COLLIE COAL (GRIFFIN) AGREEMENT AMENDMENT BILL 2026
Second Reading
Resumed from 11 March
Hon Dr Steve Thomas (3:34 pm) : I was sure I had more time left than that! I might be seeking an extension, minister.
I had done the basics when we were so rudely interrupted yesterday, but I had really only got Griffin Coal going through to about 2010. I was trying to explain the disastrous state that the coalfields currently finds itself in, which is why we are debating the bill that is currently before the house. We got to the point where Griffin Coal was basically uneconomic and losing significant amounts of money, and Premier Coal, its competitor, was basically breaking even in a good year, or perhaps making a small amount. Members might remember that in 2006, I think, there was the unification of the two split contracts between Griffin and Premier and the state, where the price that the government paid for coal went down from $65 to under $30, based on a bid made by Premier Coal. Premier Coal was owned by Wesfarmers and the bid was entirely uneconomic. That particular action effectively destroyed the coalfields economy and, 20 years later, that is exactly the outcome.
First off, if we want to blame somebody for the situation at the coalfields, blame whoever put in the tender for $30 a tonne for coal. It would have been very hard for the government of the time to go, "Well, we've been offered $30 a tonne. The current price is $65. Man, we'll take it." That basically precipitated the entire disaster that we see before us today. Members might be aware that as a result of its then failing economy, Griffin Coal ultimately went bust and was purchased by a company called Lanco Infratech. Lanco Infratech was interesting because it was owned by the Rao family in India, so Griffin Coal was purchased by an Indian company. As I said yesterday, I think, they paid $750 million for a company that was probably worth $50 million at best, if that. That was an enormous amount of money. The problem for Lanco Infratech was that it had grand ambitions for exporting coal, but that was never going to work. It was then trying to stumble along, stuck with domestic consumption at $30 a tonne for its coal, when it cost about $58 to $60 a tonne, so it started losing money. In my view, the amount of money lost by Griffin Coal has been pretty consistent since 2011 because its structure was very grim. It lost, I think I said yesterday, $80 million to $90 million a year—I think that is fairly accurate—and it is still losing that amount of money because the cost structures have not actually got any better.
It was interesting to see that, after a couple of years, Griffin Coal was owned by Lanco Infratech and entirely debt-funded by a conglomerate of banks in India, but the vast majority of that was funded by ICICI Bank in India. It was still losing significant amounts of money, so much so that it actually put the management of the Griffin Coal mine out to tender. The contract was to manage the coal mine and extract coal in 2015. The contractor was called Carna Group, which was owned and managed by a guy called Harry Carna, who, from memory, was in Waroona. Harry Carna had trucks and contracting businesses up in the North West. He had been in the iron ore business and had assumed, somehow, that coal would be a similar sort of business. Interestingly, I went and met with Harry Carna because I had had conversations with Lanco repeatedly about how the Griffin Coal mine was going to struggle and that the security of not only the energy grid but also the community around Collie was at risk. I sat down with Harry Carna in his workshop and had a conversation with him. I said, "You need to be very careful here because this is a very difficult business environment in which to operate." Harry thought that he would manage this really well.
One of the problems Harry had was that the contract that he signed back in 2015 meant that he had to keep all the current staff that it had, and then bring in his own staff on top of that. I have never seen that, as a management system, actually ever improve anything. He still had his current workforce structure plus another layer of administration in a company that was getting paid $30 a tonne for coal that cost $58 a tonne to extract. That was never going to end well. What happened at that particular point was that, funnily enough, the Carna Group imploded; it could not financially manage the process. The group, again, went bankrupt. It only lasted a year or two and the entire Carna Group was out of business. I have a feeling that it phoenixed at some point and re-emerged under some other name, but the reality was that it was never going to survive that process. A company cannot mine coal at $60 a tonne and sell it at $30 a tonne and go very well. We are still going on that process.
