Alcoa worker Chris Grayland has been with the company for 29 of the smelter's 30 years. Credit:Elly Hateley/Portland Observer The future of Victoria's biggest exporter and electricity consumer hangs in the balance. The outage occurred with remarkable timing – just days after Alcoa's 30-year government-subsidised power contract ended and with power prices set to rise after the closure of the Hazelwood power station. Grayland says he does not believe governments will allow the smelter to shut. "If it closed it would wreck the south west of Victoria, I reckon. Not just Portland but the whole region." But to continue, Alcoa requires a generous new contract with electricity supplier AGL, and hundreds of millions of dollars more in government support. This, six years after the Brumby Labor government said there would be no more public handouts for the US multinational. Victorians have already tipped in billions of dollars over 30 years to keep Alcoa afloat. While Chris Grayland and his colleagues say it is a worthwhile investment, wider Victoria might reasonably ask, what price the Portland jobs?

Alcoa's Portland smelter is struggling with high energy costs and low aluminium prices. Credit:Joe Armao It seemed a good idea at the time . . Such was government anxiety about Alcoa's future in Victoria that in mid-December federal industry minister Greg Hunt joined his Victorian Labor counterpart Wade Noonan on a flight to New York – metaphorical cheque books in hand – to plead with Alcoa global boss Roy Harvey to keep the plant open. The smelter at Portland on Victoria's far south west coast. Credit:Jessica Shapiro While both ministers remain tight-lipped, Fairfax Media understands Alcoa recieved an initial offer of $240 million – including $200 million in state funds over four years and a $40 million interest-free loan from Canberra, effectively a federal grant to help Alcoa restore the damaged smelter pots.

As he headed for New York, Hunt may have pondered the historic twist of his involvement. Thirty-seven years ago his father Alan Hunt was a Cabinet minister in the Hamer government that gave the green light to Portland as the site of the company's second smelter in Victoria. Aluminium smelting uses huge amounts of electricity. Credit:Joe Armao The other was at Point Henry near Geelong which closed in 2014 as its own, subsidised, power contract came to an end. At the time the Hamer government cited Portland's deep-water port and regional jobs as the rationale for the location, 500 kilometres from its power source in the Latrobe Valley. The Alcoa Aluminium smelter at Portland is the region's biggest employer. Credit:Joe Armao

Closer to the truth was that state development and former energy minister Digby Crozier insisted the smelter be located at Portland, which happened to be in his electorate. Still, at that time the decision made sense, sort of. In 1979, aluminium seemed a perfect fit for a state crying out for investment and regional jobs and whose primary competitive advantage was a surplus of cheap, accessible brown coal. Power lines leading to the smelter at Portland. Credit:Joe Armao The government agreed to pay the initial bill for the transmission lines from Geelong to Portland at an estimated cost of $160 million (upwards of $1 billion in today's money). But as work got under way and John Cain's ALP took the reins of government in 1982, Alcoa announced it could not afford Portland because of rising electricity prices. Without more state help, it would have to abandon the Portland project.

A power blackout in December caused molten aluminium to solidify, crippling the plant. Credit:Joe Armao The new Labor government – eager for investment and with surplus energy in Labor-held Latrobe Valley – soon caved. It signed long-term contracts that locked in discounted electricity prices for Portland (until 2016) and at Point Henry (2014) pegged to the world price of aluminium. Weaker-than-expected aluminium prices have left successive governments massively out of pocket on the deal. These original Alcoa deals with the Hamer and Cain governments belonged to a bygone era, before competition policy, privatisation, micro-economic reform and, especially, concern about climate change. Alcoa's has headquarters in New York and Pittsburgh. Credit:AP Through a more contemporary prism the deals look misguided: heavy government subsidy of a product reliant on fossil-fuelled electricity 500 kilometres from its power source.

