COLLIE COAL (GRIFFIN) AGREEMENT AMENDMENT BILL 2024 Second Reading
Extract from Hansard
[COUNCIL — Thursday, 12 September 2024] p4382b-4389a Hon Dr Steve Thomas; Hon Stephen Dawson Second Reading Resumed from 13 August.
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HON DR STEVE THOMAS (South West) [3.29 pm]: The Collie Coal (Griffin) Agreement Amendment Bill 2024 is interesting legislation that reflects an absolute disaster of management that has now gone on for nearly 20 years. The coalfields in Collie are in a disastrous state. The industry is in a disastrous state. The impact that has on the energy system of this state is disastrous. This is an absolute mess. The best the government that is in power at the moment can argue is that it is not a mess of its own making; it is a mess that it inherited. I guess one could argue that there is some truth to that. However, it is the mess that it inherited that it has to do something about. To be honest, this bill will do very little to fix the mess that is the coal mining industry in Western Australia. It is probably the worst performance of government over two decades that I have seen. It rivals pink batts in its effectiveness; it is that much of a mess.
This bill is relatively simple. It will extend a state agreement act that exists for Griffin Coal to continue to mine coal on the land it has because it is managed by a state agreement act. The government is going through a year-by-year process of extension because we are all waiting for the ultimate implosion of the coalfields in Western Australia. How did we get to this disastrous situation? I will try to get through this process by the end of today. I suspect that whoever is dealing with the next bill will not get a chance, but we will endeavour to get this one finished. That probably means I will have to cut back my second reading contribution a little, which is disappointing—such is life. How did we get to this dire situation in which we find ourselves?
Until about 20 years ago, the coalfields went along reasonably comfortably because there were two coal companies, Premier Coal and Griffin Coal. They each had a contract to provide energy to what was then Western Power, which was previously a combined unit that had generation, distribution and retail all in one. Each company had a cost-plus contract. They supplied half the coal each and they received in the order of $60 to $66 a tonne. If they were receiving $66 a tonne, and they were probably selling three million to four million tonnes a year each, they were making reasonably good money. However, something weird happened, and it was under the purview of the Gallop and then Carpenter Labor governments of 2005 to 2008 when the system of energy in Western Australia changed dramatically. There were a couple of key components to that. One was a cheap gas contract that the government under then Minister for Energy Eric Ripper negotiated with gas providers up north for gas to come down through the Dampier to Bunbury pipeline. That gas price was a bit over $2 a terajoule. If we compare that with what they are paying now, which is in the order of $12 to $15 a terajoule, it was a good long-term contract and there was an option to go forward with that under Eric Ripper.
At the same time, then energy minister Eric Ripper, a former Labor minister for whom I have a lot of respect— he was Minister for Energy and Treasurer at the same time—allowed Western Power to negotiate a single contract for coal. A price of $66 a tonne for coal was a fairly lucrative contract for the coalminers, who were the heartland of the union movement in the south west—possibly the heartland of the union movement of the state at the time. Everybody was making good money—maybe too much—and that is perhaps what drove that government to offer a unified contract. Premier Coal put in a tender for $30 a tonne—less than half the price it was receiving at the time. Griffin Coal could not get anywhere near that. Premier Coal was probably spending $40 a tonne with strip ratios in the region of 3.5 to one up to four to one. It needed that to get anywhere near $30 a tonne. It was probably costing $40 a tonne with a strip ratio of four to one. Premier Coal was owned by Wesfarmers at the time. There has always been a little bit of overconfidence in Wesfarmers, so it thought it could drive down the price. It put in a bid of $30 a tonne based on some fairly easy to access coal in seams that did not have a lot of overburden in them. At the time, it was costing Griffin Coal in Collie in the order of $68 a tonne to get its coal out of the ground. When it moved from underground to open-cut mining, Premier Coal took that as an opportunity to restructure its workforce. Griffin Coal in Collie has always been the heartland of the union movement and it was too difficult for the owner of Griffin Coal, who was Ric Stowe at the time, to restructure his business in the same manner. That is one of the reasons Premier Coal was getting its coal out of the ground for $40 a tonne and it was costing Griffin $68 a tonne. Basically, if members want to see the impact of the unions—the Construction, Forestry, Mining and Energy Union and the Australian Manufacturing Workers’ Union—on the cost of production, there is a simple example. It was a price of $40 a tonne versus $68 a tonne because one company was able to undergo the workforce restructure it needed as it went from underground to open-cut and one was not.