It is also pertinent to note that Griffin Coal, which was going bust rapidly, was not the only one struggling. Members might remember that I said yesterday that Premier Coal, which was owned by Wesfarmers back at that time, had put in a bid in about 2006. It was getting coal at $20-something a tonne. That was the company that put in the bid for $30-a-tonne coal. As we said, as the strip ratios exploded, so did its profit margin—so much so that it is not only Griffin Coal that has been getting subsidised by the state. In 2014, so a year before Harry Carna took over Griffin Coal and imploded, Premier Coal went to the state government at the time—at that point, the Barnett Liberal–National government—and said, "We're going bust, too. We're going to need some subsidies." Premier Coal, the company that put in the bid for $30, which basically destroyed the economics of the coalfield, came back to the government and said, "Well, actually, maybe we didn't get that right. The seams have changed and the really good seam that we were on has disappeared, so we're going to actually have to get a bailout as well", which it did. In 2014, there was a deal struck between the state government and the Premier Coal mining company because it could not stay afloat.
I will come back to this in a little while, and if I do not now, I will certainly come back to it in the committee stage of the bill. This is a quote from an ABC report of the time, on 14 October 2014. It states:
Energy Minister Mike Nahan said Synergy had agreed to pay a price closer to current market rates, but would not reveal the exact figure.
Apparently, not telling people about the price of coal has a long history! The article also states:
"The original coal supply arrangement, signed in 2005 by a Labor government, was simply unsustainable …
A third statement comes from the then opposition spokesman, Bill Johnston. It states:
Labor energy spokesman Bill Johnston said it was not realistic to think higher generation costs will not mean price rises.
Interestingly, back in 2014, the government went through the same process. The deal that Premier Coal struck at $30 a tonne was ridiculously low based on a particular seam of coal that could not be sustained. What happened was that Premier Coal was paid more by Synergy than the original contract, but there was a pay-off, honourable members. The pay-off was that the state government would take a capital share of Premier Coal. If Premier Coal had not paid back the additional funding by 2030, the state would own 25% of Premier Coal, which was purchased a little bit later by a Chinese company called Yancoal for $298 million—I will check that exact number. It was $297 million, sorry; I was out by a million. I am terribly sorry; when you get old, your memory starts to go! I was out by a million bucks. It was $297 million.
Hon Stephen Dawson: It wouldn't be the first time you got the numbers wrong!
Hon Dr Steve Thomas: We will start to compare records in a bit, minister; we will see how we go. I reckon I am doing pretty well!
It was 297 million bucks. The state of Western Australia had struck a deal with Premier Coal that it would own 25%, capped at $50 million. The assumption was that the company might only be worth $200 million by the time that we got to 2030, not $297 million, but it was going to take a 25% share. That has been a part of the process; it has been taking a 25% share over that period of time. But members would probably also be aware that the state has announced that it is going to get out of state coal-fired generation by 2030—the year that this new model of ownership comes into place. We are in this amazing situation where the state government will own a 25% share, worth $40 million, of Premier Coal, which will be shut down because it has no markets left. We have a 25% share that should be worth $50 million that will be worth nothing. But it had to happen. Premier Coal would have collapsed if it did not get an increase in price, in the same way that Griffin Coal has been collapsing because it has been trying to get coal out at an unsustainable price.
I thought an interesting statement in that article was the then energy minister at the time not revealing the exact price. Man, it has been hard to get prices out of this government as well that it has paid for coal, particularly for the 100,000 tonnes of coal that it bought from New South Wales a couple of years ago! Obviously, there is a long history of not actually talking about the genuine cost of coal. Thus, I am happy to throw these figures in, because I think it is particularly important. We went from $30 a tonne for coal to $40 a tonne for coal. With that extra price from Synergy, Premier Coal started to hold steady. The cost for Premier has been slowly increasing, but the cost it has received has been slowly increasing. It got to the point where it is pretty much cost neutral. I mean, you would not buy it or invest in it necessarily, because it is very hard to make a market out of it and the market will die in four years time. It has sort of been break-even the whole time, whereas Griffin Coal has ticked along with production costs still at $58 a tonne and receiving significantly less than that because of the old contracts that it had. It was very difficult for Bluewaters power, for example, to pay more to Griffin Coal for the cost of that coal because it was a very tight marketplace for Bluewaters power station. This company went along losing money hand over fist. We have got to 2015. I am halfway through my time for the speech and we are only up to 2015 and there is a lot to go!
Hon Dr Brad Pettitt: I am happy for you to extend.
