By Phil Pennington of RNZ
An Australian billionaire is looking at using the aluminium smelter site at Tiwai Pt near Bluff for environmentally friendly hydrogen production.
The smelter is due to close in just over three years at a cost of 1000 jobs and $400 million sucked annually from the Southland economy.
Dr Andrew Forrest, who founded and chairs the world's fourth-biggest iron ore producer, Fortescue Metals Group, has met Southland councils and talked to government officials about fitting Tiwai Pt into his ambitious global plans.
"The Southland region and its renewable energy potential makes it an exciting opportunity for development as a potential green hydrogen production and export hub," chief executive officer Julie Shuttleworth said to RNZ.
Forrest clashed recently with the Australian federal government over his forecast of a rapid end for coal-fired energy and steel production.
He led a big Fortescue team that visited 47 countries last year, including New Zealand.
"[Fortescue] is assessing opportunities for projects globally, including in New Zealand, to support potential green operations," Shuttleworth said.
The company signed renewable and green energy project deals on its tour, but nothing regarding Tiwai Pt was signed.
"We are pleased with our engagement with local stakeholders and government on the feasibility studies to date," Shuttleworth said.
Payment to clean up
The Government and smelter owner Rio Tinto are still locked in a months-long wrangle over a site clean-up expected to cost much more than $300m.
Documents released under the OIA to the NZ Herald last month show the Government offered to pay Rio Tinto multi-millions of dollars, if it would in turn spend about $300m on a clean-up.
But the multinational rejected the offer.
Officials had warned ministers that $300m might well be too little and the "Crown will be seen to have agreed a level of remediation below what is necessary".
Officials even named the suggested payment the "Southland Transition bond" - and elsewhere described it as a "balloon payment" enabling Rio Tinto to leave Southland.
A fallback option suggested last year was for the Government to make an "upfront payment", in return for Rio Tinto committing to "achieve legal minimum remediation standards".
The documents show officials had expected, if the "balloon payment" was agreed, that the smelter would want to disguise it as more of the electricity transmission relief it has won in the past from the Crown, so that it would get a positive reputational spin out of it.
Councils meet Fortescue
Invercargill City and Environmental Southland councils met Fortescue representatives in October last year.
"Fortescue requested the meeting to brief us on their early thinking," the regional council said.
The Ministry of Business, Innovation and Employment said it had interactions with Fortescue on the potential use of the smelter site or "available electricity" should Rio Tinto exit.
"Fortescue has expressed an interest in developing a green hydrogen project at the site."
The discussions were to update agencies and ministers on the project.
Fortescue said it was committed to empowering communities and safeguarding the environment.
It aims to make steel with hydrogen generated from renewable energy sources instead of from dirty coking coal, and plans to start building Australia's first green steel plant powered by hydrogen this year as a trial.
But Forrest's prediction of the demise of Australia's coal industry put him offside with Canberra, which is backing coal for decades to come.
Fortescue, worth $41 billion, sends most of its iron ore to China.
MBIE said Fortescue was one of several organisations that have discussed with the government potential projects at Tiwai Pt to use "the electricity that the smelter uses if or when Rio Tinto ceases operations".
The OIA documents show officials are not convinced the smelter will be shut.
Aluminium world prices have been on the up, and Rio Tinto secured a good deal on power from state-owned Meridian in January.
Negotiations have been fraught.
Officials advised ministers that Rio Tinto maintained that it regularly updated closure plans for all its smelters but "despite repeated requests, Rio Tinto has never provided any detailed information about its closure study [at Tiwai]".
The Government responded by suspending talks in March.
Ministers were told in February the best option was to keep talks suspended until New Zealand Aluminium Smelters has finished its closure study, which would not be until 2023.
"This approach puts the onus on Rio Tinto to satisfy the Crown's information needs in return for the financial relief that it seeks," a Treasury document said.
Officials were "very circumspect about the scope, quality and degree" to which the company's closure study would help fill gaps for the Crown, but "there is no downside for the Crown in waiting" for the closure study to end.
The next best option was to resume talks just before smelter was due to shut in late 2024, putting pressure on Rio Tinto to do a deal if it wanted to keep operating.
As for paying Rio Tinto to encourage it to clean-up - a proposal the company rejected last year - the documents say "officials recommend that a similar approach be taken to other large industrials" that faced closing down.