Griffin Coal obviously then had a problem because when Premier Coal put in a price of $30 a tonne, as spruiked by then Premier Alan Carpenter, Griffin could not go with it, so Premier Coal got the entire contract from Verve Energy. One of the first things energy minister Eric Ripper did in 2005 under the Labor government was to split Western Power into Verve Energy, which was generation, Western Power, which was distribution, and Synergy, which was retail, for the south west interconnected system. Horizon Energy was in place for the bits that were not connected to the major part of the grid. Verve Energy was the generating arm; it split out.
In a debate on the price of energy on 1 April 2008, Alan Carpenter said —
The new coal contracts came in at $30 a tonne compared with the old price of $65 a tonne.
It is interesting that at $65 a tonne, Premier Coal was probably making at least $15 a tonne over four million tonnes— a $60 million a year profit—and Griffin Coal was probably still losing a couple of dollars a tonne, so it was very tight. It shoved it all in at $30 a tonne and nobody could expect anybody to get to that price. Premier Coal was highly optimistic that it could cut its production costs. The outcome of that was that it was losing money hand over fist under the new contracts and Griffin Coal had no market apart from Worsley Alumina, which was owned by BHP. It kept about one million tonnes a year with that contract. What did the owner of Griffin Coal, Ric Stowe, do? He built Bluewaters power station. Bluewaters Power then got a deal through some of his Labor friends to get a contract, first off with the Boddington goldmine and, secondly, with Synergy and the Water Corporation. The contracts are actually up for renegotiation now. I want to come back to the point I have made in this place a few times. This government appears to be doing everything it possibly can to put the Bluewaters power station out of business— in the first instance by denying it the ability to tender for the contracts it currently has. I would love the minister to confirm that that is the case. I keep asking the question, but I keep getting fobbed off. I will try to cut these comments short to leave until the committee stage post question time at the very least and a bit more. We will do the clause 1 debate. I do not expect to get an answer, because that is the trend of the current government. It will hide behind commercial-in-confidence and cabinet-in-confidence to make sure that the people of Western Australia, particularly those who use energy, have no understanding of what the government is up to. Whether it is the government or the department that is leading it by the nose, the outcome is exactly the same.
It was under Alan Carpenter that we dropped the price to a point that was completely uneconomic. What happened out of that? It turns out that Premier Coal, which was the much more efficient company—it was probably costing it $40 a tonne—could not make that work and started to go broke. It was sold by Wesfarmers to a Chinese consortium. Yancoal now owns that company. It has struggled so hard to meet its cost of production targets.
We move on from the former Labor government under Alan Carpenter to the former Liberal government and then to the current Labor government under then Mark McGowan. Ultimately, the government was forced to take an equity share in Premier Coal because the price of coal was so low that the company could not survive under the current circumstances. People do not realise this. By 2030, without a significant change in the price of coal, which we will come to in a minute, the government will be a partial shareholder of Premier Coal in conjunction with Yancoal. Talk about nationalisation by stealth! It is not like the lobster industry in the midwest, where the government went out to obviously nationalise part of an industry. In this case, this is nationalisation through desperation. It is a desperation to keep the lights on by partially funding the operating losses of Premier Coal. What kind of outcome is that for energy security in the state of Western Australia?
Of course, even though Premier Coal had won its contracts, it was closer to its cost of production targets than Griffin Coal was. Remember that Premier Coal started at around $40 a tonne; Griffin was more like $68 a tonne. Ric Stowe built Bluewaters I and II so that he would have a market for his coal, because the alternative was to shrink Griffin until it was effectively non-existent. At a cost of $68 a tonne, he was selling his coal at Griffin Coal into his power station, Bluewaters power station, in a separate legal entity, Griffin Coal, and at the time, Griffin Energy, at a similar price to the price that Premier was receiving from what was then Verve Energy, in the $30s. He was losing $30-plus a tonne on the coal that he was effectively transferring from one of his companies to the other. Of course, he was slowly going broke under those circumstances. Griffin Energy was just holding its head above water. Griffin Coal was going backwards at a rate of knots, because instead of losing $10 a tonne, it was losing $26 a tonne. If a company puts out three million to four million tonnes at that price, it is losing $70 million to $80 million a year, year in, year out.
