordtoshutdown,ortomaintaintheplanttoahighsafetystandard.
However,thismissesthekeypointthatthecompanyislegallyobligedtocarryoutthefullrehabilitationworksincorporatedintothelicenceworkplan.Ifitfailstodoso,thereshouldbelegalrecoursethroughtheparentcompaniesifnecessary.
Ontheissueofcostsversusincome,arecentCitibankanalysisfoundthat“atforwardwholesalepowerpricesofabout$33amegawatt-hourforthe2015-17period,allthebrowncoalplantsarecashpositivewithahealthycashmarginonalongruncostofabout$15/MWh.”33ThisishalfthecosttheHazelwoodownersclaim.Aswell,thewholesalepricehasincreasesignificantlyin2015tocloseto$50/MWh.Otheranalyseshavealsofoundthebrown-coalgeneratorstoallbecash-flowpositive.
10REPLACEHAZELWOODPRIMER
ECONOMIC TRANSITION AND NEW JOBSTheLatrobeValleyneedsaneconomictransitionplanandastrongjobspackagebecausethemovefromcoaltocleanwindandsolarrenewableenergyisnowbothurgentandinevitable.Asalreadydiscussed,minerehabilitationmustbeonekeyelementinsuchaplan.
Theneedfor“justtransitions”hasbeenafocusforenvironmentandclimatelobbyandactivistgroupsforsomeyears,ashaveallianceswithunionsandunionactivists.In2008,GreenpeaceandtheCentreofFullEmploymentandEquitypublishedA Just Transition to a Renewable Energy Economy in the Hunter Region Australia.34
Thenationalgrassrootsclimateactionsummitsfrom2009onwardshaveemphasisedjusttransitionswithdiscussionsessions,speakersfromunionsandaffectedcommunities,andresolutions.Sinceatleast2009,activistsandNGOcampaignershavebeenmeetingwithbothunionsandcommunitygroupsintheValley,andcontinuetodoso.DanMusilhasdocumentedthisoftenarockyprocess,as“competinginterestshavebroughtvariousstakeholdersintoconflictandsuchconflictisseenasanimpassetodecisiveandeffectiveaction”.35
In2010,localgovernmentintheLatrobeValleywasgivenfundstodeveloptransitionplans.Onesucheffortwasthe2010Positioning Latrobe City for a Low Carbon Emission Futurereport.36
Justtransitionsarenoteasyworkand,aseverybodyinvolved–includingactivists,researchers,unionsandtheEarthWorkerCooperative37andcommunitygroups–hasfound,itiseasiertoagreeontheprinciplethandevelopspecific,realistic,large-scale,on-the-groundinitiativesthatgovernmentwillfund,aswasthecasewiththecampaigntoreplacecoalgeneratorsatPortAugustawithasolarthermalplant.
Bothunionandcommunitygroupshaveemphasisedtheneedforaneconomictransitionplaninwhichtheyfullyparticipateandwhichreflectstheirneeds.Inaninterview,unionleaderLukevanderMeulentoldABCRadioNational:
Ithinkthedebateaboutwhethertheclosureisgoingtooccurisoverandwhatwe’vereallygottodonowislookattheimpactontheworkersinthecommunity.Andwhatwe’rereallysayingis[that]onthisoccasion,asdifferenttolasttimewhentheyprivatisedtheindustry,wewantthecommunityandtheunionstobeinvolvedatthetable,involvedinthediscussions.Andthedecision-making…whentheyprivatisedtheindustryweweresayingthenthatthereneedstobereplacementindustriesintheValley.Weweretalkingaboutwindandsolarthen.AndifthenationalandStategovernmentshadhavegotofftheirbehindsthen,thenwecouldhavehadawholerangeofdifferentindustriesintheValleythatcouldhelpusoutofthissituation.Thesecanbedone,butthereneedstobesomerealeffortataStateandnationallevelandthat’snotreallybeingseenatallatthemoment…Wedon’t
thinkanycompensationshouldbepaidtoHazelwooduntilthecommunityandworkerissuesarefullysortedout.38
WendyFarmer,VoicesoftheValleypresident,says“Wecan’tlettheprivatisation(oftheSECV)andthedestitutionthatitcausedhappenagain.”Inanopenletter,VoicesoftheValleysays:
Whatwewantistoensurethatwecantransitiontoacleaner,fairereconomyinawaythatwon’tfurtherdevastateourcommunity.Weurgetransitionplanstobeinplacebeforethere’sanymovetoshutdownanindustry–notjust‘talk’ofplans,butactualpathwayswithrealresourcesandsupport.WhatweneedarenewopportunitiesandchoicesforLatrobeValleypeople,notthe‘putuporshutup’thatweareofferedbythecompaniesthatrunourpowerstations,orthosethatdemandthatpowerstationsmustbeimmediatelyshut.Webelievethattherearemanythingsthatcouldbe
doneheretofacilitateatransitiontoabetterfuture,andtoensurethattheinevitableclosureofHazelwooddoesn’tleaveushighanddry.Localpeoplethemselveshaveinvaluableknowledgeandideas.AllowingLatrobeValleypeopletoarticulatehowatransitioncouldwork,andwhattotransitionto,isakeychallenge.Drivenbylocalvolunteers,VoicesoftheValleyhave
builtastrongpresenceinthepastyear.Wearecurrentlysucceedingingettinghigh-levelattentionontheissuesofhealth,pollutionmonitoringandreporting.Webelievethattighteningairqualitystandardscouldprovidepositiveoutcomesforlocalpeopleandtheclimate.Wewouldlikethechancetopushforandcreatenewopportunitiesandindustrieshere.Anyassistancewiththesegoalswouldbewarmlywelcomedandappreciated.VoicesoftheValleyarepreparedtoworkwithany
groupswhoalsowanttohelpourcommunitymovetowardabetterfuture.Wearewillingtomeet,talk,collaborateandcooperate.Butthiscanonlyhappenifothersarewillingtoappreciateandworkinwaysappropriatetoourlocalcontext,concernsandaims.
