In this story

Despite the apparent optimism of their annual report, despite its ornate flow charts and Vegas colour scheme, the pressure was enormous. GDF SUEZ, the giant international energy company, was studying its forecasts. It didn’t look good. The company, 30 per cent owned by the French government, was preparing to write down assets by millions of dollars. In Europe they were being squeezed by the growth of renewables. The CEO and chairman, Gérard Mestrallet, lobbied vociferously against government subsidies for cleaner energy. GDF SUEZ Australian Energy’s forecasts weren’t great either, and word was coming from above – from offices in Asia and London – to cut assets and pull back on capital expenditure.

Late last year, GDF SUEZ/AE made a critical decision to defer major capital expenditure intended for upgrades and maintenance at their Hazelwood power station – some of this money originally marked for substandard equipment. A source has also confirmed there was no backup generator for the mine’s fire system, that its redundancy plan relied upon another mains power. “Power redundancy to ensure pumps and motors are operational in a disaster is achieved by having a second standalone power source. Two power lines for redundancy in the event of fire is definitely not standard practice – it’s not what any competent operator would have in place.”

The unsatisfactory fire prevention practices at Hazelwood highlight the company’s inadequate audit regimes, which have failed to identify risks at the mine and power station. While the company denies any breaches of compliance, The Saturday Paper understands there is considerable panic within its ranks.

The Saturday Paper also understands that GDF SUEZ/AE’s financial modelling revealed something else, perhaps more significant to this story: the full rehabilitation costs to the site would reach half a billion dollars, a figure inadequately offset by the $15 million bond paid in 1996 and never reassessed by the Victorian government. The enormous cost sat uneasily with their average yearly profits of $200-$300 million, and within the inner sanctums of the company a cynical calculation was discussed – to mothball the plant rather than fully shut it down, in order to escape the costs of rehabilitation.

The source said it was all part of a larger, global aspiration to withdraw from merchant energy markets – a claim GDF SUEZ/AE flatly denies.

Another major issue is whether GDF SUEZ/AE has properly observed its obligation – mandated by its licence – to properly “progressively rehabilitate” the mine. GDF SUEZ/AE told The Saturday Paper that this has occurred, that “in 2007/08, rehabilitation of a section of the northern batters was undertaken by truck and shovel, where some of the exposed coalfaces in this area were covered with clay.” But it is debatable whether the shifting of excess earth and its dumping on disused sections of the pit comes close to the remediation of land – that is, its restoration to an environmentally sound place, amenable to the local community.

1 . The start of the fire

On February 9, while arsonists conspired with record heat, Victorian Fire Commissioner Craig Lapsley described conditions as the worst they’d been since Black Saturday – the ungodly day in 2009 that killed 173 people. February 9 was a nightmarish combination of baked earth, erratic winds and high temperatures. About 70 fires were blazing across the state, and almost 150 warnings had been issued. The great fear was of a super conflagration of separate fires.

It was on this day that police believe a person, or persons, lit three fires in brown grass along the Strzelecki Highway. Those fires made their way to the inadequately protected coalmine of Hazelwood. It hasn’t stopped burning since. Plumes of ash and toxic smoke have covered Morwell for weeks now, obliging the state’s chief health officer to encourage the young and elderly of Morwell to evacuate, and the state and federal governments to issue relocation grants to residents. Meanwhile, the coal fire has bedevilled firefighters who are grappling with its enormous size and complexity. Coal fires are famously implacable; the oldest known fire is in New South Wales, where Burning Mountain’s underground coal seam has smouldered for 6000 years.

As the fire front soared 120 metres high and stretched a kilometre wide, GDF SUEZ/AE’s CEO, Alex Keisser, was on holiday.

2 . Morwell's community

In the shadow of the Hazelwood plant and coalmine sits one of the poorest towns in Australia. Home to 13,500 people, Morwell ranks in the bottom 10 per cent of socioeconomic advantage, according to an Australian Bureau of Statistics report last year. It’s 150 kilometres east of Melbourne in the Latrobe Valley, and as the V/Line train approaches, the nearby hills fall away revealing a panorama of power plants and fuzzy visibility. On the left is the Yallourn plant; on the right you can see Hazelwood’s distinctive row of eight thin chimneys – each rising 137 metres before a smudged horizon. Today, helicopters buzz the smoke stacks, unloading gallons of water on the burning pit. A 40-kilometre perimeter fence runs around the enormous operation.