Hon Dr Steve Thomas: Thank you. I will be seeking an extension. The Minister for the Environment would like me to extend, probably!
Hon Stephen Dawson: But the Leader of the House wouldn't.
Hon Dr Steve Thomas: Oh! We get to 2015 and no coal company is making a cent and one of them is basically dying. From 2015 to 2020, we saw massive losses in Griffin Coal, which was supplying Bluewaters and one other major purchaser. That is the marketplace for coal in WA—state generation, private generation and then a couple of commercial customers, one in particular being the alumina company. They are all losing money at that point. Over that period of time, Griffin trundled along. Remember, its purchase price of $750 million was debt funded. Its losses of, let us say, $90 million a year are debt funded. By the time we get to the early 2020s, this company is $1.2 billion in the hole. The banks are sitting on $1.2 billion of debt. Everything is debt funded. It is sitting on an asset that, despite the fact that Lanco Infratech paid $750 million, is probably worth $50 million at best. So, you have got a $50 million asset and $1.2 billion of debt. It is not looking good, people. It is a very dire situation.
Members would be unsurprised to learn that shortly after that, Lanco Infratech, the company in India that purchased Griffin Coal, went bust. It no longer exists. That company has disappeared. It left its debt holders, particularly ICICI Bank, with a massive level of debt. I have said repeatedly that this was a very grim prediction. I think that part of the reason we are actually in the situation we are in is the decision-making and processes of the investing banks, particularly ICICI. I have said in the house before that the reason Griffin Coal struggled but survived all this time—at that point, ICICI was still putting money into Griffin—is that I suspect some of the decision-makers might have gone to prison if it went bust and their actions were determined. I think that there is still some risk of that for those people, but the longer it drags on, the safer they become. It went out to $1.2 billion, and then the company started to go bust.
At that point, the government of the day stepped in. Bear in mind that we have switched from the Barnett Liberal–National government to the McGowan Labor government, but the mess has just been handballed on. This mess was probably created by—dare I speak ill of it—Wesfarmers. It was probably the decision to put in a $30 price, and that was handballed to one Labor government, one conservative government and back to one Labor government again. As much as it would be good to blame any of those governments for the situation the coalfield finds itself in, the answer is that that original decision and investment process are probably why we are in the mess that we are in.
We get to the early 2020s. At that point, both administrators and liquidators have taken over Griffin Coal. They did a debt arrangement. Secure debtors were owed about $1.2 billion, and then there were a few million dollars extra in local debts. It was still operating, and money was still coming in and propping it up. ICICI Bank, in particular, was propping up that process up to a point. That point, honourable members, was a couple of years later. Towards the end of 2022, everybody finally worked out that this was going to be a collapsing crisis. In late 2022, the then government, the McGowan Labor government, realised that Griffin was about to implode. Members have to understand that the Premier was not doing well and Griffin was about to implode. There was very little renewable energy in the system. Gas was stable, but no-one was really building additional gas. It was a crisis, and everybody was a bit sensitive. Members might remember that back in 2008 Varanus Island blew up, and that loss of power contributed to the downfall of the Carpenter government, so everybody was very sensitive about the politics of keeping the lights on, which I will come back to in a while.
The McGowan government realised that somehow something had to be done to support the energy industry in the state. At the end of 2022, then Premier Mark McGowan announced that the government would prop up Griffin Coal to the tune of $19.5 million. At the time, my view was that it had to do it because it had no choice. The lights would go out without it, so it had to do it. I understand that. I was probably a bit cynical and sarcastic around the process.
Hon Dan Caddy: No!
Hon Dr Steve Thomas: I know! You would not believe it of me, would you? I might have thrown a bit of scorn around at that point, but it had to be done, ultimately, in the same way that this bill has to be passed. The energy security of the state is too important. As much as it is fun to play political games with it, and I have certainly done plenty of that over my time, the reality is that that investment had to happen at that point. At this point in time, this particular legislation has to happen as well for the sake of energy security in Western Australia.