TomDoig,authorofthebook The Coal FacewhichtellstheHazelwoodminefirestory,saysreplacingHazelwoodisbothanenvironmentalandsocialjusticeissue:
ObviouslyforpeopleintheValleyinparticular,it’sconfrontingandpotentiallydisturbingwhenenvironmentalistsstarttalkingaboutclosingdownHazelwood,andit’seasyandjustifiabletosay,‘Whatisthetransitionplan?’…IsupporttheclosureofHazelwoodaslongasitisdoneintandemwithawellthoughtouttransitionplantocreatingjobsintheregion,andminerehabilitationisamassiveone.39
Thereisalsoalargerquestionoflabourandskillmanagementduringthegreattransition.Theworldishurtlingtowardsaclimateabyss:thereisnocarbonbudgetleftforlimitingwarmingto2C°.Manyclimatechangeimpactsarehappeningmorequicklythanmost
REPLACEHAZELWOODPRIMER11
scientistsprojected,andpositivefeedbacksarealreadybecomingmateriallyimportant,fromtheArctictotheAntarctic.40
Wenowfaceaglobalclimateemergencythatrequiresaglobalemergencyresponse,asFrenchEnvironmentMinsterSégolèneRoyalrecentlyrecognised.41Morepeopleareacceptingthisproposition,butwonderwhetherwecangatherthesocialandpoliticalwilltomakeithappen.
Ifwearereallygoingtogetbeyondthebrowneconomy,whatwillindustrieslooklike?Takethetravelindustry,asoneexample.Theideathatthegrowingoverloadofinternationalairtravelcanbezerocarbonthroughefficiencyandbiofuelsisunsupportable.Soisthenotionthatsuchactivitywouldbeasocialpriorityinanenergy-constrainedworld(especiallyforliquidfuels)and
inthemidstofahugetransformation.ThesameanalysiscouldapplytoAustralianuniversitiesandtheirrelianceofair-travel-dependentinternationalstudentincome,orthe
air-transport-dependentglobalsoftfruit,vegetableandflowerindustries.Andtheseexamplesarejustthetipoftheiceberg.
Thequestionofactingonclimatechangeandthejobsconsequencesishuge.Itrequiresaworkforceplanningandmanagementstrategysimilartothoseemployedbygovernmentsinthepastattimesofhuge,abruptchange,suchasattimeofwar.Workingforajusttransitionalsomeansworkingforanationalclimateandenergyworkforcestrategy.
From2016,asteadyflowofincomefromtheelectricitysectorofaround$100millionperyearisavailabletofundnewjobsandindustriesintheLatrobeValley.Here’show.
AsaninducementtoAlcoatoestablishanaluminiumsmelteratPortland,theVictorianGovernmentin1984offeredalargesubsidyonelectricitypricestorunfor30years,fromtheopeningofthesmelterin1986till2016.
Thissupersededanolderdealthathadrunsince1962.Thediscountwasupto50percentonpricesavailabletootherindustrialusers.ThetwosmeltersatPortlandandnearGeelongwereusingupto25percentofVictoria’spowerproduction.TheGeelongrefineryhasalreadyclosed,andthedealexpiresnextyear.
Thesubsidywaspeggedtotheworldpriceofaluminium:theweakertheprice,thegreaterthesubsidy.Thevalueofthedealissecret,buthasbeenestimatedtohavecostVictorians$4.5billion.42SincetheprivatisationoftheStateElectricityCommission(SECV)in1998,thedealhasbeenfinancedbyalandtaxlevyontheelectricitydistributors’propertyundertransmissionlines.The Age reportedin2009that:“Coupledwithspecialleviesandtaxesonelectricityconsumers,imposedbytheKennettandBracksgovernmentstocoverthesubsidies,thepublicbillforthecontractsby2016wouldbecloserto$6billion.”43Therearealsoreportsthatthedealcost$1.022billioninsubsidiesintheperiod1986-1995,and$915.8millionfrom1997to2006.
InMarch2010,LoyYangApowerstationsignedacontracttosupplyelectricitytopowerthePortlandaluminiumsmeltersuntil2036.