On the platform of Morwell station I watch a man convulse with a racking cough, and I hear two similar episodes as I stroll down the main drag. The streets are quiet, perhaps not unusual in a small town, but there is some activity at the front of Coles. A shopper emerges wearing a blue facemask, while a Country Fire Authority bus rumbles slowly past. The CFA is tasked with providing information and masks to locals. Pairs of council employees in yellow fluoros knock on doors performing welfare checks. They leave calling cards at unoccupied homes.

If you head south from the station, past the shops and the RSL, you hit the Princes Freeway, itself a casualty from the Hazelwood operation. In 2011 it ruptured from geological trauma, and a section of it shut for half a year. It is from the edge of this freeway that you can see the pit and chimneys. They’re just on the other side.

Beside the freeway is the Morwell Bowling Club, only 500 metres from the mine. Sugar and Terry are on the green, hoovering coal ash from the artificial turf with a vacuum cleaner. “It’s bloody pointless,” Sugar says. “The dust’ll be back again.” No one’s been bowling for a while, but there are locals in the pokies section of the club, noisily feeding coins to the machines. It’s not just bowls that’s taken a hit, the local footy and soccer teams – Power and Pegasus – have cancelled pre-season training or relocated to other places.

It’s a relatively clean day, and the outdoor smoking section of the bowls club has reopened. Margaret and her son Clinton are out drinking VB and enjoying drags on their cigarettes. Clinton’s left foot is bandaged from a sports injury, and crutches rest against the table.

“The elders had to be moved away,” Margaret says.

“I’ve heard the army are gonna evacuate people soon,” Clinton tells me.

Clinton is a striker for Pegasus, the only indigenous player in the Gippsland soccer league. It’s semi-professional, and he has aspirations for the A-League. Last year, he tells me, he won the “golden boot” for most goals scored. “It’s just sport and work here, and the sport’s gone for the time. It’s frustrating.”

I ask if it’s difficult being the only indigenous player. “Not really, there’s such a mix of people. Italians, Sudanese, Portuguese,” he takes another drag and looks at me. “I don’t smoke during the season.”

Margaret is proud of her children – she has another, a daughter, who is studying law in high school and wants to go to university. “They’re my babies,” Margaret says. “I’ll probably have to follow her to the city if she moves. Clinton would probably come along, too. We’re very close.”

We share a few drinks in between their sessions on the pokies, and I’m struck by their gentle resignation to the coal fire.

Behind the bar are two middle-aged women, Jeanette and Leanne, and they’re open and good-natured about my interest. Jeanette shows me the blue facemask she was given. “These are the good ones. I even wore it inside here one day. It was much better. Stuff was getting inside. If you didn’t have the mines, you wouldn’t have these towns. And the company isn’t responsible for the fire. But they have a responsibility to protect us, and yet they pulled out all the pipes for the reticulation. I mean, people are feeling tired from this smoke. Tired. What’s in it that’s making people tired?”

Leanne has a different concern. “There are locals coming in boasting about spending their relocation money here and on cartons of cigarettes. They have no intention of leaving. It’s like the baby bonus, which was just used in here or on plasma screens. You get that in low socioeconomic areas. It makes me mad. And the government just think they can spend money without any foresight.”

Jeanette laughs. “She’s crazy. She said all this to a couple of people who came in the other day.”

Leanne laughs, too. “It’s not good that I do that, I guess. I’m meant to be in a customer service position here.”

“What annoys me,” Jeanette says, “is that I can’t get the relocation allowance because I live further away, and yet I work here right near the fire. And I’m casual, so I don’t get a choice. If I don’t come in, I don’t get paid.”

Back outside sits an elderly man in a bright pink polo shirt secured neatly in grey slacks. He has snow-white hair, cropped short into a fuzz, and an equally white Abe Lincoln beard. He eyes me suspiciously as I introduce myself. “I can’t talk long, I’m off to the DHS interview soon.”