In 2010, this all came to a crashing stop when Griffin Energy finally succumbed to its massive debts and was sold to an Indian company, Lanco Infratech—a massive company that had major power generation assets. It had some coalmining assets, it needed more coal and it talked about a multibillion-dollar expansion of Griffin Coal, including exports from the port of Bunbury. Ten years after that, the outcome is not just that Griffin Coal went bust. Lanco Infratech paid $750 million for the Griffin Coal company, which was probably worth $75 million at best at the time. It was entirely debt funded at $750 million. After 10 years of operation, losing another $70 million plus a year over 10 years, its ultimate debt—it is pretty simple maths, people—with a $750 million purchase price and a loss of $70 million a year over 10 years was nearly $1.45 billion. What was the result of $1.45 billion, roughly speaking, in debt carried by Lanco Infratech? The entire multibillion-dollar Lanco Infratech company in India went bust. A company that paid 10 times the price was still trying to sell coal at a price that would send the company broke. That is the coalfield that this Parliament has inherited from multiple governments leading up to it. It is that level of disaster.
That brings us to what is going on at the moment. Members might know that I have asked a bunch of questions over the last few years on what is happening in Griffin Coal. The government is very good at not answering those questions. It was finally embarrassed by some of this stuff through the Auditor General’s office and had to answer a question on the cost of legal advice that it had spent nine months refusing to answer. The government has spent millions of dollars on legal advice from six or seven different consulting companies, all giving it legal advice and advice on how to fix this process, and the result has been, as far as I can tell, a simple statement. The price that is being paid for coal in Collie is unviable.
The government started talking about this process. Years ago, we started to ask: what is the government’s plan for Collie? The government started saying, “Our solution is that everybody has to pay an economically feasible price for Collie, a realistic price for coal.” Every time I have asked what is a realistic price for coal, the government refuses to answer. It will not tell us. Even though we have this mechanism in place that if Premier Coal loses a certain amount, the government will take an equity share in it, the government refuses to say what an economically realistic price for coal actually is.
The price of production dropped a little initially at Premier Coal, but now it is up again, and I would suspect that an economically viable price for coal, when it said it could do it for $30, was probably in the mid-$40s. A decade after that, it is probably in the $50s, and we will probably find it is in the $60s now, because the cost of production has shifted. We initially had strip ratios of four to one with good seams of coal; in many cases now, the seams of coal are over 20 to one and some of them are 24 to one. The amount of overburden we have to shift to get this coal out of the ground is six times as big as it used to be. What does that do? It pushes up the price. The price has no option but to go up. The cost of getting coal to a power station is going up. That is why, ultimately, coal-fired generation will disappear from the state of Western Australia. Whether one likes or hates coal, it is actually not an argument about climate change anymore; it is an argument about the cost of production.
Collie coal is a mid-range coal. It is a sub-bituminous coal that sits at a calorific value of about 19 gigajoules a tonne. The black coals of the east sit at about 30 or 31 gigajoules a tonne; the brown coal in Victoria sits at about nine gigajoules a tonne, but it sits in sheets and is very cheap to get out of the ground, because it does not have the same effect of overburden. It is kind of the cheap and nasty stuff, but it is easy to mine. The black coal is a lot more efficient. Western Australian coal is in the middle, but the strip ratios are the killer. It is the capacity to get that coal out of the ground at a reasonable rate that is the problem. That is why it will shift. I do not think it will shift in the timeframe that the government is suggesting when it says that it will close the last state-owned coal-fired power generator by the end of 2029. I actually do not think it will manage that, because it will not have enough alternative generation, storage or transmission in the system to be able to do that, and the strategy of the government around that is quite obvious. It is just waiting for the private sector to suddenly come in, tap into the federal government’s massive subsidies for renewable energy projects and save its bacon. As we have described before, this is the Western Australian Labor Party’s privatisation of energy by stealth agenda, which it is actively engaged in at the moment, despite all the rhetoric that we might hear otherwise. It is desperately relying on the private sector to come in and save its bacon on this. But at this point, it is really going to struggle, so I actually do not think it will get coal closed down in the timeframes in which it thinks it will get coal closed down. I suspect that the government will extend it out, although not forever. I imagine that by somewhere around 2036, the government will actually be in a position with alternative energy generation to close the last coal-fired power station.
