Stokes’ $650M pumped hydro plan reveals huge Collie clean up cost

Kerry Stokes' $650M pumped hydro plan could let WA avoid a $1.3B bill if a Collie miner fails: a risk the State Government does not ask about.

Stokes’ $650M pumped hydro plan reveals huge Collie clean up cost


Seven Group has proposed to build a pumped hydro energy storage facility in a disused coal pit in Collie and save $1.6 billion in rehabilitation costs that the State Government seems blissfully unaware of.

Boiling Cold has learnt that Seven Group Holdings wrote to the State Government in December about repurposing Griffin Coal's disused Muja coal pit to store energy with pumped hydroelectricity.

SGH would spend $650 million to produce 400 megawatts of power from about 2026. The cost is in line with ATCO's plan last week to spend $500 million on a pumped hydro facility in NSW that could generate 325MW of power for eight hours.

SGH, chaired by media owner Kerry Stokes, supported its proposal with a claim that the WA Government could save about $1.6 billion by not having to rehabilitate the Muja mine pit.

Centre for Mining Restoration director Professor Kingsley Dixon said this estimate seemed "reasonable, bordering on conservative."

In 2018 Dixon told WA Today in 2018 that Collie's coal pits were "voids to the horizon" and "backfilling" the pits was beyond current technical ability.

"I frankly don't know what we should do with holes that now measure in the cubic kilometres," Dixon said.

"Pit voids, ecologically and naturally, don't provide a surface for the environment to return."

State Government does not check if companies can pay

The responsibility for the rehabilitation of mine sites rests with the companies holding the mining leases, a spokesperson for the Department of Jobs, Tourism, Science and Innovation said.

Muja pit owner Griffin Coal recognised just $31 million for rehabilitation liabilities in its accounts to March 2018, the most recent report lodged with corporate regulator ASIC. Premier Coal, the other Collie coal miner, recorded $30.5 million in its accounts for the year to December 2019.

Rehabilitation provisions are the present value of a future cost, and the value is affected by when the work would occur, and the discount rate used. A $30 million provision could represent say $70 million of work performed near the end of the decade.

However, discounting does not explain the discrepancy between the miner's provisions and the "conservative" Seven Group estimate.

Together the two miners have recognised $61.5 million to rehabilitate mine pits covering an area 17km long and 4km wide: just four per cent of Seven Group's estimate for one large pit.

Both of Collie's coal miners are well known to be heavily indebted and either losing money or marginally profitable. Coal's quickly reducing share of the WA power market and the need to move more overburden each year to mine each tonne of coal will likely make the businesses more precarious.

"Mining companies are required to prepare mine closure plans outlining the plans and strategies for the rehabilitation of their mining operations which are reviewed by regulatory agencies," the JTSI spokesperson said.

"This is a process currently being undertaken by the Collie coal companies, and others, on a three-yearly cycle."

Boiling Cold asked what the Government did to ensure mining companies can pay for rehabilitation.

"It is not usual for Government to assess the financial capability of companies to undertake their project responsibilities," the JTSI spokesperson said.

The Federal Government had a similar light-touch regulation of the decommissioning of offshore oil and gas facilities until a company producing oil went into liquidation in 2019 and landed Australian taxpayers a clean-up bill of up to $500 million.

Could mine rehab make pumped hydro add up in WA?

Pumped hydro acts like a battery: it use surplus electricity to pump water uphill and later generate electricity when the water travels downhill through a generator. In WA's South West, it would likely take in power during the day when solar panels are most productive and discharge power in the evening.

The maximum power is determined by the capacity of the pump/generator and the hours of operation depend on the volume of water stored in the upper and lower reservoirs. The Muja pit would be the lower reservoir.

Possible pumped hydro energy storage facility in Collie
Possible pumped hydro energy storage facility in Collie. Source: ANU PHES Atlas, 2017

A State Government report into the next 20 years of the South West grid released in November did not consider pumped hydro in detail. The Whole of System Plan concluded that batteries were the preferred form of energy storage in all scenarios.

Batteries were cheaper, had lower energy losses, and were easier to install the capacity required when as needed.

State-owned electricity generator Synergy is planning a 100MW battery in Kwinana, but further increases in variable solar and wind generation will require more energy storage on the South West grid.

In the lead up to the 2017 State election, the then ALP opposition promised a study into pumped hydro at Collie.

Energy Minister Bill Johnston said the report revealed "many technical and engineering challenges which suggest it is not currently viable."

"However, the Government would welcome any private-sector proposal, and we continue to welcome innovation and risk-taking by the private sector in WA's energy journey," Johnston said.

Pumped hydro may not be viable in WA purely as a component of the energy system. However, if it eliminates or delays a huge rehabilitation bill that could fall on WA taxpayers, there could be a net benefit to the State.

Seven Group's pitch for pumped hydro was made under the State's market-led proposals policy introduced in March 2019 to provide a single channel for businesses to approach the Government about potential investments.

A Department of Finance spokesperson said initial MLP proposals are kept confidential for commercial reasons but are publicly disclosed if they progress to the second stage of business case evaluation.

A proposal is a long way from a project.

Dixon said that storing and pumping vast quantities of water in a disused mine site would have its own environmental concerns.

"They have to demonstrate the capacity for this to be safe, stable and non-polluting," Dixon said.

Boiling Cold understands there is another possible way to fill the vast void of the Muja pit: with overburden from a potential mine expansion nearby.

The pumped hydro facility would not be the first SGH investment in Collie. SGH subsidiary Westrac that distributes Caterpillar mining equipment received $2.77 million from the WA Government's $20 million Collie Futures fund to open a training centre for operators of automated trucks.

Seven Group Holdings did not respond to questions from Boiling Cold. Griffin Coal declined to comment.

Main image: Flooded coal pit near Muja Power Station, Collie. Source: Google Maps