In2014,FairfaxbusinesseditorMathewDunkleywrotethat:
ausefulstartingpointforthecalculationwouldbethe$100millionayearthegovernmentleviesonthelandunderpowerlinestohelppaythestate’sliabilitytotheglobalaluminiumgiant.TreasurerMichaelO’Brienconfirmedthisinastatement,sayingtheaveragesubsidyinthepastthreeyearswas$90million.44
Afterprivatisation,thedealwasadministeredbythecorporateshelloftheSECV.InOctober2013,theAustralian Financial ReviewreportedthatVictorianStateGovernmentaccountsfor2012-13showed:
thegovernmentpocketed$350millionfromtheSECVasaspecialdividend.TheSECVisacorporateshellthatlargelyadministersthestate’selectricitycontractswithAlcoa.ThisdividendstemmedfromtheSECV’stradingactivitiesandwasquietlybankedagainstthe2012-13financialyearwhenthe2013-14budgetwasannouncedinMay.45
SincetheSECV’sonlysignificantroleiscollectingrevenue,andpaying,fortheAlcoadeal,itseemsinsomeyearstheprofitwasbankedbythegovernment.Attheveryleast,thisisaclearprecedentforSECVrevenuesinexcessofcostsbeingpassedbackintotheStatebudget.
UnionsourcessaythatthewagesbillatHazelwoodisjustover$100millionayear.Theevidenceabovesuggeststhattherevenue-raisingmeasuresassociatedwiththeAlcoasubsidyarearoundthesameamount.
WhentheAlcoasubsidyendsin2016,thereisaperfectopportunityforthemoniesof$100millionayeartobeswitchedtonewjobandindustry-creationinitiativesintheLatrobeValleyasbrown-coalgeneratingcapacityisreduced.
When the Alcoa subsidy ends in 2016,
there is a perfect opportunity for the
monies of $100 million a year to be switched to new job and industry-creation initiatives in the Latrobe Valley as
brown-coal generating capacity is reduced.
FUNDING THE JOBS TRANSITION
12REPLACEHAZELWOODPRIMER
OPTIONS FOR CLOSUREInternationalPowerrejectsanyproposaltointroduceclimatechangepolicy,undertheguiseofenergyeffic-iencymeasures,whichhasthepotentialtodestroythevalueofexistinginvestmentsinthegeneratorsector.46
Excesscapacityintheelectricitymarketdrivenbyenergyefficiencyandmorerenewableenergyhasbeenholdingdownwholesalepowerprices.OwnerssuchasAGLandOrigin–withvertically-integratedoperations(andcustomerbases)andwithlessancientandlower-pollutingplant–havebeenlobbyinggovernmenttotakeexcesscapacityoutofthemarket.Butgovernmentshavesofarbeenunwillingtointerveneand/orsubsidisesuchaction.
OneproblemisthatalthoughLatrobeValleygeneratorsaremorepollutingandtwoofthethreefacilitiesaretheoldestinAustralia,theyhavelowercoststhanblackcoalandgasgeneratorsandwouldsurviveanymarket-basedrationalisationintheabsenceofacarbonpriceortradingscheme.47
SeniorStatebureaucratsintheenergydepartmentareawareoftheneedtoclosedowncoalinordertoroll-outrenewables.Thequestionisbywhatmechanism:plantage,emissionsstandardsorsomeothermeasure?
VictorianPremierDanielAndrewshasflaggedthecapacityandwillingnessofthegovernmenttomodify and/orcancelHPS’slicence.
Thetermsofreferenceforthereconvenedinquiryandgovernmentstatementsindicateitislikelythatthegovernmentwillincreasetherehabilitationbondfromthecurrentlevelof$15million.Asdiscussedabove,totalrehabilitationcostswillbeseveralhundredmilliondollars.The2014firecost$100million,including$32millionbornebytheStategovernmentforfiresuppressioncostsalone.
TheStategovernmenthasastrongcaseforrecoupingthosecosts,inadditiontoincreasingtherehabilitationbond.ThestatehasborneawiderangeofcostsrelatedtotheoperationofHazelwood,apartfromthe2014fire.TheseincludecostsassociatedwiththeMorwellRiverdiversioncollapseandtheclosureofthePrincesFreewayforsevenmonthsandotherpriorincidents,asbestosissues,thecostsofinquiries,andelevatedcarecostsforMorwellandLatrobeValleycommunitiesassociatedwithboththe2014fireandincreasedincidentsofsomechronichealthconditionsintheregionoveralongperiod.
Aswell,legalrecoursetocompensateresidentsforthephysicalandemotionalcostsoftheMorwellfirecouldbelaunchedifHPScouldbeshownliableunderVictorianlawforhavingfailedtocomplywithminingandenvironmentallaw.Prof.SamanathaHepburnofDeakinUniversitysaysthat:
GDFSuezcouldalsobeliableunderVictoria’sEnvironmentProtectionAct.Iftheenvironmentispollutedasaresultofadischarge,emissionordepositofanysubstancefromminingpremises,theoccupierwillbedeemedtohavecausedthepollution.48
Couldthelicencebewithdrawnwithoutcompensationifitcanbedemonstratedthatthetermsofthelicencehavebeensignificantlybreached,forexampleinrelationtothe2014fire?Theinquiryconcludedthat:
OntheevidencebeforetheBoard,GDFSueziscurrentlycompliantwithitsobligationsundertheMineralResourcesActandrelatedregulations,aswellastheconditionsspecifiedinitscurrentmininglicence,approvedworkplanandapprovedrehabilitationplan.
Howeveritexpressedconcerninrelationtosomecomplianceissues,whichfellintoa“grey”area,andfoundthat:“TheBoardisnotsatisfiedthatGDFSuezhascompliedwithr.5.3.7oftheOHSRegulations.”