In the meantime, my proposal is that we build some additional gas generation to see us through the transition. My policy for transition is that we extend coal where we need to and where we are able to. At the same time, we would build an additional 300 megawatts of gas generation—we used an Economic Regulation Authority costing for that, so I will use the government’s own figure of $264 million—until we get to the lower emissions future that we will eventually get to in which other sources will come in. Those other sources could look like a whole range of things. Ultimately, that settled pattern will be a couple of decades down the path. Obviously, coal to gas and then gas to whatever comes next is a fairly simple policy. What that will do is keep the lights on and the air conditioners running while we transition, and also keep the price to a level that consumers can afford. That is a critical part. The government’s plan is firstly to throw it open and rely on the private sector for generation, which will drive up the price. These guys are not going to do it without making a significant dollar in the process. I know that the government will get some subsidies out of the federal government and that that will fund part of it, but it is difficult to see the current government’s plan actually working.
In the debate in the other chamber, a couple of particularly interesting comments were made, and I think it is worth us going into them in some detail. I will then deal with the subsidies that exist for Griffin Coal, because there seems to be no end to this process. I included in a question on Tuesday some comments made by the Premier in the Legislative Assembly on 7 August 2024. The Premier of this state said —
We believe that wind and energy storage and solar will play a key role in the interim period and that we do not need a new coal-fired power station today. We will need one at some point in the future as part of a firming program of renewable energy and energy storage, but the Australian Energy Market Operator has said in its projections that that is in the medium term, not in the immediate term.
I think the poor old Premier got a little confused on the day and I think he actually meant to say “gas-fired power station”, not “coal-fired power station”. I asked a question about this of the Leader of the House on Tuesday. As usual, I got no answer to the question that was asked and got the usual sidestepping diatribe and pure politics. The reality is that the former Minister for Energy, Hon Bill Johnston, suggested in estimates that the state would have to build some more gas generation not as a peak station for base load but for what we now call firming. It appears that the Premier is now joining in. I actually listened to the debate and wrote down what the Premier said. Hansard always try to make us sound a little bit better than we generally are, for which we are greatly appreciative, but the words he said, which I wrote down as I listened to the replay, were —
…we don’t need a new coal-fired power station today. We will need one as part of a firming program of renewable energy and energy storage at some point into the future.
That is what he said on the video. I think what the Premier of the state, who is also the Minister for State and Industry Development, Jobs and Trade and responsible for the bill before the house today, actually meant to say was that we will need some gas-firming generation in the future—that we do not need it yet, but we will need it in the future. That is probably right; we do not need it yet because we still have coal. We still have a bit of coal because the government extended the life span of unit 6 at Muja, interestingly to one month past the next state election. The government is going to hold everything together past the election because it is terrified of what is going to happen in the next term of Parliament. I think the Premier, if members will forgive the old expression, has belled his own cat. The little bell is dinging away. The Labor Party in this state is actually going to build some more firming generation, and it will use gas. Okay; the Premier said that a couple of months after the opposition announced its state energy policy, in which it said it would build a bit of extra gas, but it is nice to see the government coming along with us. We have been talking about it for a couple of years now. I might send the government an account for a breach of trademark or intellectual property rights over this bit of policy, but it is nice to see the government coming along as part of the process, because it is really essential. I do not think there is a major difference now because the government has jumped on board with a bit of extra gas firming to get to whatever comes next. We might disagree on what will come next in a couple of decades. My mind is open to all options; the government’s mind is not necessarily open to anything. It is definitely open to private investment saving the day. I am open to private investment as well. If a company came along and said that it would like to build 300 megawatts of gas generation for firming capacity, I would be completely open to that; I do not think there would be any issue with that. We are going to find ourselves in a very similar position; it is just that in this particular circumstance, the opposition actually led the way.
