AGL coal split raises fresh fears over rehabilitation plans for biggest emitter

AGL Energy’s recently announced plans to split up its energy business, carving out its fossil fuel assets into a separate business, have raised fresh fears that the company has not set aside sufficient funds to properly decommission its coal fired power stations.

Environmental legal advocacy group Environmental Justice Australia (EJA) says that the split of the AGL business will create significant uncertainty about the future of the company’s coal and gas projects and that there is a lack of detail currently available on AGL’s plans.

AGL announced this week that it is proposing split its business into two, with its coal and gas assets split off into a separate business dedicated to electricity generation, while its retail and clean energy businesses remain within the core AGL brand. EJA said that the added dimension of AGL’s proposed business split adds to the uncertainty over the future of the company’s power station sites.

“Analysis of AGL’s financial statements, along with the uncertainty surrounding this demerger, throws the company’s promise to cover the costs of rehabilitating its coal-fired power station sites into question,” Environmental Justice Australia lawyer Bronya Lipski said.

“There were already huge concerns about whether AGL would adequately rehabilitate its Loy Yang power station site before this announcement. Costs allocated for rehabilitation appear to be grossly inadequate and with this demerger there is a risk they will fall through the cracks altogether.”

The briefing paper details that AGL has set aside just $344 million to cover the costs of remediation of four of the company’s power stations, including the Liddell, Bayswater, Loy Yang A power stations and the Camden Gas Project.

With EnergyAustralia recently announcing that it will bring forward the closure of the Yallourn power station, AGL’s Loy Yang A power station will be one of the last remaining brown coal generators in Australia. The 2,210MW Loy Yang power station currently ranks as Australia’s single largest greenhouse gas emitter, producing 16.6 million tonnes of carbon emissions in the 2019-20 year.

The new briefing paper published by EJA suggests that AGL may have significantly underestimated the costs of rehabilitating its coal generators, especially the Loy Yang A brown coal power station, which AGL currently expects to close in 2048.

In financial statements released in 2014/15, AGL said that it estimated the cost of rehabilitating the Loy Yang A brown coal power station at $54.7 million, which was substantially below estimates later provided to an inquiry into the Hazelwood mine fire.

“These estimates rely on the cheapest option being open to AGL Loy Yang, which is flooding the mines with water either fully or partially,” the EJA briefing paper says. “The feasibility of water availability for mine rehabilitation in Latrobe Valley is in doubt, with the Department of Environment, Land, Water and Planning technical studies demonstrating water resources in Latrobe Valley are unviable at current take amounts let alone if water allocations were increased for the purposes of mine rehabilitation.”

EJA fears that this amount will be inadequate to cover the actual likely costs of remediation, noting that Engie estimated that the cost to remediate the nearby Hazelwood power station would run to as high as $743 million.

“Without adequate funds for rehabilitation, the Latrobe Valley community will be left with legacy contamination and taxpayers with the bill to clean it up. AGL must address the mounting concerns about the rehabilitation of Loy Yang A power station and mine in light of its demerger announcement,” Lipski added.

A spokesperson for AGL told RenewEconomy that the company is continuing to assess the resource needs for rehabilitation of its coal and gas facilities.

“AGL conducts periodic reviews to assess and determine the cost of environmental restoration/rehabilitation of its sites, consistent with [the AASB137 standard]. These are subject to changes in technology and the expected future use of the sites. The latest review was undertaken recently, leading to an increase in the provision, as was disclosed with our recent half-year results,” the AGL spokesperson said.

“We are continuing to pursue redevelopment opportunities that maintain the precincts in keeping with the existing purpose of each sites, being energy generation and storage, leveraging the use of existing infrastructure, land and enduring assets to maintain an economic contribution. The anticipated cost of these rehabilitation works in accordance with AASB137 have been recognised in our financial statements. Our future cash-flows are expected to be adequate to cover the restoration costs.”

“AGL takes its environmental compliance obligations extremely seriously and will proceed to safely close and rehabilitate each site and work cooperatively with the New South Wales and Victorian Environment Protection Authorities to ensure we comply with all of our obligations,” the spokesperson added.

EJA recently claimed a win in its campaign to oppose AGL’s proposed Crib point gas import terminal, which was recently denied development approvals by the Victorian planning minister, who cited the projects “unacceptable” environmental impacts.

“Minister Wynne’s assessment reflects the overwhelming and sustained opposition from a broad alliance of groups including scientists, residents, tourism and fishing businesses, and our clients. We congratulate all of those involved for their perseverance and dedication,” EJA lawyer Virginia Trescowthick said.

“As far as we’re aware, this is only the second time a proposal has been rejected by a Minister under the Environmental Effects Statement legislation.”