John Madigan (Victoria, Democratic Labor Party) Share this | Hansard source

by leave—With the catastrophic collapse of the Morwell River diversion in the TRUenergy Yallourn mine three weeks ago and related escalating problems, now is the right time to ask: what lessons have been learned from privatising Victoria's power industry? Have governments absorbed these lessons? Right now at Yallourn, people are working in wet, muddy and dangerous conditions trying to restore the mine to service. I ask fellow senators and members of the general public to think about these workers, the big problems confronting them and the risks they are exposed to. The Morwell and Latrobe rivers are in flood. These flood events are natural. Forever, these and the rivers of central Gippsland have flooded the Latrobe Valley.

However, natural flood events should not be confused with what happened at the Yallourn mine in 2007 and what happened again three weeks ago. In 2007, the north-east batter of the mine's Yallourn eastern field collapsed. The north-east batter is the dividing wall between the mine and the Latrobe River. When it collapsed, the Latrobe River flowed into the mine. One of the first media comments TRUenergy management made immediately following the collapse was to blame a recent flood event in the Latrobe River.

I make this point because three weeks ago flooding in the Morwell River was blamed for the very recent failure of the Morwell River diversion. This allegation needs to be tested by an independent inquiry. A royal commission is sorely needed to get to the facts of this second catastrophic collapse and to go further than the 2007-08 investigation. Back in 2007, the then Victorian state government commissioned an independent investigation into the north-east batter collapse. The report by Mining Warden, Professor Tim Sullivan, is important and I will seek permission to table that this evening. The report reveals the consequences of privatisation which, I suggest, the Victorian government never considered while it was busy selling off Victoria's power industry. The report finds that understandings about the safe management of the Latrobe Valley's coalmines—understandings built up over long periods by the State Electricity Commission of Victoria—were lost at Yallourn. They were lost because of privatisation.

The SEC employed a team of 50 people to study, survey, monitor and manage the Latrobe Valley's coalmines from geology and hydrology perspectives. No comparable expertise was developed inside the Victorian power industry or government after the specialist division in the SEC was dismantled by privatisation. The Department of Primary Industries also lost the expertise to ensure informed and active oversight and regulation of the Yallourn mine. To quote from the Mine Warden's report:

It is questionable whether the DPI has the requisite skills or can acquire and maintain a high enough level of skill in this booming mining environment to adequately manage and review complex technical areas, given the failure of the system that has occurred in relation to the NE Batter.

Privatisation meant that the state regulator was without the skills necessary to keep the industry safe. TRUenergy depended on a revolving door of external consultants, providing, at times, inconsistent opinions.

In 2002, TRUenergy embarked on major changes to its mining operation and mine-monitoring regime. Many of these changes were driven by the search for efficiencies and cost cuts, as is the wont of private companies. The combination of all these factors led to decisions and actions contrary to long-held understandings about how to keep the mine safe. In 2002, the practice of drilling horizontal bores into the coal seams to remove groundwater was stopped. In 2004, the practice of de-watering aquifers under the mine floor was stopped. From 2002 onwards, pressure built up inside the walls of the mine and, from 2004 onwards, under the floor of the mine. This created the conditions long known to cause batter failure in the Latrobe Valley coalmines. Added to this, as pointed out by the mining warden report:

Over time an incorrect design failure model became accepted and this model showed the NE Batter had a high factor of safety and was stable. This was also supported by the annual geotechnical review.

Inspections up to and until the day before the collapse showed the north-east batter was under enormous stress. Even when the river was running right through the mine's wall, TRUenergy and its consultants continued believing their model was correct. I refer the Senate to photographs of the batter in the mining warden's report; they are truly disturbing images of privatisation in action. Workers were directed to continue mining at the base of the batter and were put in grave danger. Luck, not design, saved these workers.

Understanding why the north-east batter collapsed in 2007 sheds some light on the collapse of the Morwell River diversion three weeks ago. In the very same period, TRUenergy was adopting an incorrect design failure model and making changes that would render the mine unsafe; it was designing and constructing the Morwell River diversion. The 2007-08 investigation briefly assessed the Morwell River diversion, or MRD, to reveal the following:

During construction in 2003 a very large movement of the MRD went unnoticed until the annual monitoring survey was carried out. The movement occurred along what appears to be a horizontal fault 10m below the base of the coal seam.