EMISSION STANDARDSAnemissionsperformancestandard(EPS)isaspecificlimittotheamountofpollutantsthatcanbereleasedintotheenvironment,usuallyperunitofproduction.AnEPScanregulatepollutantsreleasedbyautomobilesandotherpoweredvehicles,andsmallequipmentsuchaslawnmowersanddieselgenerators,buttheycanalsoregulateemissionsfromindustryandpowerplants.WhilstseveralStateshaveanEPSfornewpowerstations,nonedosoforexistingplant.49
AnalysisfromBloombergNewEnergyFinancefindstheUnitedStateswillshutsevenpercentofitscoalpowercapacitythisyear:
ThisisbecauseanewMercuryandAirToxicsStandardwilltakeeffect...Thishasactedtobringtoaheadthedemiseofagingpowerplants,withownersunwillingtoinvestsubstantialfundstocontroltheirairpollutants.Ontopofthe23GWofclosurestheyexpectthisyearwillbeafurther30GWshutbefore2020.50
EmphasishasbeenplacedonregulatingHPSemissionssuchthattheownerswouldhaveachoiceofinvestinginlowemissionstechnology,orclosingtheplant.In2010,thenVictorianPremierBrumbydeclared:
theBillprovidesthereservepowertoregulateemissionsfromexistingbrowncoal-firedgeneratorsifanegotiatedphasedowncannotbeachieved.51
Inintroducinghis2010climatebill,Brumbysaid:
Asafirststepfollowingthepassageofthisbill,itisintendedthattheEnvironmentProtectionAuthoritywillusethispowertosetanemissionsintensitystandardfornewpowerstations.Thegovernmentisproposingastandardof0.8tonnesofcarbondioxideequivalentpermegawatthour(tCO2/MWh),whichwillpreventtheconstructionofanynewpowerstationsbasedonconventionalbrowncoaltechnologies.Theintroductionofthestandardwillbesubjecttopublicandindustryconsultation,andanassessmentofeconomicandsocial
REPLACEHAZELWOODPRIMER13
impacts.TheseamendmentstotheEnvironmentProtectionAct
willalsoclarifythatregulationsmaybeintroducedthatsetagreenhousegas‘trigger’torequirelicensingandworksapprovalsforgeneralindustrialandcommercialsitesthatarelargeemittersandenergyusers.ThiswillenablethegovernmenttoensurethatbestpracticestandardsandtechnologiesareusedbyVictorianindustry—givingourbusinessesanedgeinalow-carboneconomyandavoiding‘lockingin’inefficient,long-lastingtechnologies.Anychangesinthisregardwillalsobesubjectto
consultationthroughregulatoryimpactstatementsorequivalentprocesses.Thispowermaybeusedforotherpurposesinthefuture,suchasestablishingemissionsstandardsforexistingpowerstations—withtheaimofmovingVictoria’sbrowncoalgeneratorsintolinewithinternationalbestpracticeandprovidingastronginvestmentsignaltoupgradetechnology.Again,anynewstandardsinthisareawillbesubjecttofullpublicconsultationandregulatoryimpactstatements.52
Bywayofcomparison,theUSEPAemissionsstandardsproposedbytheObamaadministrationforexistingplantaverageabout0.5tCO2/MWhby2030.53Recentresearchfindsthatforthe2C°goal,andtoreducegreenhouse-gasemissionsintheshorttermandcatalyselonger-termcuts,countriesshouldreducethecarbonintensityofelectricitygener-ationtobelowauniversaltarget0.6tCO2/MWhby2020.54ThisislessthanhalfofHazelwood’semissionsintensity.
SodoestheministerorEPAcurrentlyhavethepowertoregulateemissionsabove0.8tCO2/MWh?
The0.8tCO2/MWhstandardwasremovedbyBaillieugovernmentamendmentsin2012.55HowevertheEPAwouldbeabletoregulateemissionsifappropriatelegislationforanenvironmentprotectionpolicy(includingCO2emissionsstandards)ispassedbyParliament,andthatfailuretoconformtothestandardwouldbeasoundbasisforwithdrawaloflicence.
Inadraftofhisclimatereviewreport,economistProf.RossGarnautnotedthat:
Governmentdoesnotgenerallycompensateforlossofassetvaluebecauseoftheinternalisationofanenvironmentalexternality.Pastcaseswhereatakenrightwasremovedwithoutcompensationincludepolicychangesapplyingtoasbestosandtobacco.56
Germanyhasrevealedplanstoforcetheclosureofthenation’soldestanddirtiestcoalpowerplantsbyintroducingmeasuresthatwouldallowcoalplantstoproducenomorethansevenmilliontonnespergigawattofinstalledcapacity,withfinesof$A25-28/tonneover that.57Bywayofcomparison,thatwouldsetabenchmarkforHazelwoodoflessthan11milliontonnesofCO2peryear,comparedtopresentpollutionof16milliontonnesofCO2peryear.
POSITION ON CLOSUREInSeptember2008,InternationalPoweritselfflaggedthattheHazelwoodplantcouldbeshutdown,subjecttothenegotiationofadequatecompensation.Inasubmissiononthefederalgovernment’sthenCarbonPollutionReductionScheme(CPRS),InternationalPowerAustralia’sExecutiveDirectorTonyConcannonstatedthatthecompanysupportedmeasuresthatwouldresultintheclosureofthemostpollutingpowerstationsontheprovisionthatthey“arecompensatedforthefulllossofassetvalue.”
