The Victorian Government has confirmed that all revenue generated from water access for the rehabilitation of the Loy Yang coal mine will be reinvested directly into the Latrobe Valley and Gippsland regions, creating a long-term funding stream tied to mine closure and rehabilitation activities.
Under the arrangement, revenue received from AGL’s bulk water entitlement for mine rehabilitation will be paid into the Regional Jobs and Infrastructure Fund. The fund supports community projects, job creation and infrastructure investment across regional and rural Victoria, with a specific focus on long-term economic transition.
Funding would begin once mine rehabilitation at Loy Yang commences and continue until 2065 at the latest, providing a multi-decade source of investment linked to rehabilitation timelines.
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Protecting water users and river systems
The allocation of water for mine rehabilitation has been structured to protect existing water users and the health of Gippsland’s river systems. Conditions attached to the bulk entitlement restrict water take to the wettest months of the year and limit volumes to historical levels previously used for power generation.
AGL will be required to pay $230 per megalitre per year for water access once rehabilitation begins, with the charge indexed to inflation over time. Any use of water for mine rehabilitation will also be subject to separate regulatory and environmental approvals.
Minister for Water Gayle Tierney said the decision was designed to provide certainty while safeguarding other water values. “This is a significant decision that will provide the Latrobe Valley and Gippsland community with certainty in planning for future mine rehabilitation and will not diminish the water entitlements of other water uses and values,” Tierney said.
Supporting rehabilitation and waterway health
Beyond funding regional development, the revenue stream is expected to support opportunities to improve waterway health and long-term resilience across the Latrobe River system. Potential investments include water security and efficiency projects, environmental rehabilitation and initiatives that enhance outcomes for Gunaikurnai Traditional Owners through self-determined planning.
Allocating water for mine rehabilitation is also intended to support a safe, stable and sustainable post-mining environment, reducing long-term risks associated with legacy mine voids.
Treasurer Jaclyn Symes said the approach ensures benefits flow back to the region. “We are backing our local communities to ensure that funds raised from mine rehabilitation go back directly to supporting the Latrobe Valley and Gippsland through the regional trust,” Symes said.
Community expectations and long-term transition
The Latrobe Valley faces a prolonged transition as coal-fired power generation winds down and rehabilitation planning progresses. Decisions around water allocation, pricing and governance have become central to that transition, given the scale and duration of mine rehabilitation activities.
Member for Eastern Victoria Harriet Shing said the funding model reflects community expectations. “We have listened to local community and are delivering the financial benefits of the mine rehabilitation back into the Latrobe Valley and Gippsland while ensuring the former mine sites are left safe and stable,” Shing said.
Water governance beyond mine closure
For the water sector, the decision highlights the growing intersection between water entitlement frameworks, mine rehabilitation and regional economic transition. By linking water access revenue directly to community and environmental outcomes, the approach represents a model that other jurisdictions may watch closely as large-scale mine closures accelerate across Australia.
As rehabilitation planning advances at Loy Yang, the way water is allocated, priced and reinvested is likely to play an increasingly important role in shaping both environmental outcomes and regional resilience.