Governments foot the bill for oil and coal cleanups, so should they do the same for renewables?

In the last three months, two ageing fossil fuel projects have become taxpayer problems – and it’s prompting the question of whether governments should make the same commitment to hold final liability for abandoned solar and wind energy sites.

The answer is dividing industry groups and experts. But they are in lockstep on one point: More must be done to avoid the scenarios now playing out in Queensland and Western Australia. 

During July and August, the owners of the Cliff Head oil field off the coast of Western Australia collapsed, forcing the federal government to step in to handle the clean up after previous owner Triangle Energy offloaded the assets to a company that could never afford to decommission them.

Last week, Queensland was handed the clean-up of the ageing Bluff coal mine, after owner Bowen Coking Coal went into voluntary administration and its liquidators “disclaimed” responsibility for all decommissioning.

It is possible that governments will need to step in as a last resort if renewable energy projects are abandoned, says RE-Alliance policy head Tony Goodfellow. 

But the lesson from forsaken fossil fuel sites, which Western Australia is still figuring out and Queensland saw enough of earlier this century to set up ‘chain of responsibility’ laws, is to put protections in place before that happens.

“We’ve been advocating for clearer, more consistent decommissioning rules with industry and state and federal governments,” Goodfellow tells Renew Economy.

“We’ve asked states and territories to consider trailing liability for existing projects, alongside a consistent framework for new ones.

“Planning conditions and private agreements already address decommissioning to varying degrees. What’s missing is consistent assurance that the obligation can actually be met, including for older projects whose agreements may not contain adequate safeguards.”

Trailing liabilities are already used for fossil fuel projects in some jurisdictions in Australia. These allow regulators to chase former owners for cleanup costs if a current operator collapses, but inevitably these have been put in place after a disaster — not before.

For example, the federal government only instituted this for offshore oil and gas after the Northern Endeavour catastrophe, a floating oil platform that was left stranded in 2020 when owner Northern Oil and Gas Australia entered voluntary administration. That’s now expected to cost $2 billion to clean up, according to Boiling Cold this week.

Not all polluters pay equally

But others bridle at the idea of governments promising to pick up the tab, saying it’s a slippery slope to the kind of shirked responsibility seen from coal mine owners or oil and gas companies who cry poor when the time comes to clean up the mess.

Conservation Council of WA executive director Matt Roberts says the fossil fuel industry is held to no standard at all, calling decommissioning promises especially in offshore oil and gas “words on paper”.

Climate Energy Finance director Tim Buckley says while he has no problem with setting up rehabilitation bonds for renewables, he questions why the new industry should be held to a much higher level of account than the mining industry, “which for 200 years has got away with doing next to no rehabilitation.”

“Governments have only taken responsibility for end of life assets because the fossil fuel industry has been brilliant at outsourcing that.

“The fact that rehabilitation is only set at a quarter of the cost, is a failure to hold that industry to account.”

“The mining industry has been exempt from polluter pays.”

Buckley compares Vast Solar’s solar thermal site in New South Wales (NSW), yet to be cleaned up after a fire tore through it 10 months ago because liquidators are still untangling the assets, with coal mines intentionally shuttered years ago by viable companies that remain toxic pits.

Engie’s Hazelwood coal pit is still not cleaned up almost a decade later and in 2015 the NSW Department of Planning let Rio Tinto off the hook for rehabilitating the Mt Thorley-Warkworth coal mine, saying it would cost $2 billion.

Caveat emptor for landowners

Governments have so far explicitly disavowed taking on last resort responsibility for renewable energy sites, putting the onus on landowners.  

“The polluter pays in New South Wales (NSW). If the company closes down, it’s the landholder’s obligation to clean up the site,” New South Wales (NSW) premier Chris Minns told radio station 2GB in March, following a devastating fire in Jemalong.

In December last year, a solar thermal project being decommissioned after owner Vast Solar collapsed, caught fire and the site remains untouched.  

But this situation is a bit different: it hasn’t been abandoned and administrators are still finalising a proposed sale of the remaining Vast Solar assets to 1414 Degrees, according to a letter to creditors in September.

Furthermore, the clean up needed for renewables and fossil fuels isn’t directly comparable.

“The gulf in cost is significant,” says Roberts.

“This is because the gulf in impact and toxicity and complexity is so significant that the requirement on the renewable industry would be so much less than the oil and gas industry for the same requirement.”

Renewable energy is a fundamentally different proposition: an an end-of-life coal mine has negative value, but an end of life wind or solar site still has an infinite resource and a grid connection.

“A 20 year old wind farm also has a near 100 per cent profit margin,” Buckley says.

“I am very happy for the renewable industry to be held to a high standard. What I don’t want is for it to be held to a high standard when the coal industry is held to a very low standard and for the last 150 years has been allowed to outsource its responsibilities.”
RE-Alliance is forecasting that more than 1 gigawatt (GW) of wind and solar will start reaching end of life over the coming decade.

Pacific Blue’s Codrington wind farm is the first, due to cease operations by the end of 2027 and decommissioning of the 14 turbines to start in 2028.

The contractor is yet to make a call on what to do with the old turbine parts and other equipment.

Laws are coming

But people are still drawing a line between what they can see — the Jemalong fire, the Cliff Head oil and Bluff coal disasters — and what they think might happen to landowners hosting wind or solar farms.

Garner Smith is the mayor of Gannawarra shire, a Victorian region where emotions are running high on renewable energy. 

Earlier this year he told Renew Economy of scepticism that future project owners will put enough into promised decommissioning funds, and he doesn’t believe projects won’t be sold off to shell companies at the end of their lives. 

So-called ‘bottom of the harbour’ phoenixing was popular in the 1970s, when asset owners would sell assets to $2 companies with no cash to pay for decommissioning, thus ‘sinking’ the asset to the bottom of harbour to be out of sight and mind.

But states are moving to put rules in place for renewables to ensure this kind of behaviour never happens. 

Queensland and South Australia have laws requiring financial securities from renewable energy developers to protect against abandoned sites. 

NSW is closing in on setting up its own system, with a Bill currently working its way through parliament.

Clayton Utz lawyer Vicki Aron says it will impose a security of up to 50 per cent of the cost of decommissioning, paid to the consent authority.

If the operator is wound up and the security falls short, then it is the landowner who is left with infrastructure on their property and exposed to the residual remediation costs, Aron tells Renew Economy.

Her colleague Claire Smith says potentially in the future this could be ratcheted up to a staged 100 per cent payment, but because the impact and cost of decommissioning is not as high as for mining, oil, gas and landfill projects she’s not sure governments would want to go that far.

Victoria, Western Australia and Tasmania all rely on planning conditions to manage decommissioning, and landowners making smart, informed decisions when they sign lease contracts.

All bar Western Australia have rules requiring some kind of financial security for fossil fuel projects, however, and many explicitly admit that the buck stops with government if an owner collapses. 

“Under current regulations: landholders are protected from liability for harm caused by, or arising from, the failure of any legacy petroleum and gas infrastructure on their properties, unless they have caused or contributed to the harm,” a Queensland government website says. 

“The State takes responsibility for legacy infrastructure.”

Industry groups RE-Alliance, Community Power Agency, the Clean Energy Council and the Queensland Renewable Energy Council have all put forward proposals to set a decommissioning standard for renewable energy, focusing on bonds and financial securities.

The Clean Energy Council’s William Churchill says the organisation has held talks with governments and industry, and their proposal is providing a basis as policies evolve.

The hope is that a well designed system will, unlike the fossil fuels sector, remove the need for the public to carry the cost at all.

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