Thecompanyestimatedthatthepre-CPRSassetvalueofboththeHazelwoodandLoyYangBpowerstationswas“over$4billion”,butthiswasdisputedbyenvironmentgroups,particularlyinlightoftheCommonwealthBankdecisionin2010towritedownthevalueofitsshareholdinginHPSfrom$24millionto$1million.58OtherLatrobeValleygeneratorshavebeenresoldatasmallfractionoftheirprivatisationprice.
On28July2010,the AFRreported(“Hazelwoodownerswantclosure”)anInternationalPowerspokespersonassayingthecompanywouldratherworkwiththefederalgovernmenttoclosedowneightturbinesthanthetwoproposedbytheBrumbygovernment.59
Federal MP for Wills Kelvin Thomson at CERES environment park, 2012
14REPLACEHAZELWOODPRIMER
REPLACE HAZELWOOD CAMPAIGNSCampaignstoreplaceHPShavebuiltsince2005withanumberofcampaignsanddirectactions.Alargecivil-disobediencerally,thelargestofitskindatanyAustralianpowerstation,wasundertakenon13September2009,whenanestimated500peopleparticipated,withmanycampingnearbyonthepreviousnight.
Protestorsbreachedthenewlyinstalledsecurityfenceand22peoplewerearrested,manyforillegallytrespassingonHazelwoodproperty.Manyprotesterswereofficiallychargedandsubsequentlywererecipientsofdiversionordersandvariousfines.
AftertheSeptember2009rally,theVictorianLaborenergyministerunveiledlawsdesignedtoprotectthebrowncoal-firedpowerstationsfromprotests.TheElectricityIndustryAmendment(CriticalInfrastructure)Billcreatedtwonewoffences.Ifapersonisfoundonapowerstation’slandorpremiseswithoutauthoritytheycangotojailforayear.Andifapersondamages,interfereswith‘’orattachesathing’’tothepowerstation’sequipment,theyrisktwoyears’jail.Forthisoffence,thepersonmustbefound‘’reckless’’inrelationtowhethertheiractwillresultindisruptingelectricitysupply.61
The2009-2010“SwitchoffHazelwood”and“ReplaceHazelwoodwithcleanenergy”campaignsbroughttogetherabroadanddiversecoalition,whichfocusedattentionontheissueinthelead-uptotheNovember2010stateelection.ThecampaignframedHazelwoodasatestoftheLaborstategovernment’sclimatecredentials.
Theissuereceivedsustainedmediacoverageandbroadpublicsupport,withmanyeventsincludingprotestsonparliamentsteps,asecondrallyatHazelwood,andclimateactiongroupsininner-northseatsandelsewhereconductinganextensivedoor-knockingcampaignwhichreachedseveralthousandhouseholdsandamplifiedinternalLaborconcernthatseatscouldbelost.
ThepoliticalterrainatthetimewaswellanalysedbyMelissaFyffeinThe Ageon16May2010in“Beardingthedragon”.62
TheLaborcabinetagreedtoapolicyofphasedclosureofHazelwood,whichwasannouncedinThe Ageon 10July2010.63
Coal Swarmreportedtheevents:
Intherunuptothe2010electionthethenBrumbyLaborgovernmentsoughttoblunttherisingvotersupportfortheGreensbyproposingtheshutdownofpartoftheHazelwoodpowerstationandreleasedTaking Action for Victoria’s Future,aclimatechangeWhitePaper.InitsWhitePaper,theBrumbygovernmentcommittedtocutgreenhousegasemissionsby20percentby2020.‘Themostcost-effectivewaytocleanupourenvironmentandachievethisreductioningreenhousegasoverthenextfouryearsistoclosetwooftheeightunitsatHazelwoodPowerStation,’PremierBrumbystated.64
TheVictorianClimateChangeBillwasintroducedintoParliamenton27July2010,andamendedtheEnvironmentProtectionAct1970(Vic)toallowfortheimpositionofatargetemissionslevelfornewpowerstationsandtoenabletheregulationoflargeemitters.
TheVictorianLaborgovernmentnarrowlylosttheNovember2010electionbeforeitcouldbeginnegotiationswiththepowerstationowners.
InSeptember2008,InternationalPowerflaggedthattheHPScouldbeshutdownsubjecttothenegotiationofadequatecompensation.In2012,thefederalgovernmentabandoneditsContractforClosureProgramwithoutenteringintoseriousnegotiationswiththeHPSowners.
Inthelead-uptothe2014Victorianelection,acommonly-agreedplatformforVictorianclimategroupsandNGOsincluded:
Planningfortheorderlyphase-outofouroldestanddirtiestpowerstationsstartingwithHazelwood,YallournandAngleseapowerstations.
During2014,theLaborPartyoppositioninVictoriarefusedtoruleoutneworexpandedfossilfuelprojectsincludingfurthercoalallocationsorthedevelopmentofanunconventionalgasindustry.Nordiditmakeanycommitmenttoclosedownanyexistingcoalgeneratingcapacity,unlikeitsstandin2010.
InJanuary2015,theAndrewsgovernmentannouncedthatthe2104minefireinquirywouldbereopenedtolookintoareportedspikeindeathsandconsideroptionsforthemine’srehabilitation.