We are going to run out of time before we are going to get this through. However, we will try to get to the basis of this. We will probably have to ask this in the committee stage of the bill, but I will try to give the minister as much warning as I can. As we have said, Griffin Coal is in a disastrous state. It continues to lose about $70 million to $80 million a year. It has lost that amount year in, year out for a decade and a half at least, and probably close to two decades. That is $700 million to $800 million each decade, or $1.5 billion of losses. The joy is that most of that loss was absorbed by an Indian investment company that has now gone bust. Do members know who is absorbing that cost at the moment? It is the taxpayers of Western Australia, who are putting a massive amount of money into Griffin Coal. Assuming that the Minister for Energy and the Parliamentary Secretary to the Minister for Energy have answered my questions honestly, which I am sure they would, that money is being used to cover the operating losses of a company that is still losing $70 million to $80 million a year. One issue is exactly how much money will be put into Griffin Coal. This is something that the minister might be able to clarify. The government made an announcement entitled “Funding offers certainty for Griffin workers and WA electricity system” on 1 December 2023. A key line in that is
— To avoid the risk of sudden closure —
As in, everybody has gone bust and is out of a job —
the State Government has allocated $220 million to support continued operations at Griffin until June 2026.
That is $220 million. However, prior to 1 December 2023, $40 million had already been invested in bailing out Griffin Coal, as evidenced by the answer to question without notice 1500 that I asked on 28 November 2023. The question asked how much had been delivered to Griffin Coal as at 27 November 2023, and at least $40 million had gone through at that point. A significant amount of money had been provided prior to the announcement of $220 million at the end of 2023. Griffin was already haemorrhaging money at that point. Can the minister clarify for me whether the $220 million announced on 1 December 2023 included the funding granted to Griffin Coal prior to 1 December 2023? Is the total amount that is going to Griffin Coal capped at $220 million or is the funding provided prior to that period on top of the $220 million? One of the issues that I would like to find out is: what is the absolute total cap on that money?
According to the questions I have been asking in Parliament and answers I have received, from March 2023 to August 2024, $113.1 million has flowed to Griffin Coal over about 18 months, so it was still running at a loss of $70 million a year. The earlier handouts given to Griffin Coal on 7 March and 31 May in June and August 2023 and on 22 September and 17 November 2023 all came before 1 December 2023 when the announcement was made of a cap of $220 million. There we see that extra money that gets us out to the figure of $260 million that I keep using. Is the cap $220 million from 1 December 2023? Is all the money paid prior to 1 December 2023 additional to the cap, or is the government capping the entire amount of the bailout to Griffin Coal at $220 million? Either way, the government will struggle to get the cap to $220 million because it is supposed to fund Griffin Coal until 30 June 2026, which is nearly two years away. What the government has spent to date plus another $70 million a year for the next two years, which is another $140 million, the government will end up spending $250 million to $260 million just to get that through. I assume, and I think the Premier has said this, that government will come back at some point to increase the amount of money for the bailout. Some clarity around that would be incredibly useful. I think we will see the government being unable to maintain its commitment to cap this money and maintain what is going on at Griffin Coal.
If the government invests a quarter of a billion dollars—that is a huge amount of money, which is just about WA Inc part 2—into a foreign-owned insolvent company, and at the end of that process, the government will have a foreign-owned insolvent company, and it will be in no better financial position than when we started. Unless something significantly changes, the government is putting in a quarter of a billion dollars just to buy itself three and a bit years. It is like the government has bought a broken down old 1962 Valiant that barely runs. It puts $1 million into doing it up, and at the end of that process it has a 1962 Valiant that barely runs! That is the issue that the government is facing. I understand that some of it is in desperation to get past the next election. If, as the government says, its only agenda is to keep power prices from going up until it gets itself re-elected next year, this is all just a holding pattern, waiting for us to get to the next step, but there is no long-term future vision. The government says, “Somebody will have to pay the full economic price for coal, but we can’t tell you what that is.” I am not sure which company will do that. At the same time, the government is undermining a couple of the significant contracts that Griffin Coal currently has.
Griffin Coal currently provides coal to Synergy and the Water Corporation for desalination. It does not provide it to them directly; it provides it to Bluewaters power station and Bluewaters power station has contracts with Synergy and the Water Corporation. The government has publicly said that Bluewaters power station will not be getting those contracts back. Therefore, Griffin Coal’s major client, Bluewaters energy, will be locked out of some of its major contracts by the government, which in the meantime is pouring a quarter of a billion dollars into Griffin Coal at $6 million or $7 million a month just to keep it afloat. Who is the government’s accountant? Holy mackerel! That has got to be the worst business deal anybody has ever seen since the petrochemical deal in the 1980s and 1990s. It is an absolutely disastrous deal. If the government is just trying to keep the price down so that it does not have an impact at the ballot box, at least come out with a longer term strategy. What is the solution to this? The solution, ultimately, is to put Bluewaters out of business, and without those contracts, Griffin Coal becomes even less viable, and with Griffin Coal even less viable, the government has to either shift from an operating loss subsidy of $6 million a month to an operating loss subsidy of $10 million a month, and the situation just gets worse, or is the government just waiting for it to all fall in a heap? That is the only other way that we can read this. The other option is that the government is just waiting for it to all fall in a heap, and it will just walk away saying, “Well, we want to win in 2025. Whatever happens in 2029, if we happen to hold the seat the Collie, all well and good, but if we lose it, such is life!”
