Closing a coal-fired power station: Insights into leaving a positive legacy

8 minute read  23.06.2021 Neil Gordon

More thermal power stations in Australia are approaching the end of their economic life. We share our experience and insights following our key engagement in a successful power stations closure project and explore how to leave a positive legacy.

 

Key takeouts

 

  • Involve and bring all stakeholders on the journey from the start of the process
  • Anticipate, plan and manage all aspects of the project from the start, and collaboratively
  • Look for efficiencies and alternate revenue opportunities during the process

More thermal power stations in Australia are approaching the end of their economic life. The impact of further investment in renewable energy is accelerating these closures, with a number of power station owners bringing forward previously announced closure dates. Against that backdrop, we share our insights into the first fully-completed, successful closure and demolition of Australian coal-fired power stations and dedicated coal mine and rail infrastructure, and the repurposing of the generation site, the Northern and Playford B power stations at Port Augusta. This was a complex four-year program with significant impacts for affected local communities and regions.

Closure timeline

In June 2015, the closure of the Flinders Power operations in South Australia was announced. This resulted from a strategic review of the future of the Port Augusta power stations and the associated Leigh Creek coal mine. The power station operations were 'housed' within the Flinders Power group which, at the time the closure was announced, formed part of the Alinta Energy group. Prior to the closure program commencing, the Flinders Power group was separated from Alinta Energy.

MinterEllison was engaged as the legal advisor to the consortia to deliver the four-year closure program that involved the closure and demolition of the two power stations, the remediation of the site, the closure and rehabilitation of an 80-year old operating coal mine, the hand back to the government of the Leigh Creek township, and the closure of a dedicated coal railway line. Safety and stakeholder support were critical success factors.

Closing a power station and mine: a program of planning and consultation.

The circa A$300 million Flinders Power closure program is the largest and most complex of its type in Australia to date. It has been hailed as a 'model' for future large infrastructure project and mine closure programs.

Key success factors for the closure project were: early and careful planning by the consortia, clear communications, stakeholder support (including government, employees and the community), and public safety.

The legal requirements in closing a power station and associated mine are many, and include property, environment and planning, governance, employment and regulatory aspects. Alinta Energy involved MinterEllison on almost every aspect of the four-year closure program, including:

  • Closing and dismantling the two coal-fired power stations
  • Electricity regulatory obligations and negotiating associated contracts, including cessation of transmission connection agreements and temporary relocation of network infrastructure
  • Remediating the 'feed stock' Leigh Creek coal mine through a complex and unique mine closure plan
  • Surrender of long term power station and mining leases to the State of South Australia
  • Remediating the very large ash dam storage area
  • Negotiating with the EPA on power station site, and ash dam, remediation
  • Sale of remediated power station and ash dam land
  • Closure of the coal railway line and its return to the State
  • Cessation and transfer of the management of the Leigh Creek township to the State
  • Retaining, modifying, and in some cases even improving, former power station and mine site infrastructure for the future benefit of local ecosystems and regional populations
  • Industrial relations advice, and ensuring the large regional workforce was adequately looked after during the closure program.

Like all members in the program consortia, we focused on providing advice that guaranteed public safety, had community and stakeholder support, and played our part in delivering the program successfully, on time and within budget.

 

Meticulous early-stage planning and continuous consultation with Alinta Energy and other key stakeholders were vital. Throughout the program, we delivered legal advice with a lens on timeliness, responsiveness, safety, cost and compliance,”
Neil Gordon, MinterEllison Project Lead.

 

Plan. Engage. Leave a positive legacy.

Closing down a large electricity generation business spread across separate sites linked by a 250km railway brings unique challenges. Some of the early challenges Flinders Power faced included:

  • Loss of employment for a workforce of over 500 people
  • The broader economic impact on surrounding regional areas
  • Managing substantial safety and environmental challenges and obligations
  • Significant negotiations with the State Government and regulators.

These challenges were overcome by our partnership with Flinders Power that focused on:

  • Meticulous planning
  • Stakeholder engagement
  • Exceeding community expectations
  • Bringing forth efficiencies. Generating revenue
  • Leaving a positive legacy

Looking back on what was achieved, and looking forward, these five factors must be high on the agenda for any operator planning to close a power station in a similarly safe, timely and community-supported way.

1. Meticulous planning

Meticulously plan, sequence and prioritise every aspect of the closure process, taking into account the 'pros' and 'cons' of moving in one direction over another, or taking one step before another.