Bike commuters take a message to local MP at Climate Action Moreland event, May 2105. Photos John Englart.
REPLACEHAZELWOODPRIMER15
LABOR IN 2010Labor’s2010climatechangeWhitePaperstated:
VictorianGovernmentwillreservetherighttoconsiderregulatingemissionsfromexistingbrowncoal-firedelectricitygeneratorsifagreementonaphasedowncannotbenegotiatedandanationalcarbonpriceisnotinplace.66
PremierJohnBrumbycalledHPSAustralia’s“dirtiestandmostpollutingpowerstation”.67
SpeakingtoABCradiotoJonFaineinJuly2010,BrumbyexplainedhisHazelwoodpolicy:
Brumby:I’mnotsureofthepointofthecaller’squestion…eitheryoubelieveinclosingHazelwoodoryoudon’t,andIdo.AndsowhatIannouncedyesterdaywasastagedclosureofHazelwoodwiththefirsttwounits–theyhaveeightunits,it’sthedirtiestpowerstationinAustralia,mostcommentatorsbytheway,ifyou’vereadtheFinancialReviewthismorningtheywouldsayit’sprobablythedirtiestanywhereintheworld–andI’veputforwardaplanthatwewillhaveastagedclosureofit.
Faine:Butyoudon’thavethemoneytopayforit?
Brumby:Well,wedoactually,sowehaveastrongeconomyandastrongbudgetposition,soasIsaidyesterdayreleasingthispolicyJohn,ourGovernmentinVictoriaisinapositiontotakeleadershiponclimatechangeinlargepartbecausewehavemanagedthebudgetandtheeconomywellandwecanaffordtomakethesechanges.ButasIsaidyesterday,ifyouwanttodothisjobproperlyitwillrequireapartnershipbetweenourgovernment,theFederalgovernmentandnegotiationswithInternationalPower,sowhatIannouncedyesterdayisacleardefinedstrategywithastagedclosure.68
On10July2010,Stock and Landreported:
Cut emissions or else, says Brumby
Victoriahasthreatenedtouseitsenvironmentalregulatorypowerstoforcebigcarbonemitterstoreduce
greenhousegasemissionsifnegotiationsoverplannedshutdownsfail.Apolicydocumentpublishedbythegovernmentthis
weekpromisedtoreducecarbonemissionsby20percenton2000levelsby2020.Italsobackedanationalpriceforcarbonasthebest
meanstoachievethecarbon-reductiongoalandflaggeditwouldseektonegotiateaphasedshutdownoftheemissions-intensiveHazelwoodpowerstation.VictorianPremierJohnBrumbyusedasecond-
readingspeechofhisgovernment’sclimatechangebillinParliamentyesterdaytodetailhowhisgovernmentcouldusetheEnvironmentalProtectionAgencytoregulateemissionsintheabsenceofacarbonpriceorifnegotiationswiththeownersofHazelwood,InternationalPower,stalled.“Whilethegovernmenthasalreadycommenced
preliminarydiscussionswithInternationalPowerandotherstakeholdersinHazelwoodaboutourcommitmenttoastagedclosureofHazelwood,theBillprovidesthereservepowertoregulateemissionsfromexistingbrowncoal-firedgeneratorsifanegotiatedphasedowncannotbeachieved,”hesaid.69
THE GREENS Intheleaduptothe2014stateelection,theVictorianGreensannouncedapolicytophaseoutHazelwood,AngleseaandoneofYallourn’sfourunitsin2015,andtheotherthreeunitsofYallournandLoyYangBby2023.TheGreenssaidtheirplanwillrequireamendmentstotheElectricityIndustryAct2000orrequiretheministertowithdrawgenerationlicences,andthat:
TheGreensplanwouldre-bootAustralia’sinevitabletransitiontoacleanenergysystemwithouttaxpayerhandouts.70
ThepolicysaysasteadystreamoflocaljobswouldbecreatedintheLatrobeValleyandAngleseaastherehabilitationofminesanddecommissioningofpowerstationsrequiresasignificantworkforcestretchingwell
“We have a plan for the first phase-down of brown coal in Australia, ever…We are the only party with a specific plan and timeline for the closure of Hazelwood.” 65Jane Garrett, Victorian emergency services minister and Brunswick MP, in 2010
16REPLACEHAZELWOODPRIMER
COMMUNITY CAMPAIGNINGPoliticalpartieswillpayarisingpriceforafailuretoplanthephasedclosedownofthecoalindustryinthefaceofescalatingclimatechangeandextremeevents,especiallyastheclimatemovementadoptsacommunity-organisingmodelfocusedonbuildingdirectpoliticalpower.
Ayear-longreviewhasresultedinmanykeyplayersintheclimatemovementmovingtoalignstrategy,improvecommunications,revitalisegrassrootsconstituencies,andbuildelectoralpowerbyadoptingnewmodelsofface-to-facecampaigningthatbuildonrecentexperiencesinstateelectionsandoverseaslessons.