At the end of 2022, $19.5 million was announced. The first payment of $7.3 million was made on 7 March 2023. By the time we got to the end of May 2025, we were up to $182.7 million. In July 2025, the Premier had to add another $259 million. Sorry! I will get the timing right. The current Premier in December 2023 announced an additional $220 million and another $49 million in 2025. At that point, which was the middle of last year, there was a subsidy of $308 million, from 7 March 2023 to 30 June 2025. If we work that out, assuming we get to the number of $308 million by 30 June last year, which looks reasonably likely based on all the payments, the subsidy to Griffin Coal is $97 million a year. I have a spreadsheet of all the payments that were made on a monthly basis, and they get to $308 million. The company was losing a significant amount of money, so the government, to keep the lights on, had to do a deal that was effectively paying for the operating losses of Griffin Coal, based on a set of contracts and the bad management structure from nearly 20 years and two governments earlier. The state is on the hook for $97 million a year. That is $308 million, which is almost the same as the disastrous decision to revamp Muja A and B many years ago, which I figure was a bit over $320 million. There is not a lot of glory in the energy system to be passed around anywhere.
Hon Dr Brad Pettitt: There might be a moral to the story.
Hon Dr Steve Thomas: Yes, there might be a moral to this story. I think that is right, and I am hoping to come to that moral before I finish my contribution.
The government has now announced, as part of the bill before the house, that the subsidies for Griffin Coal will continue, despite having said over the last 18 months that they would not. I agree that it is essential that they continue for the stability of the grid and to keep the lights on in Western Australia. In fact, the Premier, when he made this announcement, used those exact words. I happily wrote those words into an energy policy for the opposition before the last election: keep the lights on. That is true, so I support what the government is doing because the alternative is a disaster. It has to happen in this particular arrangement.
I will be asking the minister for the exact numbers when we get to the committee stage of the bill. I do not propose we spend a long time there. I will ask. The minister probably cannot tell me. He might not have it. I am pretty certain I have it, but we will see how we go. The minister asked about numbers before, and I was $1 million out. We will see how we go with this particular Nostradamus prediction. Where is Hon Anthony Spagnolo? My estimate is that the next five years of this arrangement, with losses of around $97 million a year, will cost $485 million. I do not think it will get a lot cheaper, but it may be a little bit cheaper. The government will split it. It has been announced that it will split the costs between the government, the taxpayer, and the largest users of coal, which are one particular aluminium processor and one private power producer. It is a fairly simple calculation on the assumption of an even split. Let us say that they can make a few savings. They will put in $150 million each, which gets us to $450 million over that five-year period. Sorry. I will check my maths for that. Let us divide that three ways and say $150 million over five years. Let us say that it will be $30 million each. I will be very interested to see what answer we get back because I am pretty confident that it will be somewhere between $25 million and $35 million each. I am going to assume that because we would probably have to have an even split. It is not a complicated bit of science.
Let us assume that the taxpayer of Western Australia has gone from a subsidy of $97 million to $30 million a year, as a nice round number. Let us assume that that is the case now. That is a better outcome. The overall losses have not shifted but it is now a shared burden between industry and the taxpayer. I like that outcome. I think it is a good outcome. I think the government has done the right thing on this, again, because it does not have any choice. This is where we are going to land with this bill. I have not addressed a lot of the subsets of the bill, and without an extension, I will not necessarily get to all the technical detail, so we will have to debate clause 1.
Hon Stephen Dawson: You can ask questions.
Hon Dr Steve Thomas: We can do it in clause 1 if it comes to that, because it is getting late in the day and somebody else probably wants to make a contribution at some point.
That is the short history of the coalfields and in particular my involvement with them. I support the government's bill and I actually support the government's payments, because it is right—$30 million a year for five years is better than $97 million a year for five years.
Hon Stephen Dawson: You are getting very progressive as you spend more time in here!
Hon Dr Steve Thomas: The minister is getting very conservative! The minister is engaging with the private sector, and he needs to a bit more of that, but I will come back to that the minute. I like to see it; I am enjoying it.
I probably want to finish the last bit of my contribution. I could talk about the issues there—holy mackerel!—for another day, but I want to get to the reasons why we have got to where we have and where we have to go from here as part of this energy debate. We are continuing to subsidise a loss-making company—ostensibly it is foreign owned, but it is in administration and liquidation—at a state level for $30 million a year for another five years after 30 June. I have already said that I agree with that and think is an appropriate outcome because the government has to do it, not because it has a choice. To be honest, I was a bit surprised to hear the Premier announce that in, I think, January, because if I were the Premier, I might have tried to announce it on 24 December just to try and sneak it through when I thought I was not watching! It would not have worked, but it was probably worth a try!