I have to say, I go to Collie all the time, and the people of Collie are furious with the way the Labor Party has treated the coal and power industry in Collie. They will probably still vote Labor because it is one of those very frustrating exercises in that we provide an alternative government and everybody says that they think the alternative is better, but they have been ingrained for three generations to vote Labor, so they still vote Labor. It is a frustrating exercise, I have to say, but that will probably be the outcome. It is not that we will suddenly shift a lot of Collie voters to a conservative party, but it would be good if they did because they might actually get a better outcome because I think the Labor Party takes Collie for granted. Labor members say, “They will just suck up whatever we throw them, and however incompetent we become doesn’t matter because we’ll still win the seat of Collie.” Maybe that is right. Maybe the people of Collie need to look at this and say, “Maybe we need to put a bit of pressure on the Labor Party to actually take us seriously.”
The destruction of Bluewaters power station by not being able to find contracts for its output is a dastardly act that the Labor Party seems intent on inflicting upon the economy and the people of Collie. The flow-through damage will hit Griffin Coal mining, and suddenly the whole thing will implode. Yes, it will probably help the government’s green energy agenda, so well done. But it is devastating for the town and the economy of Collie. In the meantime, it will probably not keep the lights on between 2025 and 2030. I do not think that the government will find that the privatised green energy tsunami it is expecting will come in and save its bacon in the end. Even if it does, the government is still going to shatter the economy and the community of Collie. The management of this situation has been an absolute mess and an absolute disaster. Frankly, it is hard to see any kind of solution that the government has apart from delaying the implosion until past the next election. As far asI can tell, that is the government’s strategy. It will delay the implosion. In the end it will drive up the price of electricity for everybody, and Collie’s economy will be significantly damaged.
The member for Collie–Preston, in the debate in the lower house, told us about all the wonderful work being done in Collie and the $660 million Collie rescue package. What the Labor Party does not tell people is that nearly half of the rescue package covers the decommissioning costs of the power stations. It is not that $660 million is for the diversification of the Collie economy; half of that will go towards decommissioning the power stations. Exactly how much of that remains for employment in Collie versus everything else we will see in the fullness of time. That program is not altogether terrible; it includes some decent projects. Some of them are a complete nonsense. Like every set of government projects, we will always get a few pink batts amongst everything else. I understand that it is difficult. We will probably not get one major project to replace one major industry. It has to be diversified for a whole pile of smaller projects. It is not the salvation for the town; it will not fix the problem.
The town of Collie has suffered pain for two decades. As I keep reminding the Labor Party, ever since it dropped the price of coal from $65 to $30 a tonne, according to the former Premier, the town has suffered and struggled. It will not make it through without a great deal of pain and without enormous restructure. The people who work in the power industry will not automatically become baristas or be employed in other growth areas. I get that it is not easy. I understand that it is not simple to close a significant industry in a town and then suddenly require it to shift to something else. It will take time. The timber communities in the south west are discovering that. The coal generation energy system is also learning that. It is tough to diversify an economy.
The way this closure is being done is incredibly messy. The government has paid millions of dollars for advice, which says one thing: the price of power has to go up so the companies that generate it can pay more for coal so that the coal companies can be economically viable. The only alternative is implosion. I do not imagine he would— this would be cabinet-in-confidence or commercial-in-confidence—but it would be nice if the minister said, “Our strategy looks a bit like this.” The government has been absolutely silent about its strategy and how it will manage this process. It has been absolutely silent on the impacts on Griffin Coal in particular and how it will manage the transition. It is very optimistic. I am sure that we will hear about the big battery that will be built in Collie and the cost of that. Yes, that project will employ a handful of people in the fullness of time. The privately built and owned power system is probably doing better than the Synergy one at the moment but I understand that the Synergy one is starting to come across. That will assist the process. Ultimately, I have no problem with that. The government’s current transition plan will need more battery power, not less. In the same way I predicted that the government will have to build some additional gas plants, I now think that the Premier has belled the cat and the government will get some more firming gas. We are not even arguing about that anymore. We are so close on energy policy and we have this nice agreement that we will build more gas plants for energy that we can now start to debate the timeframe, which is the only alternative part. That is good.
