The State Government’s budget released this week revealed brown coal royalties would be lifted to 5.88c per gigajoule to "better reflect the environmental costs associated with the extraction of a natural resource, and will ensure the state receives a fairer share of the returns to the industry".

Victorian Minerals and Energy Council executive director Chris Fraser said coal miners were not happy with paying for the research, and reckoned the research should be a collaborative venture between the private sector and government, The Australian reported.

The budget confirmed funding of $A2.2 million for a brown coal drying pilot plant that would use greenhouse-friendly technology pioneered by the Cooperative Research Centre (CRC) for Clean Power From Lignite.

To be built in the Latrobe Valley, the pilot plant will test the scale-up to 15 tonnes an hour of a highly efficient coal-drying technology that could cut the greenhouse gas emissions associated with brown coal power generation by a third or more.

The technology has been developed by the CRC with the support of the Latrobe Valley Generators (Loy Yang Power, International Power Hazelwood, International Power Mitsui Loy Yang B and Yallourn Energy).

Known as Mechanical Thermal Expression, the process can remove more than 70% of the water from Victoria’s brown coals, resulting in massive greenhouse gas savings when the dry coal is burnt to generate power, acccording to CRC chief executive Dr Peter Jackson.

"Using this technology to dry coal for a new state-of-the-art power station, greenhouse gas emissions can be reduced by more than 30% compared to today's power stations," Jackson said.

"Even bigger reductions – more than 40% - can be achieved with dry coal fed to the next generation of coal gasification-based power generation technologies."

Design of the pilot plant has already begun, with construction planned for late-2005 and testing to start in early-2006.

The total project value is $A6.3 million. The Victorian Government and the Australian Greenhouse Office will provide $A4.4 million, with the other $A1.9 million in infrastructure, services and other in-kind support coming from the Latrobe Valley Generators.

The pilot plant will be located at Loy Yang but will test coals from each of the Latrobe Valley mines. The plant is a pivotal step in the development and application of the technology, according to Jackson.

"Successful testing at this scale will enable the design of a commercial scale demonstration plant, which could be built later this decade," he said.

"This project demonstrates the commitment of government and the generating industry to the efficient use of Victoria's brown coal resources, and to reduction of greenhouse gas emissions.”