HRL'S proposed Morwell dual gas-fired power station looks likely to be shelved following a Federal Government announcement late Friday it had terminated a $100 million funding agreement with the company.
Though the news was hailed as a victory for "people power" by environmentalists, Federal Resources and Energy Minister Martin Ferguson told The Express the decision was made "irrespective of any political ramifications" and followed HRL's failure to meet "funding deed" conditions.
The company's bid to build a 600 megawatt generation capacity plant in the Latrobe Valley has encountered ongoing challenges, including stringent conditions enforced by the Victorian Civil Administrative Tribunal, intense green opposition and difficulty securing private investment.
Environment Victoria safe climate campaigner Victoria McKenzie-McHarg claimed HRL had failed to meet the conditions of its grant agreement six times "yet continued to be given extensions (by the Federal Government)," and "it was only when our supporters got serious and started campaigning for the money to be withdrawn" the government "took the problem seriously".
Mr Ferguson rejected any suggestion the government had been swayed by pressure from green lobbyists.
"The record will show this program (the Low Emissions Technology Demonstration Fund) has always been met in a professional way," Mr Ferguson said.
"(Green groups) can run all the petitions and demonstrations in the world and I will not give into political pressure."
The proposed plant projected an operational workforce of about 30 people as well significant jobs in the construction phase.
It proposed a low-emissions peaking capacity power station and, in addition to federal money, secured a $50 million commitment from the State Government.
It is unknown whether the latter commitment will also be withdrawn.
Mr Ferguson would not reveal which conditions HRL had failed to meet, citing confidentiality arrangements, but Ms McKenzie-McHarg said she believed "not having equity in place was the biggest hitch".
Mr Ferguson said the government had "made it clear in February this year that it would grant one final extension until 30 June 2012 for HRL to meet the conditions".
"It has not done so and, accordingly, the funding agreement between HRL and the Australian Government will be terminated," he said.
While Environment Victoria celebrated the news, saying it was "testament to the tens of thousands of Australians who have been part of the campaign to stop HRL," Latrobe City Mayor Ed Vermeulen expressed disappointment.
"I see it as a great pity that this has happened but it is understandable if they haven't met their deadline.
"But I would hope if another proposal was put up by them or one of the other generators it would be looked at in the light that we need a major project off the ground here and we need government support," he said.
Cr Vermeulen said political opposition from environmentalists to the HRL project, on the grounds it was would still emit about 0.8 tonnes of carbon per Megawatt hour, were "not realistic".
He added it would have been appropriate to meet an "intermediate need" and was less emissions-intensive than other brown coal power stations.
Environment Victoria said the decision was "likely to be the final nail in the coffin" for the project.
With key regional leaders calling for an urgent government announcement on the power industry's future in the Valley, Mr Ferguson said he understood perceptions of uncertainty prevailed locally but insisted "we will not leave the Valley stranded".
"All the power stations continue to operate, with the continued expectation of maintenance and normal work, and even if there is a successful 'contracts for closure', you are not looking at that happening before 2016," he said.
He added that National Electricity Market reliability requirements (for electricity supply) would also need to be met as part of any future plans.
"We understand the fears…we are not just going to take the money and leave…I don't think that's the approach of any of us, the state or federal governments," he added.
It is believed Mr Ferguson may visit the Valley again this week.
HRL could not be contacted for comment.
Read our blog about the decision here