But what happens at the end of the coal industry is the critical component. The bill before the house will kick the can down the road another year. Ultimately, this ratifying agreement will take it out to the end of June 2026, which seems to be the critical date. I know the lower house also talked about this. In the current timeframe, the Labor government abandoned ship on Griffin Coal and ultimately Bluewaters power station. The subsidies for Griffin Coal will run out at the end of 2026. It is also when the proposed current agreement—the extension of the state agreement act—will evaporate. When asked on 7 August in the other place what will happen beyond 1 July 2026, the Premier said
— I have been given a rather concise and interesting answer, which is that we do not know. It really depends on what Griffin considers to be its future at that point in time. We may come back to Parliament with a termination agreement. We may come back with a different proposal, depending on how Griffin sees its future and the commerciality of that future.
Again, I think the Premier has belled the cat on this issue. The people of Collie understand that 1 July 2026 is when they will get thrown out with the bathwater. The government has said, “Well, we have got past the 2025 election at this point, so we are comfortable. We now understand that we will have to put up the price of energy or come up with another solution.” That is the point. It will have to be done by 1 July 2026. It is not just that the state will exit coal-fired power stations owned by Synergy; the damage that the government is doing to Griffin Coal and Bluewaters sits on top of that. This legislation will get us to 1 July 2026. The government has said that 220, 260 or whatever that number is will get Griffin Coal through to 1 July 2026. At that point, all bets will be off. The government will say, “At that point, we’re not going anywhere.” The government might have to come back and do something different. It will struggle to come back and deliver a commercially viable outcome, particularly if it is not active in the area. That is what is missing in this debate. How will the government get to a commercially viable outcome for the coalfields? For Premier Coal and Synergy, where will we get to as the government tries to close down its coal-fired power stations in a timetable it will probably fail to meet? The funny part is—I ask members to listen to this— that the government is taking an equity share in Premier Coal, whose coal goes to Synergy, which at this point will be closed down by the end of 2029. The government is taking an equity share in a coal company that will have no market. It is brilliant. The writers of Yes, Minister could not produce this stuff. The government is taking an equity share in a company that will have no market and, ultimately, if the government’s plans come to fruition, cease to exist. It will be interesting to see what sort of cost that comes to by the end of 2029. That will be an interesting prospect.
On the other side of the ledger, the government is trying as hard as it can to drive Griffin out of business by driving Bluewaters out of business. That is ultimately the position in which we find ourselves. To be honest, the bill before the house, which will provide a one-year extension to the coalmining state agreement act, is something of a joke. It is an important joke because Griffin Coal will be able to operate for one more year, so the government cannot continue to do that.
We need to ask a couple of questions when we get to the committee stage. There are a couple of good parts in the bill. I am particularly interested in the sections of the bill that will require Griffin Coal to provide various plans and documents on how it will manage its leases and assets over the next couple of years because there are requirements, as listed by the government, in this process. I will be very interested to see exactly what it will be asking of Griffin Coal. I have asked questions in Parliament on numerous occasions relating to what these agreements look like. What is the government asking Griffin to agree to? What is Griffin prepared to do? Again, the government is hiding behind commercial-in-confidence because its management of the coalfields is such a disaster that it cannot afford to have proper scrutiny of its activity, and I get that. But I will keep asking, and will ask again during the committee stage of the bill as best I can, for a little bit of information on how this might work and what Griffin will be required to do.
Because we need to sit down and get into the committee stage, I do not expect a large and fulsome reply from the minister. I understand that he is the representative minister and he is part of a government that has to be dragged kicking and screaming to release information, particularly in this area. It does not matter whether it is energy or state development; we cannot get reasonable answers. After the first attempts to get reasonable answers and I get none, I guess I will give up, but I will give it a go.