Hon Dr Brad Pettitt interjected.
Hon Dr Steve Thomas: There might have been a few others watching as well, Hon Dr Brad Pettitt, and I am going to come back to you in a bit more detail in a minute.
Hon Tjorn Sibma: Look out!
Hon Dr Steve Thomas: It will be in a very positive way! It will be positive contributions from here on in, minister! That is what we are interested in. I will even explain why. The issue we face—we have debated this in the house before, and I am the first to acknowledge that I have had a bit of political and media fun with it—is that the current transition plan, once the government struggles, will fail without some adaptation. I have been really pleased to see the government engage in some of that adaptation. I have been a bit cynical in my media releases, and I might have promised to reduce my cynicism over time.
Hon Dan Caddy interjected.
Hon Dr Steve Thomas: I know—disappointment, Hon Dan Caddy. I think I am always constructive, but I am a bit cynical sometimes. I have to revert to a bit more constructiveness.
The plan that the current minister has cannot work, and I think there has been some acknowledgement of that. I will say this, and I speak directly to the Minister for Energy and Decarbonisation, Hon Amber-Jade Sanderson: I think you are a very intelligent, articulate person, and I think you are a worthy opponent. I respect you for the work you have done. I think you do a good job, but I think the problem you have is that you have been the minister for a year and you have inherited something of a basket case. I do have some sympathy because the plan that you have inherited will not work and cannot work. Ministers change over, and I have always said that it probably takes five years to learn the energy portfolio and what goes on. Hon Dr Brad Pettitt has been at it for a very long time, and I have always enjoyed his contributions in this space. I think it takes a long time to learn. The current minister has been there for a year and the biggest issue that I think she faces is that she probably has the same advisers the last two or three ministers have had—perhaps not two ministers back, perhaps not Hon Bill Johnston. His problem was perhaps more being able to get funding to change the outcomes. Then there was a new minister who probably did not understand the system because it takes time. I know Hon Bill Johnston had been around energy for a long time.
Significant investment in time and money was needed, and a complete revamp of the energy policy was needed. The only way that this state does not crash is if we put the political argy-bargy aside for a bit and actually deliver an energy plan that can work. When I go to international and national meetings on energy, I say that the good thing about Western Australia is that the plan that we had at the election, which I wrote, and the plan that the government has are probably 80% in common. We all agree on the basic science. I have written in the past that we will go to a transition. The government believes we will go to a transition. The bulk of the transition will eventually be renewable energy backed up by, in many cases, new technology, and I think that is a great outcome. Funnily enough, I went to a briefing yesterday, and whether or not you believe in nuclear energy, the briefing from a major energy company said small modular reactors may arrive somewhere around 2060.
Several members interjected.
Hon Dr Steve Thomas: They might well do. AI might drive it, honourable member. We might get there by 2060, and that is fine—2050 or 2060.
Hon Dr Brad Pettitt interjected.
Hon Dr Steve Thomas: Hon Dr Brad Pettitt and I will not be in the seats we are in at that point. We might be in rocking chairs. Hopefully we will still be around.
In 2050 to 2060, technology will change. I agree with the government that we have to have a transition. I have said this in the chamber before: it is very hard to be someone on my side of politics who believes we should act on climate change and reduce emissions. It has caused me a lot of abuse over a lot of years, but I think we have to get there. What we are debating is how we get there, what it looks like and the timeframes. That is critically important, because the state cannot afford to get this wrong. Forget the politics. If the lights go out, the government will be gone and we will have an alternative government in place, which is good for us, but for the state it is problematic. I like that we have about 80% in common and we fight about the timeframes.
I am going to try to work to give us actual solutions to the problem here in the process. It is really important. From my interactions over the years—a number of years now—with Hon Dr Brad Pettitt, I am pretty sure he is happy to contribute as well. We have some disagreements on the speed and the total amount of renewables. I do not believe that we will get to 100% renewables in my lifetime. He might have a different view. I think we will have gas underpinning the grid for my lifetime at least, and I know I am getting on a bit, so no comments, thank you!
