Mine operators could ‘walk away’

A VICTORIAN mine regulator has told an inquiry there is a 50-50 chance mine operators could “walk away” from their rehabilitation bonds.

As the Hazelwood Mine Fire Inquiry reviews the effectiveness of rehabilitation bonds at the Latrobe Valley’s three coal mines this week, it heard of the potential high-risk liability.

Rehabilitation bonds set as part of licence conditions have gone unchanged for 20 years, with each mine given a $15 million bond when the State Electricity Commission was privatised.

The bonds were set to provide the government with sufficient money to rehabilitate a mine if the mine owner walked away.

But evidence from the mine regulator said there were questions if the current method of estimating liabilities for bond determination “suits the large brown coal mines in Victoria”.

In cross examination, Ross McGowan of the Department of Economic Development agreed there was a 50-50 risk of mine licensees leaving significant costs to the state in carrying out approved rehabilitation works in the case of insolvency.

“There’s always a financial risk to not being able to pay their debts when they fall due,” Mr McGowan said.

Counsel assisting the inquiry Peter Rozen told the inquiry there had been no review of the bond levels despite the mines getting bigger.

Mr Rozen said $15 million bonds had been set as an “interim” level, but nothing had changed in 20 years, although mine operators had adjusted their State Government approved work plans for mining and rehabilitation.

“There has been very little concrete action in making any changes,” Mr Rozen said.

The three coal mine operators provided new bond estimates for mine rehabilitation as part of the inquiry review.

Yallourn set a range between $46 and $91 million; Hazelwood $73 million and Loy Yang $112 million.

However, an independent assessment by American technical services company AECOM has estimated the cost of rehabilitating sites is in the hundreds of millions.

The report commissioned by the inquiry said conservative estimates of the liability cost of closing mines earlier than planned was $196 million for Loy Yang, $170 million for Yallourn and $251 million for Hazelwood.

Mr Rozen said it was clear there was a big gap between the existing bonds and even the lowest rehabilitation liabilities provided by the mines.

“I’m wondering if that’s because the department is concerned that, if it does increase the bonds, it might trigger these risks of either insolvency or refusal to comply with the increased bonds,” he said.