HRL-Dual Gas has made an application to construct a new power station in Morwell, which will run on a synthesis gas generated from brown coal and natural gas.
The company claims the plant would emit less carbon than any other coal-fired power station in Australia, but environment groups have called on the Environment Protection Authority [EPA] to reject the proposal.
At a public forum in Traralgon, Mark Wakeham, Campaigns Director for Environment Victoria, questioned the Victorian Government's commitment to tackling climate change.
"This HRL project is going to hang around over the election campaign," he said.
"The government is really pushing hard its climate credentials and yet this is seriously undermining their argument that they're taking action on climate change. On the one hand they're promising to reduce our use of coal, on the other hand they're providing $50 million to a project which will increase our use of coal in Victoria."
Over 4000 public submissions have been made about the proposal – the largest number ever received by the EPA.
During the public forum it was stated that the EPA received about 20 submissions in support of the project, while around 3700 submissions were proformas.
Submissions in favour of the project have cited its potential for jobs creation and expressed doubts about the reliability of renewable technologies to provide baseload power.
Those opposing the proposal have questioned its greenhouse gas emission levels, the potential for increased noise in residential areas of Morwell, and concerns over how the project will meet the Victorian Government's climate change emission targets.
$100 million from the Federal Government's Low Emissions Technology Development Fund; and $50 million from the Victorian Government's Energy Technology Innovation Strategy have been committed to the project.
But Mr Wakeham called on State and Federal Governments to withdraw this funding.
"I actually think that decisions that were made four years ago wouldn't be made now because of the community concern about climate change and we wouldn't be putting $150 million worth of public money into new coal fired power stations," he said.
The General Manager of HRL, Paul Welfare, declined requests to be interviewed by the ABC.
But on a previous occasion Mr Welfare has stated that people in the Latrobe Valley are broadly supportive of the proposal.
"They see that this is a potential technology that is good for the Latrobe Valley. It will keep jobs in the Latrobe Valley and keep energy being produced in the Latrobe Valley."
"This is looking to be the best energy efficient power station in Australia, both black coal and brown coal," he said.
The EPA is expected to make its decision before January 2nd 2011.