Hon Dr Brad Pettitt: Less and less of it—not more.
Hon Dr Steve Thomas: There will initially be more gas. I am actually very pleased the government has picked that up. I think it is a fairly simple argument. You do not expand coal, but you keep coal for as long as you have to to maintain stability and then you add gas to maintain that stability while you eventually transition to a lower emissions future. I think that is the obvious solution to where we are now. I am actually quite pleased that the government has sort of changed its rhetoric to reflect a lot of that. Our 80% confluence might be a 90% confluence at the end of the day. I do not have an 80% confluence with the Greens (WA), but I probably never will, but do not let that suggest that I think Hon Dr Brad Pettitt's contributions are unworthy, because I listen to them every time. I rate his contribution on energy debate very highly, as I did one of his predecessors from the North West, Hon Robin Chapple, who I thought made amazing contributions in the energy debate in this place, as the Leader of the House has as well. But the reality is that we must have a transition that works, and I am committed to a transition that works. It will not look like the Greens' version of the transition. I hope the government will continue to come on board with some of these processes and I hope we end up with a fairly healthy debate about that at the end of the day. There are some really positive steps that I think are happening here.
The reality is that for the stability of the grid and pricing, which is important despite what the bureaucrats say, and for the welfare and economy of the state, it has to be managed in an orderly fashion that looks after industry, maintains supply and keeps the lights on. I am happy for the Premier to pick up the slogan. That all works for a proper transition. The transition inherited by the current minister cannot work. We agree on this. Hon Dr Brad Pettitt and I have run a few arguments and debates on this. There is not enough renewable energy on the books, or even in the private sector as proposals, that can be delivered to get to the transition on the current timeframe. We will not get to the end of 2029 and close down the last of the coal without a major change. The problem is that it is already too late. Again, we are here to help the government with these slightly different views. Hon Dr Brad Pettitt would suggest to rapidly build a whole pile of, probably, wind farms, but also solar. I think solar is a bit underappreciated in the current government plan, but we do not have time to go through the various sources in detail. I think that is absolutely the case. I am an economic realist. I know Hon Dr Brad Pettitt has a pretty good understanding of this stuff. The government has taken very little renewable energy of its own to date. I really enjoy the numbers provided by Hon Dr Brad Pettitt. If the government has committed to 800 megawatts of state-owned renewables and is only going to get halfway, it has a problem. From the questions I have asked, the government has taken only 108 megawatts of contracts for renewables outside that. In the private sector, that is 20 megawatts a year over the last five years. With the current timeframes and the economies around wind farms, which have got a bit more difficult over time, the government is not going to get to its target. This is where we need to be realistic.
I met the proponents today of one of the major proposals for wind in Western Australia. There are not many days when I do not meet with an energy industry person of some sort. I actually introduced them to Hon Dr Brad Pettitt and suggested they have a chat with him. There is a project desperately waiting for support from the government in terms of a plan on where renewable energy is going to go. Ultimately, if it is going to get delivered, they will need an offtake agreement from the government. If the government is going to go down this path, it has to work out how much it is going to purchase and under what circumstances. Right now, that is not happening. I have sympathy for the current Minister for Energy and Decarbonisation because the position that she finds herself in is that it has not been done. I guarantee that—I am happy to talk directly to the minister now—the private sector cannot build renewable energy projects without a market. There are some nonsense ones out there. I know that Hon Dr Brad Pettitt and I will probably disagree on a couple of these. To propose wind turbines out in Geographe Bay at three times the price of onshore wind farms—gigawatts and gigawatts of it—with no market to sell it to is stirring the population up for no reason. It is a nonsense. It is a bit like trying to build the Osmington coal mine many years ago, which we probably agreed on back then too. It is insanity. If the government is going down a renewable path, it has to know how many renewable resources, where to put them and how they tie into the grid. The transmission component of renewables is an incredibly important thing. Hon Dr Brad Pettitt and I have probably raised this without giving it the gravitas that it deserves. How proponents are going to connect up is still up in the air—no pun intended. Nobody really has that detail on where the lines and substations go. How effective that is and at what cost is still being sorted out.