Obviously, this is a joke that we need to support, because it is an alternative to a proper solution for the coalfields, the coal industry, the power generation industry and, most importantly, the people and community of Collie.
HON STEPHEN DAWSON (Mining and Pastoral — Minister Assisting the Minister for State and Industry Development, Jobs and Trade) [4.20 pm] — in reply: I thank Hon Dr Steve Thomas for his contribution and appreciate how he has dealt with the situation this afternoon. I have a couple of things to say, noting, obviously, that we are going to go into committee.
The honourable member asked what a reasonable price for coal would be. That price reflects the cost of production for Griffin Coal. As the honourable member has flagged, this can be expensive, but it varies based on the costs to Griffin of extracting that coal.
In terms of the subsidies, the member asked a question about the announcement on 1 September 2023. I am advised that the answer about the cap is that it is $220 million plus previously allocated funds. I am told that that is approximately $260 million or thereabouts. In terms of whether we would add to the budget, I am also told that the government is committed to funding Griffin through to June 2026. The total funding allocated is expected to cover that period.
The member asked about strategy. I cannot comment on any strategy. My sole task is to deal with the task at hand, which is the stewardship of the Collie Coal (Griffin) Agreement Amendment Bill 2024, which I am hopeful of getting through this afternoon.
With that, I commend the bill to the house.
Question put and passed.
Bill read a second time.
Committee
The Chair of Committees (Hon Martin Aldridge) in the chair; Hon Stephen Dawson (Minister Assisting the Minister for State and Industry Development, Jobs and Trade) in charge of the bill.
Clause 1: Short title —
Hon Dr STEVE THOMAS: If I am going to live up to my promise, we have about 20 minutes maximum for the committee stage. Is the minister happy just to do clause 1?
Hon Stephen Dawson: You ask the questions wherever you want.
Hon Dr STEVE THOMAS: I will try to live up to that commitment, assuming that I am the only person who will be asking questions during the committee stage of the bill.
In clause 6 on page 7 of the bill, proposed clause 11A(4) of the agreement provides that Griffin Coal has to submit detailed proposals under and in accordance with clause 10. That is a standard clause in every state agreement act and in every extension. What level of public clarity or transparency will there be about the plans that Griffin has going forward? It is all very well for the government to say that it has looked at this and the Department of Energy, Mines, Industry Regulation and Safety or the Department of Jobs, Tourism, Science and Innovation—whichever is in charge of it—has said that it is happy with it. How will the public have some sort of confidence that government is doing its job and Griffin actually has a plan going forward? What level of disclosure will there be?
Hon STEPHEN DAWSON: I am told that the detail will essentially be commercial-in-confidence because it will contain the material that companies will not want to disclose. However, previously, there has been a public environmental review under part IV of the Environmental Protection Act. There was a public consultation process at that stage. Anything moving forward will still need to align with the approvals that have been previously given and consulted on.
Hon Dr STEVE THOMAS: In the minister’s second reading speech, he basically said that the current term, which was a previous extension, will finish on 30 June 2025. This one will take it from 30 June 2025 to 30 June 2026. I am interested in the timeframe. First, how urgent is it to get this particular agreement through? When will this agreement start? I thought it would be 30 June 2025 for a one-year agreement. What is the process around that? Hon STEPHEN DAWSON: The bill will come into operation from royal assent. Essentially, it will extend the term of the agreement for 12 months until 2026. I am advised that June 2026 is considered sufficient time to reduce the electricity system’s reliance on coal from Griffin and to ensure a managed transition for Griffin’s coal industry. If Griffin Coal is to continue after this, any longer term plan will need to be industry-led on a commercially sustainable basis without ongoing government funding and underpinned by customers paying a fair price for coal. It will be up to Griffin’s receivers and managers to make a proposal to government to continue operations after that June 2026 date that is commercially viable without relying on government funding. Hon Dr STEVE THOMAS: Once Hansard comes out, I am going to have to look in some detail at the minister’s answer because I think he effectively said—was a written answer prepared, which I think is important?—that this is an extension, effectively, to see the death of Griffin out of the energy system. That is how I have interpreted it. When we come back after question time, the minister might have a different view of that. Because I am old and cynical now, I take an old and cynical view of these particular things. I think what he has just effectively acknowledged is that this is to get us through to the government’s planned transition. Committee interrupted, pursuant to standing orders