In 2009 Rob Maclellan, a Liberal elder and cabinet colleague of Hamer and Hunt, described the decision to back the Portland smelter so far from the Latrobe Valley as a "collective moment of insanity" and a "costly disaster" for Victoria. Ship jobs being taken from Portland locals and moved overseas. The MV Portland moored in Portland. Credit:Amy Paton But the smelter was built and for years it has been a policy nightmare for governments wanting to truly open Australia to global markets and cut carbon emissions – without sending an entire region into an economic tailspin. The upsides of keeping the smelter Victorian industry minister Wade Noonan has slammed the Greens for suggesting the smelter should close unless it can find a clean-energy source. Credit:Scott Barbour

Alcoa in Portland has its obvious upsides. It is Victoria's single biggest exporter, its silvery-grey metal ingots accounting for more than $842 million in trade. An Australia Institute report for the Australian Workers Union in December found that closure would cut at least $800 million from GDP. Health Minister Greg Hunt has criticised Bill Shorten for suggesting the government had bought the AMA's silence. Credit:Jesse Marlow That economic significance is magnified dramatically in the south west regional economy where Alcoa occupies a special place that is hard for outsiders to fully appreciate. "People in Melbourne often don't understand," says Chris Grayland. "They often just see the government money."

Portland mayor Anita Rank is keen to see Alcoa stay. "We just don't want the rug pulled out from under us right now." Credit:Amy Paton Alcoa is the district's biggest employer and ratepayer, supporting 500 permanent employees, at least 160 contractors, and another 2000 spin off jobs. Grayland says the smelter's impact is felt well beyond Portland with workers commuting from Hamilton, Warrnambool and Mt Gambier, with their collective wages important to the economies of all three centres. State Liberal member Alan Hunt celebrates the decision to build Alcoa's Portland plant in December 1978. Credit:Fairfax Photographic He is a union stalwart and a long-standing health and safety rep. Yet he acknowledges the company's strong standing among its workforce. "Yes, we've had our blues but Alcoa had a good relationship with unions on the whole. Wages are good and employees [are] reasonably happy most of the time."

Portland Aluminium (the local Alcoa subsidiary) is widely viewed as a generous contributor to local services and the community, including to local environmental groups. Senator Nick Xenophon is proudly protectionist and part of a populist political tide that increases Alcoa's chances of getting new subsidies. Credit:Darrian Traynor Yet, viewed from a more distant vantage point, Alcoa in Portland has increasingly looked like a costly anachronism. Its environmental impacts are an obvious negative. Aluminium's carbon problem is not in its own operations; just 10 per cent of the industry's carbon emissions are from smelters themselves. Its real contribution to emissions is through its voracious consumption of electricity. In Victoria, that's particularly problematic because most of our electricity is from emissions-intensive brown coal. Elsewhere in the world, the industry makes much greater use of renewables, especially hydro.

Alcoa Portland is the biggest single consumer of Victoria's electricity. When both Portland and Point Henry were operating that consumption was as high as 20 per cent – enough energy to power half of Melbourne's homes. And enough of that energy was lost in transmission to Portland to power the town as well as the smelter. Even at the current (pre-outage at least) rate, Portland still uses about 10 per cent of the state's electricity. Its closure would slash Victoria's greenhouse gas emissions. When Dick Hamer and John Cain welcomed Alcoa to Victoria, electricity was cheap and abundant. Increasingly now, it is neither, especially after the closure of the outmoded Hazelwood power station. In late 2016 after Hazelwood's end was announced, the federal energy regulator (AEMO) concluded that supply would be adequate but that it would be "tighter" during unusually hot weather. Victorian Government-commissioned modelling points to household power bills rising by between 4 and 8 per cent as a result of Hazelwood's closure. Meanwhile smelters have emerged across the world, including in southern Africa, Iceland and the Middle East, with low-cost electricity. The low-cost advantage that Australian smelters once had is fast diminishing.

The true cost Alcoa has been frightfully expensive for Victorians. In 2009 The Age unravelled the ongoing mystery of the cost of the power contracts for Portland and Point Henry, primarily by analysing the obscure financial reports of the State Electricity Commission of Victoria. It concluded that by the end of contracts for Portland (2016) and Point Henry (2014 when it closed), Victorians would have subsidised Alcoa by at least $4 billion. Recent estimates have put the cost of the subsidy at between $100 million and $120 million per annum for recent years, the equivalent of up to $200,000 per year for each of the 600 direct jobs at the Portland smelter. Such a price, the Greens have argued, is simply too much to pay given the added environmental costs of coal-fired emissions. "Unless a clean energy solution can be found to power the Portland smelter, no level of government should be pouring taxpayer money into the multinational Alcoa," said Greens industry spokesman Adam Bandt before Christmas. In response Labor's Wade Noonan slammed the Greens. "They are no friends of workers and certainly no friends of Portland."

