Fortescue's $92m Queensland hydrogen exit leaves $1bn pipeline stranded

The Australian

3 hours ago

Andrew Forrest sprinkled a little magic dust over the captivated Queensland Media Club audience in early 2022 when he described the promise of green hydrogen energy as better than any spell conjured-up in the pages of a Harry Potter book.
Australia's richest businessman was then touting his plans for the world's largest electrolyser manufacturing plant and a green hydrogen production facility in Gladstone that was to neighbour the Palaszczuk government-led proposed $12.5bn Central Queensland Hydrogen Project (CQ-H2), which it hoped would become a global exporter of the energy. But three years later, both projects have been abandoned and the Queensland government is about to complete a $1bn water pipeline to Gladstone to service the CQ-H2 project.
The pipeline, to be completed next year, now has no customer.
It can also be revealed the Crisafulli LNP government has engaged lawyers to advise on 'remedies' for Mr Forrest's company, Fortescue, to repay what taxpayers spent in luring his project to the state.
Sources have told The Australian that the incentive agreement struck between Fortescue and the former Labor government was estimated to be worth $92.5m. The state government spent more than $60m, according to the sources, on land and supporting infrastructure for the Fortescue project ahead of it being axed last month.
Gladstone mayor Matt Burnett, who unsuccessfully contested the federal seat of Flynn for federal Labor in 2022, told The Australian on Monday there were serious questions on how infrastructure, particularly the $1bn Fitzroy-to-Gladstone water pipeline, and built for the proposed green hydrogen industry will now be used.
Mr Burnett said the pipeline only went to the industrial precinct where the green hydrogen projects were to be located.
'The pipeline was to provide water to future energy and industry projects in Gladstone, and CQ-H2 was the main customer,'' he said. 'The pipeline doesn't connect to the dam, it's not for residential use. So now there is no major user for the water.
'How do they now intend to pay for the pipeline? That's a problem for this new government.''
Mr Forrest axed the hydrogen projects with an announcement last month it was pulling out of Gladstone. The manufacturing plant was built and had begun producing electrolysers but the green hydrogen facility was still a patch of dirt.
Even before Fortescue closed its operations, the Liberal National Party government, which defeated Labor at the October state election, had effectively killed off the CQ-H2 project by refusing a funding request of $1.6bn in ­January.
CQ-H2 was initially touted as being able to produce up to 200 tonnes of liquefied hydrogen a day by 2028, and four times that by 2031.
State-owned power company Stanwell Corporation led the consortium and after its funding request was refused, it withdrew from the project.
Two of the major Japanese consortium partners also quit CQ-H2, citing rising costs in the face of the unproven commercial viability of the energy.
It was reported earlier this year that the 2019 initial $12.5bn estimated cost of the project's construction had blown out to $14.75bn by 2022, and there were further expected blowouts amid the worldwide hike in input costs.
A Fortescue spokesman did not comment on details of the purported taxpayer-funded deal struck with the former Labor government to convince the company to locate its project in Gladstone. 'We are in discussions with the Queensland government and will return funds where required under the grant agreement,'' the spokesman said.
It is understood the deal included up to $20m in payroll tax rebates over eight years. But a further $72.5m was offered to support the development of the land and enabling infrastructure – including power, wastewater and transport infrastructure – for the manufacturing facility and green hydrogen plant.
It is understood the government is considering reimbursing the $4.5m paid by Fortescue for the state-owned land in which its facility was built.
The government would not discuss the details of its plans. 'The Queensland government is working to recover taxpayer funds provided to support the project,'' said a spokesman for the Department of State Development. 'There is an active and ­ongoing effort already underway, and the department is working through terms to enable this ­outcome.'
Already, the federal government has announced it will seek repayment of taxpayer assistance provided to Fortescue's projects in Gladstone under its Modern Manufacturing Initiative.
Last month, a spokeswoman for Industry and Innovation Minister Tim Ayres flagged that the government believed it would be appropriate for Fortescue – a company worth almost $60bn – to refund the taxpayer assistance provided to it under the federal Modern Manufacturing Initiative. 'If Fortescue does not proceed … it would be reasonable for the government to seek reimbursement for where the grant agreement hasn't been fulfilled.' Read related topics: Andrew Forrest Politics
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