Climateandclean-airgroups,bothbigandsmall,havealonghistoryofcampaigningondirtycoalandviewtheclosureofpowerstationssuchasHazelwoodandAngleseaasasignificantstepinbuildingazero-emissionseconomy.FriendsoftheEarthsaysthat:
ThefullclosureofHazelwoodwouldbeaprofoundactonatleasttwolevels.ItwouldbeapowerfulsymbolthatVictoriaisnowfinallyshiftingfromitshistoricrelianceoncoal,andwouldremoveabout12percentofourgreenhouseemissions.77
EnvironmentVictoriacontinuesastrongfocusonHazelwood,withattentiongivenrecentlytothefiresinquiry,andreportsonminerehabilitationandthesocialcostofHazelwood.
Significantly,Australia’slargestenvironmentalNGO,theAustralianConservationFoundation,hasindicateditwillgivemorefocustoHazelwoodandAustralia’sbiggestpollutersthanpreviously.Inlaunchingitsnewstrategyin2015andareporton Australia’s Top 10 Polluters,ACFmadeitclearthat:
TheFederalGovernmentmuststartplanninghowitisgoingtoretirethemostpollutingandout-datedcoalplantsandreplacethemwithcleanenergy.78
WritinginThe Australian,ACFPresidentGeoffreyCousinsreiteratedthat:“Wemustconsiderhowtostartretiringthemostpollutingandoutdatedcoalplantsandreplacingthemwithcleanenergy…”.79AndACFCEOKellyO’ShanassytoldThe Guardian:
It’snotgoingtoworkanymoretobejustquietlyaskinggovernmentstodotherightthing.Sothepurposeofthisreportistosay–wearegoingtoholdyoutoaccountandwearegoingtogoouttoallAustraliansandbuildahugeconstituencyinthiscountrytomakesureyoudowhatAustralianswantyoutodo.IfgovernmentsputtheinterestsofpollutersabovethoseofAustraliansthenweneedtostarttogrowaforcetosupportcleanenergy,notcoal.Thisisdefinitelyashiftinourfocus…Werespecttheroleofpoliticians,butwedon’tthinktheyaredoingenough.There’sagreatsayingthatthepowerofthepeopleisgreaterthanthepeopleinpower.Ithinkthepeopleinpowerforgetthatsometimes.Wearegoingtoremindthem.80
Aswell,Australia’semissionsreductionperformanceandgoalswillcomeunderincreasingscrutiny,bothathomeandabroad,intheleaduptothe2015UNclimatechangeconferenceinParisinlate2015.TheclimatemovementwillbeoneofseveralplayerspointingtoAustralia’spoorperformanceandtheresponsibilityoffederalandstategovernmenttoworktogethertoclosedownold,dirty,sub-criticalcoalpowerstations.
Recentmediareportingonthecoalindustrycrisisandpowerstationclosureshassteppedupwiththereleaseofvariousreports,butalsobecauseinbusinessandpoliticalcirclesthereisgrowingrecognitionthatthecoalindustryisbecomingtoohottohandle.
overadecade:
Rehabilitatingcoalminesanddecommissioninggeneratorsisfullofjobs-richpotentialifdoneunderaplannedandstagedprogram.71AmajorityofLatrobeValleyresidentsandthelocalCFMEUwantrehabilitationplansbroughtforward.72TheGreensaredeterminedtocreatethesejobsnow.MinerehabilitationacrosstheLatrobeValley,accordingtoEnvironmentVictoriawouldcreatearound450skilledandunskilledjobsformorethanadecadeandprovideabilliondollareconomicstimulustotheregion.73
On20November2014,federalGreensleaderChristineMilneannouncedthelaunchingof“atwo-prongedfederalandStatepushtophaseoutVictoria’sdirtycoal,whileusingfundsfromtheCommonwealth’sBuildingStronger
RegionsFundtodeliverajobstaskforce.”74 On23January2015, The Agereported:
TheVictorianGreenswillusetheirupperhouseclouttopushfortheclosureoftheHazelwoodpowerstation,claimingitisarisktothecommunityandnolongerneeded.GreensMPEllenSandellsaidHazelwoodwasoneofthedirtiestcoalplantsintheworldandshouldbeclosed.75
GreenMPsEllenSandellandAdamBandthaveannouncedtheyaremakingReplaceHazelwoodafocusoftheirworkfortheyearandare“callingonthegovernmenttoreplaceHazelwoodwithcleanenergyandtosupportacommunity-ledtransitionplanforminerehabilitationandjobcreation”.AGreens-initiatedrallywasheldonParliamentHousestepson16April.76
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IT’S OVER FOR COALCoal’slustreisrapidlyfadingasitssociallicencedegrades,andacrisisofoverproductionresultsinplummeting prices81andmineclosureinAustralia,with50,000jobsinallminingincludingcoallostinthelastthreeyears.