Locals are meeting officials from the Department of Human Services to evaluate their suitability for relocation. He says he’s not hopeful, that he lives too far away. A few hours later, he’s back nursing a Styrofoam cup of coffee and a cigarette. I ask how it went. “I didn’t get it. It’s okay. But they’re obsessed about where people live – but it all depends on the wind. Sometimes places far away will cop it, depending which way it’s blowing.”

He echoes Leanne. “I’ve heard of people pissing it up here, or on the horses.”

That afternoon, spent with smokers and with the choppers circling nearby, I heard a medley of frustrations with GDF SUEZ/AE – about the scarred freeway, a dodgy fire system, the fact that fire had happened before. “The smoke is sickening,” a young woman tells me. “Nauseating. I have to wipe it down from my benches, and sweep it from my back porch. It’s not good.”

Before the old man in the pink shirt leaves, he turns and says to me: “I don’t know why you’re here, mate. I’d get on the next bloody train out of here.”

3 . Power plant rehabilitation bonds

On September 10, 1996, after the Kennett government privatised its power plants, the Hazelwood mining licence was issued. Approved by the minister for agriculture and resources, P.J. McNamara, it granted Hazelwood Power Corporation (owned by GDF SUEZ/AE) a term of 30 years to excavate brown coal. One of the fundamental requirements when applying for a mining licence, and a component of the rehabilitation plan that is lodged along with the mine’s work plan, is the payment of a rehabilitation bond. This bond is paid upfront by the company as assurance against environmental degradation. The bond is mandatory under the Minerals Resource Development Act 1990, and specified in Section 80.

But, as Professor Samantha Hepburn, a natural resource management expert at Deakin University, told me, “The rehabilitation bond is issued at the discretion of the minister. The minister can issue a further bond if the initial one is deemed insufficient. However there is no mandated criteria outlining the considerations that the minister must take into account in assessing the value of the bond.” (It’s worth noting that the act is currently being revised, but the new version is yet to be enacted by Parliament.)

Importantly, Hepburn tells me, the act also gives the minister the power to undertake a liability assessment of the rehabilitation bond and may engage an auditor to certify accuracy – in other words, periodic evaluations to determine if the original bond is still an appropriate assurance. You might require these evaluations for any number of reasons – inflation, for example, or as previously unseen risks are revealed. But despite the manifest inadequacy of $15 million, the fact that 18 years had passed, or that fire had previously broken out at the site, no reassessment of liability seems to have occurred by the Victorian government. The Victorian minister for energy and resources’ office responded that bonds are “periodically reviewed to ensure they are current”, but did not specifically answer the question of whether the Hazelwood bond has been subject to liability assessment.

4 . Environmental offsets inquiry

This story isn’t simply about fires and the preparedness of mines and power plants to deal with them – important as that is. It is also about poor oversight of rehabilitation, and a pattern of mining companies performing the bare minimum of environmental remediation. The shifting of loose earth and rudimentary capping is not a faithful definition of rehabilitation – it’s far from fully and properly repairing the land for future use, whether recreational, agricultural or other. Our framework of assurances that land will be meaningfully rehabilitated – bonds and inspections – are as insufficient as our oversight of major power plants. The cynicism of possible mothballing, or of performing minimum works and calling it rehabilitation, is not isolated. As the mining boom ends, the scars it leaves will only become more clear.

Recently, a Victorian parliamentary inquiry was launched into mineral exploration. It tabled its report in May 2012; the government issued its response last year. On the matter of rehabilitation bonds, the government argued that they were, in fact, too much of an imposition on mining companies. “The government understands that bonds can impose significant costs for some industry members during the early development phases of their projects and may prevent the commencement of mining and quarrying projects. The government will reduce the impost that the rehabilitation bond scheme places on some mining and quarrying projects to start up.”

This week, the federal senate voted to put the issue of “the history, appropriateness and effectiveness of the use of environmental offsets in federal environmental approvals in Australia” to the environment and communications references committee for inquiry. The inquiry is set to report by June this year. It passed with the backing of Labor and the Greens, but was described by Environment Minister Greg Hunt as a “stunt”. Given the pock-marked history of Hazelwood – literally and figuratively – the inquiry seems more vital than mere political aerobics.