The report continues:

The geotechnical model was incorrect as it did not include this fault … It is unusual in construction of such an important piece of infrastructure to have such a large gap in monitoring.

When governments privatise undertakings as big and complex as an entire power industry, the major systemic failures created in that process are the cause of lasting problems.

Investigation into the failure of the north-east batter made clear that private mine operators do not invest in the skills and bank of technical knowledge necessary to keep the Latrobe Valley mines safe. The Victorian government learned that privatisation had created a culture of disrespect for the SECV's knowledge and practice. It learned that competing mine operators in a privatised power industry do not and will not willingly share geotechnical knowledge, even when sharing would make their operations safer. Under privatisation and deregulation, each private mine owner could manage or mismanage their mine as they saw fit. Privatisation made Yallourn coalmine very unsafe.

In response to these lessons, the then Victorian government re-regulated mining in the Victorian power industry. It also employed technical experts so the government could do its job as the industry regulator. Yet, despite these positive actions, the Victorian government did not go far enough. It did not order a legally empowered investigation into the risks created by privatisation, despite being warned about their seriousness. The mining warden's report referred repeatedly to the risk that valley coalmines pose to nearby infrastructure, including the Princes Highway. The Melbourne-Bairnsdale railway line is even closer to the Yallourn mine.

We need to know more about these risks in light of the fact that, according to the DPI website, 'they may take some time to materialise'. The 2008 mining warden's report only refers indirectly to the Loy Yang and Morwell mines. We do not know what happened in the mines during the high period of privatisation between 1997 and 2008. We do know that the Princes Highway was closed for most of 2011 in the section very close to the Morwell mine because the foundations of the road were moving.

What risks must materialise before a royal commission is established? Would a regional rail-line or a national highway falling into a valley mine be enough? Two rivers in the last five years have fallen into the Yallourn mine. How much environmental damage must occur before governments act? The federal government has spruiked its managed closure of 2,000 megawatts of polluting power stations, yet we are witnessing the disorderly impairment of Victoria's third largest generator thanks to the legacy of privatisation. How much damage to its energy and environmental policies is the federal government willing to sustain before it challenges privatisation?

This week, the Victorian Greens and the Victorian Labor opposition united in calling for a Victorian parliamentary inquiry into the collapse of the Morwell River diversion. An inquiry is definitely needed. Now is not the time for a light touch. You do not use a two-pound ballpein hammer when a 20-pound sledgehammer is needed. Victorians, and all Australians, deserve full scrutiny and disclosure of the problems created by privatisation in Victoria's power industry. The only way to get this job done is by a full royal commission. New South Wales and Queensland are pursuing full privatisation of their power industries with strong support from the federal government. That means the problems created by privatising Victoria's power industry are of national significance and national public interest; as would be the findings of a royal commission into these problems.

We do not have to repeat the mistakes of the past in order to learn from them. I take this opportunity to ask Ministers Ferguson, Combet, Burke and Albanese to support my calls for the establishment of a full royal commission into the failed privatisation of Victoria's power industry. I ask Minister Ferguson to withdraw his support for full privatisation of New South Wales and Queensland power industries, pending the outcomes of such a royal commission. I ask Premier Baillieu to show wisdom by establishing a royal commission in the interests of people living and working in the Latrobe Valley, Victorian power users and taxpayers, and the environment.

As TRUenergy has hopefully learned, it is cheaper to mitigate risk by good practice rather than cutting corners, creating and gambling with risk and paying the price if the risk materialises. That also applies to the practice of government. There is much at stake in this matter. I hope governments can keep learning from the terrible situation in the Latrobe Valley, a situation that demands the establishment of a royal commission. Only then will governments equip themselves with the right tool for this job—to fully expose the risks created by privatisation, to learn from that process and to change government policy by withdrawing support for privatisation.