The NSW Environment Protection Authority has granted a new two-year exemption to Vales Point Power Station for emission standards for nitrogen oxides.
The controversial decision means the coal-fired plant can continue to pollute at levels that community groups claim threaten people's health.
It comes after Environmental Justice Australia [EJA] challenged the legality of the EPA's decision to issue Vales Point with a five-year licence variation in December 2021.
This decision exempted the power plant from meeting pollution standards for nitrogen oxides, but also "tightened standards" that community groups said didn't go far enough.
EJA argued the variation was not legal because the plant's owner, Delta Electricity, failed to meet its deadline to submit the licence variation application.
The EPA determined its decision "was likely to be legally invalid" and has now granted the new two-year exemption.
NSW EPA CEO Tony Chappel said: "Our role in all NSW communities is to put people's health and the environment first".
"It is the guiding principle in all that we do and drives our regulatory approach," Mr Chappel said.
"We believe this exemption strikes the right balance - reducing emissions to support the health of our communities and environment, but also supporting the state's need for ongoing reliable and affordable energy."
Environmental Justice Australia lawyer Jocelyn McGarity said "the EPA has conceded Delta's previous pollution exemption was unlawful".
Ms McGarity said the EPA "had to resort to using extraordinary powers to continue to allow Delta to pollute at rates higher than otherwise allowed under NSW laws".
She said the two-year exemption meant that "by October 2024 Vales Point has two choices - clean up its act or plan for earlier closure."
She said this was a "win for community health" and the result of "our clients and the community tirelessly fighting for clean air to protect all members of the community".
She said this especially applied to "kids with asthma, those who are pregnant and older people with respiratory and cardiovascular illness".
"However, we know there's no safe level of pollution and it's disappointing the EPA has determined that continued pollution will not have any significant adverse effect on community health.
"As always, the devil is in the detail. We will be closely scrutinising any conditions attached to this emergency exemption, and Delta's compliance, to ensure the EPA is properly regulating Delta to protect community health from toxic pollution."
The EPA said modelling had found that the "ground level concentration of NOx [nitrogen oxides] in the community meet the national health-based standards".
"We're confident the community is not being impacted in the same way some people are alleging, when we've looked at all the data," Mr Chappel told the Newcastle Herald.
"As part of Delta's updated licence conditions, the company must begin to implement better controls to proactively address their emissions and the results of this work will be considered by the EPA in 2023."
Doctors for the Environment Australia have argued that the EPA has been giving Vales Point special treatment for years.
It noted that Eraring power station had upgraded to low NOx burners, but Vales Point had not.
The EPA, though, has taken into consideration the age of the Vales Point plant, compared to Eraring. The cost of low NOx burners is also thought to be a factor in its decision.
The EPA will instead require Vales Point to analyse other ways to reduce NOx emissions that are more "cost-effective" and "technically possible in terms of engineering".
It's not clear what those are, but the Herald was told they relate to "engineering solutions" and how emissions are managed when the plant is scaled up or down.
"Well before this exemption expires we'll be able to have a good dialogue with the company about what's possible," said Mr Chappel, the EPA CEO.
Dr Ben Ewald, of the University of Newcastle's School of Medicine and Public Health, said the EPA had previously required Delta to do an "engineering analysis of what the options were" to reduce NOx emissions.
"That was done by a company called Jacobs. That report was out a year or two ago. It sets out various options for reducing NOx emissions," said Dr Ewald, a member of Doctors for the Environment Australia.
"There are options other than low NOx burners, but they're more expensive."
Dr Ewald believed Delta was making "huge profits at the moment because electricity prices are so high".
"So any argument that they can't afford it is completely spurious," he said.
Delta spokesperson Steve Gurney said Vales Point Power Station "operates in accordance with strict environmental licence conditions, with diligent oversight by the Environmental Protection Authority".
"Delta's environmental protection licence was varied by the EPA in December 2021 after considerable input from the community and other groups.
"Notably, limits for emissions such as of oxides of nitrogen were tightened as part of this process. Delta continues to comply with these reduced limits."
Delta said the EPA's decision follows independent analysis which "consistently shows that air quality on the Central Coast and Lake Macquarie is very good and amongst the best in NSW".
"It also concludes that levels of nitrogen dioxide, sulfur dioxide and carbon monoxide easily meet national standards."
Dr Ewald said emissions that meet national standards "doesn't mean it's safe".
"You get health effects from pollutants below the standards. That's recognised in official policy. When there's an opportunity to improve air quality below the standard, there is a health benefit," he said.
"Just saying it meets the standards therefore everything is OK, don't worry about it, that's completely false thinking and doesn't match the science.
"The licence limits for power stations in Australia allow much higher levels of pollution than the licences in the EU [European Union], North America, Japan and Korea.
"Power stations in those places meet standards that allow about one fifth or one tenth the amount [in Australia].
"In those places they use technology referred to as scrubbers, where they scrub out pollutants before it's released into the air.
"Those technologies are more expensive than low NOx burners, but they do a better job."
Dr Ewald added that: "The bottom line seems that the EPA has failed us again by requesting yet another study, inquiring into the problem rather than doing something about it."
In its decision, the EPA has also considered the rise of renewables and the prospect of Vales Point closing in 2029.
However, there has been some discussion about the plant's life being extended.
As the Herald reported last month, Czech company Sev.en Energy has reached a deal to buy the Vales Point plant.
Furthermore, the new two-year exemption "may be revoked, varied or renewed", the official EPA order states.
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