Alcoa the poker player An important factor in keeping Alcoa in Victoria has been the company's formidable prowess as a lobbyist. As one Victorian Labor elder is fond of pointing out, Alcoa is one of the world's great exponents of bluff. From its early dealings with the Hamer and Cain ministers through to recent talks with Hunt and Noonan, Alcoa has extracted big concessions with its threats of closure. It's first big win was getting the Hamer government to pay for the transmission towers linking it to Melbourne and the Latrobe Valley. Then came the 30-year sweetheart power contract with the SECV. Seven years ago Alcoa threatened to shut down if it was not protected from the Rudd government's carbon price. Then, as The Age revealed in early 2016, ahead of that subsidised contract finally ending, the company was again preparing to demand help.

But as AWU Victorian secretary Ben Davis points out, the pre-Christmas outage made Alcoa's threats "much more real". So real, that Alcoa's director of corporate affairs, Brian Doy, was able to describe the outage as "certainly the worst incident" at the Portland smelter. So real in fact that the Federal Government became involved in negotiations for the first time. The outage was a disaster for everyone concerned, not the least, Alcoa. But it also gave the company a powerful new bargaining lever. The Xenophon, Hanson and Trump factor The attentiveness of Coalition and Labor ministers at both levels of government is likely influenced by the emergence of populists like pro-Australian industry advocate Nick Xenophon, One Nation's Pauline Hanson, and US president-elect Donald Trump. By the late 2000s the public policy cards looked stacked against the Portland smelter.

The shared free-market legacy of Paul Keating, John Howard, Jeff Kennett and John Brumby, and an apparent consensus on climate change, pointed to an end to subsidies once the government-sponsored power contracts finally ended at Point Henry and Portland. And when Joe Hockey in 2013 effectively told the car industry to stand on its own or leave – "either you're here or you're not" – Alcoa's bargaining power look weakened. The rise of Donald Trump on the back of discontent in rust belt regions of the US has swung the pendulum back, weakening instead the appeal of both environmentalism and economic rationalism. Labor's current industry policy is notably more "pragmatic", as one of its senior figures describes it, and a long way from the Keating vision. Glenelg shire mayor Anita Rank is in no doubt that the rise of Xenophon, Hanson and Trump has spooked both sides of politics and partly explains the extraordinary current concern about Portland.

As a Liberal, Rank is uncomfortable about government intervention but she makes an exception for the local smelter. She insists the council and local business are working to grow and diversify the local economy. "We just don't want the rug pulled out from under us right now." On Friday, Alcoa insisted the "goal" of the Portland plant was to be viable without government support. History strongly suggests that the Alcoa smelter will need ongoing subsidy; arguably even more so now, given rising power prices, and the growth of cheaply produced aluminium elsewhere. No planning for transition And, as long as the Portland smelter hangs on, governments, industry and unions seem paralysed about planning beyond it. The tragic lessons of the Latrobe Valley privatisation experience – where a similar lack of planning left an entire region economically and socially decimated – do not appear to have been learned. AWU state secretary Ben Davis has been tireless in his efforts on behalf of his Portland members. But he will not engage in what might happen post-Alcoa. "It's a young plant with plenty of life. I just want the plant to stay open."

But the smelter will close and all the signs point to it happening soon, including Alcoa's decommissioning of its own cargo ship in early 2016. Sources say that in its current negotiations with AGL it is seeking a short-term contract. It has an ageing workforce with the average length of service about 20 years and a hiring freeze for most production roles has been in force since big layoffs last year. Aluminium is not a labour-intensive industry and arguably governments could get more employment bang for their buck by supporting other enterprises. Renewable energy, for instance. Understandably, Chris Grayland is focused on the here and now, and ensuring he and his mates have a job to return to as soon as possible. He says he is quietly confident because the current political climate favours Alcoa. "The last thing they (governments) would want is for Alcoa to go." Alcoa's Portland smelter turns alumina into aluminium ingots. Credit:Joe Armao

By the numbers, Alcoa Portland Alcoa is a major Victorian exporter; about $500 million per year

The Portland smelter employs about 600 staff plus 180 contractors and another 2000 spin-off jobs, making it the biggest employer in the state's far south west.

Consumes about 10 per cent of Victoria's brown coal-fired power.

Accounts for about 6 per cent of Victoria's greenhouse emissions.

Has cost Victorians more than $4 billion (Fairfax Media estimate) in state subsidies over 30 years (includes now defunct Point Henry plant)

Another $240 million in government assistance now on offer.