Hon Rod Caddies: So, transitioning without any idea.
Hon Dr Steve Thomas: Well, yes. A plan has to be in place. The problem then becomes one of time if the government believes that renewables will play a role in the future energy mix of the grid. I do. It is my words in the policy. It is written into the policy that says we will have more renewables. We can debate how much and where it is, but unless the government knows where and how, it cannot deliver it unless companies have offtake agreements or agreements to connect. Offtake agreements cannot take what is called a financial investment decision (FID). The current wait time for a major project like many of these to get up is somewhere between five and six years. If the government is going to transition its energy system in three years time, but it is going to take six years to build the things needed to transition, it has a problem. That is why I think we have seen a potential extension of coal. I will call it a potential extension of coal. I am pretty confident it will happen. It will not be long. It will be a few years but it will not be long. We have seen the private sector looking at investment in gas. There are a couple of solid projects. One is an expansion project in Kwinana. I do not want to name companies. I do not think that is fair. That project is 250 megawatts. There was another announcement last week for 400 megawatts. I think there will be enough gas generation at a peak.
Hon Dr Brad Pettitt: They're both peak?
Hon Dr Steve Thomas: At this stage I am confident they will all be at peak. The government is going to need that. I do not think it will close down coal on the current timeframe even if they get up. The government still has problems with getting them up in time because it is going to close down the Collie power station in September 2027. I am pretty confident it will be somewhere between 2027 and 30 March 2029. It will close somewhere in that patch for reasons I do not have time to go into. At that point, the government needs that additional gas to be able to stabilise the grid to do that. That is the plan that actually starts to work. I have taken Hon Dr Brad Pettitt's name in vain here, but I have said before that I am sure he is happy to contribute. I am happy to contribute to make this a workable plan.
I will finish with this: The state needs a workable energy transition plan. It is too important to the state and the people who live here to not make this, in my view, the highest priority of this Parliament, this government and all of us in our thought processes. This is a critical juncture in the state of Western Australia. It is critical for us all, and I am committing myself to try to make it better.
Hon Phil Twiss (4:17 pm) : I am not sure how to follow Hon Dr Steve Thomas with that vast array of information and knowledge, but I shall do my best and take a different tack on it. I had a bit of a look into this legislation, the Collie Coal (Griffin) Agreement Amendment Bill 2026. I understand the background of it and why we need to have it. If we do not allow this legislation to go through, essentially the lights will go out. I want to run through that.
The WA government, over a fairly long period of time, has made some key mistakes with this. Coming from my background in the oil and gas industry, having to deal with contracts and variations there and keeping things going over here, it has staggered me how fundamentally broken this coal mine and power station issue has been. I am at risk of repeating myself. Some of the agreements that were put in place set this up for failure in a dramatic way. Some 20 years ago, there were things like fixed-price contracts that were killing both parties in the agreement for several years. A lot of warnings were made for over a decade—close to a couple of decades. We are at a point now where we have to push this legislation through in a short timeframe or else we have a failure of the energy transition. The government has ignored the warnings. It allowed this crisis to continue. It required a $308 million taxpayer bailout. It is now chasing another one. From 2022, Griffin Coal had debts of $1.6 billion. Now, in only 2025, we are up to $2.4 billion. My concern is that whatever steps we make now, what is the number going to be in another two or three years? How many billions of dollars of debt are they going to be in and what more is going to be asked of the WA taxpayer just to keep the lights on?
Part of the bailout was the promise that the funds would not go overseas, but some of them did—to the tune of around $1 million a month.
I have already mentioned this. I have got a note here that they failed to resolve the uncommercial Bluewaters–Griffin pricing deadlock that resulted in fixed-price contracts that worked against both parties. It has left WA exposed to a single failing coal mine.
I recall Hon Dr Steve Thomas mentioning renewables as if that is part of the transition plan. The renewables were not brought online in a timely manner so that the mine and the power station could actually be shut down before we got deeper into this situation. We also have the issue of the transition to renewables and the way it will operate with baseload power, coming from coal. We have ended up with a coal-fired power station becoming a huge maintenance liability, because over time, if a coal-fired power station load is up and down, you cannot shut them down or start them up at will because the thermal expansion and stresses will degrade them very quickly.