Take your time and do your due diligence upfront, not as you go, with a clear focus on the 'end game' and what needs to be achieved to finalise operations. There may be multiple pathways leading to the same result, but deciding which one is the most logical, sequential, efficient and cost-effective, will not always be straightforward. There may in fact be greater benefits, in terms of cost and time, to adopt a different pathway than may, at first, have seemed the most obvious.

2. Stakeholder engagement

Given the serious impact closure is likely to have on a range of people and other businesses, always have open and transparent dialogue from the outset with all key stakeholders. Stakeholders will almost certainly include employees, the wider community, indigenous groups, 'anti-closure' organisations and environmental groups, politicians and other elected officials, and government and other regulatory bodies.

Openness and transparency might sound like invitations for resistance and argument, but those elements might be inevitable in any event. Sensible consultation with, and involvement of, key stakeholders, even if you don't ultimately see eye-to-eye, is likely to produce a better outcome for all.

Flinders Power maintained an open and collaborative relationship with residents throughout the closure process through an active Community Reference Group. In addition, hundreds of residents, including many schoolchildren and university groups, toured the power station site during various stages of the demolition and rehabilitation process.

3. Exceeding community expectations

To be forgiven (at least in part) for closing down a significant business like a power station or a mine, you need to do it to 'best practice' standards. You should constantly look for ways to keep the community and other stakeholders involved and onside.

In the case of Flinders Power:

  • Around 100 full-time workers were employed over 30 months at the height of the closure program, with more than 30% of that workforce and external spend sourced within local districts;
  • As the local community had been the home to this business for several generations, four public auctions were held, allowing locals to secure their piece of power station history;
  • 75,000 tonnes of steel were dismantled and removed from the power stations, 97% of which was recycled;
  • Better-than-industry-standard safety outcomes were ensured when carrying out the demolition and removal, with 100% compliance on all contractual and regulatory obligations;
  • The 273-hectare ash storage area at the power station was completely rehabilitated, with over 6,500 truck movements and the sowing of over six tonnes of native seed that will ultimately cover the entire ex-storage area;
  • An enormous site contamination assessment and remediation work program was completed, culminating in sign-off by an independent auditor;
  • The remediated site was intentionally sold to a significant commercial enterprise for the purpose of creating new and replacement employment opportunities for the local community, and

At the Leigh Creek mine:

  • 14 million lcm (loose cubic metres) of earthworks were undertaken, and 4 million lcm of inert cover put in place to remediate the mine;
  • Over 70 km of 3m high x 9m wide base surface water bunds constructed; and
  • The very large mine retention dam was retained and redesigned for ongoing use by the Leigh Creek community for recreational purposes and the future benefit of native flora and fauna.

4. Bringing forth efficiencies. Some could generate revenue.

Flinders Power generated significant efficiencies in its closure program. The Flinders Power managers engaged a multi-disciplinary team that brought specialist skills, and together they collaborated to achieve efficiencies in the:

  • Large scale demolition
  • Environmental remediation
  • National Electricity Market regulation and compliance
  • Electricity de-contracting
  • Mine closure program
  • Employment, insurance and workers compensation
  • Land tenure (including Crown Land)
  • Stakeholder management and dispute avoidance management and resolution, and
  • Winding up and corporate re-structuring.

On top of achieving efficiencies, Flinders Power also generated revenue streams, which reduced the 'net' cost of the overall closure program. These included:

  • The sale of yellow goods timed to maximise the return to Flinders Power, with maintenance and leaseback arrangements that led to a win-win outcome for Flinders Power and the purchaser; and
  • Significant land sales (post-remediation), specifically targeted at future users, bringing new business operations to the local area, resulting in employment opportunities for the local community.

5. Leaving a positive legacy

Strive to leave a positive legacy by exploring all opportunities for the repurposing or future uses of sites. Allow for future value creation by applying a strategic approach to securing the ongoing beneficial use of sites. Preferred options should consider synergies with other sites and industries and should complement existing government and community objectives to increase development potential. Seek to maximise the retention and usage of existing infrastructure to reduce cost for, and increase benefit to, new development opportunities.

The bottom line insight: bring everyone on the journey

Closing down a power generation business is a huge task. The real challenges and opportunities are to bring the workforce, local community, decision-makers and interest groups along with you to make the journey as informed and painless as possible.

On top of that, careful planning ahead of time and the involvement from the outset of a team of collaborative experts (like engineers, specialist lawyers, and environmental consultants) will generate the best efficiencies and lessen the risk of unforeseen issues.

Ensuring that the team members within the business who are driving the closure program are committed, suitably engaged and carefully incentivised to see the closure through to the end, will undoubtedly result in a smoother, more efficient and less costly outcome.

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https://www.minterellison.com/articles/closing-a-coal-fired-power-station-lessons

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