Aluminium giant Alcoa will be able to extend its Anglesea coal mine about 600 hectares further into heritage-listed parkland, under a confidential arrangement with the Victorian government to renew its mining licence for 50 years.
Negotiations between Alcoa and the government to renew the company's 50-year mine lease, which expires on January 1, 2012, began under the former Brumby administration in 2008 and have continued since Ted Baillieu led the Coalition to victory last November.
Alcoa has mined coal and operated a power station in environmentally sensitive heathland at Anglesea since the late 1960s.
The power station supplies about 40 per cent of the electricity used by the company's aluminium smelter at nearby Point Henry. The smelter and mine employ about 1000 people in the Geelong area.
The re-negotiation of the mine lease is shaping as a politically sensitive issue for the Baillieu government, with Greens urging it to conduct an environmental impact statement and set new emissions standards for the power station before any agreement is reached.
''Everyone knows it is closing time for coal and this mining licence is the government's chance to set new standards,'' Greens MP Greg Barber said.
A confidential government briefing paper from late 2010 obtained by The Age reveals the negotiations are well advanced, with the Department of Primary Industries agreeing to Alcoa's demand to keep the royalties it pays to the state the same as specified by the 1961 agreement.
The right to compensation by owners of properties affected by the mine will also remain the same as set out in the 1961 agreement.
Alcoa is understood to have recently submitted a new work plan for the mine to the Government, including a map outlining the location of the coal reserves it intends to mine over the next 50 years. It is understood that future mining operations are likely to encroach on up to another 600 hectares of the Anglesea heath.
Parks Victoria describes the Anglesea heathland as the ''richest and most diverse vegetation community in Victoria''. The area is listed with the Australian Heritage Council as a place of natural significance.
The Age has been told that Parks Victoria recently spent $1 million reviving the area of native heathland that the Alcoa works plan shows could be affected by future mine operations.
The briefing paper shows Alcoa will be exempt from complying with Victoria's Native Vegetation Framework, which requires areas of cleared native vegetation to be offset by the protection of an equivalent area elsewhere.
According to the new arrangement between Alcoa and the government, the company will be required to offset native vegetation losses if it strays outside the proposed new boundary for the mine.
Under the 1961 agreement, there were no restrictions on Alcoa removing native vegetation on the 7000-hectare site it leases from the government.
The briefing paper suggests cabinet approval for the mine lease extension agreement and associated legislation is scheduled to occur in May.
Energy and Resources Minister Michael O'Brien declined to comment on the negotiations with Alcoa, which he said were ongoing.
Mr O'Brien said the government would balance the economic importance of Alcoa to the Geelong region ''with the need to improve environmental outcomes for all Victorians''.
Alcoa spokesman Brendan Foran declined to comment on the status of the negotiations. But he said a work plan for the mine had been submitted to the government as part of the lease renewal process.
''The company does not presently have detailed post-2016 coal mining plans but will commence development of these plans in 2012.''
Mr Foran said Alcoa was satisfied with the progress of negotiations.