I served part of my apprenticeship on steam-fired warships and I worked at the Kwinana Power Station.
Hon Dr Steve Thomas: How old are you?
Hon Phil Twiss: Old enough.
Hon Dan Caddy: Not as old as you, mate.
Hon Dr Steve Thomas: Touché.
Hon Phil Twiss: Not as old as you.
I know that steam power is at its best when it is running close to flat out. When we start messing around with it and we have to shut it down, de-power it and then bring it back up and down, we make it very unviable from a cost point of view. Now we are in the situation that we are having to bring some more gas generation online, which is fantastic for that immediate use when we need to increase our load, particularly with renewables. The problem is it is very, very expensive to run. It is not efficient to run, but it is cheap and quick to put in place. Fortunately we have that option open to us. Without gas, we would be in a very bad place. Hon Dr Steve Thomas has talked about the criticality of getting gas-fired power online as soon as possible.
One of the things that I think has been really egregious about this is the lack of a contingency plan for operator collapse. Looking at it, I think this operator collapse goes back as far as about 2015, which was pretty much from the outset. When Lanco Infratech took over and even before it started, it was in the red. We had an operator running at a point that it was starting to lose money straightaway. The agreements put in place were diabolical. We had no contingency to this. We are at a point now where we are having to extend, extend, extend and we have to spend money on batteries and alternative power storage so we can cover the gaps in the system at great expense to the WA taxpayer.
I look at those agreements and the companies involved from overseas. The government had oversight of this investment, which was extremely high-risk from a foreign-owned entity that had very little interest in the ongoing wellbeing of Western Australia. I guess they thought they were going to make a tonne of money out of it and got caught up in some bad deals.
To reiterate, this bill is critical. I know there are concerns about the bill to do with some of the rehabilitation and I will talk about some of those concerns later. There are some concerns, but without this bill Western Australia will essentially shut down in terms of power, in terms of the lights. We have got to keep it going until we have an alternative that can fill in the gap.
Hon Dr Steve Thomas has gone through a lot of this, but the Griffin Coal mining company is in a pretty bad state. It is operating under significant duress. It is not only being run by receivers and in liquidation, but has some very complicated and risky contractual arrangements as part of this variation.
From 2023–24, we have seen the need for constant intervention by the government and bailing out by WA taxpayers. There were recent emergency variations. We had resource management challenges where the company desired to expand and acquire new leases, but the arrangements did not allow that to happen and did not make them viable. The arrangements put the company in a cash position where it could not do it. We are now in a position in which the state has to prioritise the economic and practical development of the remaining coal resources as the highest priority to safeguard Western Australia's energy security. There is really nothing higher than that. In this situation at the moment, we have got to look at it through that lens and deal with the fallout from that.
A difficult part is the limitation of the appointed receivers in that they hold limited personal liability in this. In terms of the state trying to enforce long-term environmental, contractual and operational obligations, it is extremely difficult. We all know about its impending expiry; it is about to shut down. We are dealing with an operator that is a receiver on a site that is in liquidation. There is a very strong possibility that we will end up with a chaotic exit out of this with all sorts of problems.
I find it interesting that the government is moving away from broad, five-year terms to manage it, to staged, detailed proposals. This means that the government is going to be looking at this on a regular basis and the minister will have far greater control over the mining and the operation. The interesting part of that is the new entity framework in the legislation that is central to this bill. It allows the state government to create a new entity, which could be a state entity, to take over part of the mining, decommissioning and all of the rehabilitation process. I will be very interested to hear in Committee of the Whole what that will actually look like, how the government proposes to nominate this new entity, who that might be or, if it is a state entity, who is going to run it. Who in the government has the skills and the ability to run a coal mine in that situation?
The bill mandates that the company must, if the government requests, transfer all rights, land titles, additional mining tenements and intellectual property to the new entity to ensure the continuity of service and safety of the mine itself. It also allows the government to strengthen intervention rights. It allows the government to compulsorily acquire the company's property. If a negotiated transfer fails, the minister will have veto power over coal sale agreements and will have to be consulted every three months on any action that affects the state's interest. Again, that is understandable given the criticality of this situation.