Business Spectator,undertheheadline“Acoalgiantontheropes”,saysthatUS-basedPeabody,theworld’slargestprivatepure-playcoalminingcompanybyvolume,reportedayear-to-datenetlossof$US272million,followinganetlossof$US955millionin2013and$US432millionin2012.Itssharesaredown62percentoverthelasttwoyearsrelativetotheS&P500index.82
BHPishalvingitsexposuretocoalbymovingsomeminestoaspin-offcompany(South32)thatismadeupofholdingsBHPnolongerwants.Riohassignaledamoveawayfromcoalmining.Renew Economyconcludesthat:
Thetakeawayinsumisthatfiveoftheworld’slargestminingconglomeratesarerapidlyreducingtheircoalexposureasthehorsesbolttheburningbarn.83
Anewreport,Boom and Bust: Tracking The Global Coal Plant Pipeline,showsthat,aroundtheworld,two-in-threeproposednewplantsarenotbeingbuilt.InChina,coalusefellin2014forthefirsttimein14years,whiletheeconomygrewby7.3percent.From2003to2014,theamountofcoal-firedgeneratingcapacityretiredintheUSandtheEUexceedednewcapacityby22percent.84Expertsare
warningthatChinais“pastpeakcoal”.85 Increasinginternationalfocusisbeinggiventothe
old,dirtyandinefficientcharacterofAustralia’scoalgenerators.ArecentreportfromOxfordUniversity’sStrandedAssetsProgrammeidentifiesthe100globalpowercompaniesmostatriskfromgrowingpressuretoshuthighlypollutingcoalplants.86Theanalysis,producedtohelpinvestorsassesstheriskofmajorfinanciallosses,alsofoundHazelwoodmajorityownerEngiewasthirdinthelistofmostpollutingcoalstationfleetsintheworld.
Thereportidentifiedthemost-polluting,least-efficientandoldest“sub-critical”coal-firedpowerstations.Itfound89percentofAustralia’scoalpowerstationfleetissubcritical,“byfar”themostcarbon-intensivesub-criticalfleetinworld.87
TheInternationalEnergyAgencycalculatesthatoneinfourofthesesub-criticalplantsmustclosewithinfiveyears,iftheworld’sgovernmentsaretokeeptheirpledgetolimitglobalwarmingto2C°.Thismeansthat22percentofAustralia’scoalpowerstationfleetmustclosewithinfiveyearsifwearetoplayanequitablepartinkeepingtogovernmentpledgestolimitglobalwarmingto2C°.
PressurewillbuildonnationalandStategovernmentsrespondtothisneed.Willtheystartclosingdownpowerstations,orthrowinthetowel?
‘The smoke got thicker and darker and then it seemed to be coming from everywhere, swirling around until it blanketed the entire town…’
On 9 February 2014 a fire took hold in Victoria’s Hazelwood coal mine next to Morwell and burned for one and a half months. As the air filled with toxic smoke and ash, residents of the Latrobe Valley became ill, afraid – and angry. Up against an unresponsive corporation and an indifferent government, the community banded together, turning tragedy into a political fight.
Tom Doig reveals the decades of decisions that led to the fire, and gives an intimate account of the first moments of the blaze and the dark weeks that followed. The Coal Face is a gripping and immediate report of one of the worst environmental and public health disasters in Australian history
OUT NOW $9.99
18REPLACEHAZELWOODPRIMER
NOTES1. http://www.theclimategroup.org/_assets/files/Generation-
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4. http://www.theage.com.au/environment/climate-change/emissions-from-power-sector-still-climbing-as-coal-use-rises-20150303-13twq8.html
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11. http://environmentvictoria.org.au/index.php?q=media/repeat-offender-documents-highlight-hazelwood-environmental-breaches
12. “CleaningupVictoria’sPowerSector:thefullsocialcostofHazelwoodpowerstation”,byJordanWardandMickPower,http://environmentvictoria.org.au/sites/default/files/Hazelwood%20Report_Social%20cost%20of%20carbon.pdf
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17. http://theconversation.com/the-case-for-shutting-down-hazelwood-power-station-some-facts-and-figures-7940
18. Thissectiondrawnfromsubmissionstoandreportoftheroyalcommissionhttp://report.hazelwoodinquiry.vic.gov.au/
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34.http://www.resourcesandenergy.nsw.gov.au/energy-consumers/solar/sustain-renew-fit-subs/sustain_renew_fit_subs_greenpeace_australia_pacific_attach_a.pdf
35.DanMusil,“’GreeniesvsCoalCommunities?’–GeographiesofdeliberationinVictorianclimatechangeandenergydebates”,BachelorofArts(Honours)thesis,UniversityofMelbourne
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43.http://www.theage.com.au/national/smelters-costing-us-45-billion-20091016-h17r.html
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47.http://www.afr.com/business/nsws-vales-point-power-plant-seen-vulnerable-if-ret-deal-is-struck-20150514-gh198d
48. https://theconversation.com/stronger-laws-needed-to-prevent-another-hazelwood-coal-mine-fire-24215
49.http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BN/1011/PerformanceStandardsemissions
50.http://www.businessspectator.com.au/article/2015/4/10/energy-markets/grim-and-grimmer-analysts-deliver-double-blow-coal
51. http://www.stockandland.com.au/news/agriculture/agribusiness/general-news/cut-emissions-or-else-says-brumby/1899959.aspx
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54.http://www.nature.com/nclimate/journal/v5/n3/full/nclimate2494.html?WT.ec_id=NCLIMATE-201503
55.http://www.theage.com.au/victoria/no-emission-limit-on-new-coal-plants-20120327-1vwmu.html
56.http://www.garnautreview.org.au/CA25734E0016A131/pages/draft-report-chapter-20.html#20A
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59.http://environmentvictoria.org.au/media/hazelwood-owners-want-closure#.VPz1lGaDqiA
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60.http://www.theage.com.au/comment/why-dan-andrews-should-close-the-hazelwood-power-station-20150524-gh6ynv
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