Labor is frustrated with Rio Tinto as 'all options' on table for Tomago smelter

The government can't hide its frustration with Rio Tinto, majority owner of the Tomago aluminium smelter, which is now being threatened with closure.

But at the same time it's preparing to dip deeper into taxpayers' pockets to help the company out. Again.

Labor finds itself caught in a bind.

It thought it had done enough at the start of the year to secure the future of the plant.

After months of negotiation with the company, and with an eye to the looming election, the government in January unveiled its $2 billion green metals fund, a tax credit for aluminium and steel produced with renewable energy.

It was largely aimed at providing a lifeline to Tomago, located in the NSW Hunter Valley, where Labor was — at the time — nervous about its political prospects.

The taxpayer support to produce "green aluminium" was timed to coincide with the end of Tomago's current coal-fired energy contract in 2028.

"This represents a massive opportunity for growth and that's why today we're investing in Australia's aluminium industry," the prime minister said during a visit to Tomago, describing it as delivering certainty for the workforce.

No hint at threatening closure

Anthony Albanese wasn't the only one talking up Tomago's future.

Then CEO of Rio Tinto Australia, Kellie Parker, joined the prime minister to warmly welcome and take some credit for the outcome. 

"I am incredibly proud of the work that my team have done, and the aluminium industry has done to work with this Government on finding a future, particularly for this smelter here, the best smelter in Australia with the best technology."

Tomago Aluminium had already pledged to decarbonise its smelting by 2035 and said the new green metals fund would help secure its business for decades to come.

Sure, there was no absolute guarantee the smelter would continue operating, but there was certainly no hint Tomago would soon be threatening closure.

Fast forward to this week and Tomago now says it can't find a pathway to survival with either coal-fired or renewable power options.

Confidently optimistic just nine months ago, the company now argues its power costs from 2029 are just too high.

There's no final decision, of course. But Tomago Aluminium is now "consulting" workers on their future. 

It's a blunt threat to shut down, with 1,000 jobs on the line, as the company seeks a better offer from the Labor governments in both NSW and Canberra.

Labor looking at 'all options' 

Within Labor's ranks, there's outrage at the company's behaviour.

They're not, however, saying no to another handout.

Indeed, Industry Minister Tim Ayres is now looking at "all options". He's not ruling out subsidising Tomago's energy bills or even taking a direct government stake in the plant. But he insists there are no guarantees or blank cheques.

The closure of Tomago would represent a triple blow for the Albanese government.

It would mean the loss of blue-collar jobs in heartland Labor territory, it would cast doubt on the ability of heavy industry to survive the great net-zero transition, and it would expose the limits of "A Future Made in Australia".

Those limits are already being tested by the growing line-up of metals manufacturers seeking government bailouts.

Already this year the government has pumped money into a steel plant, as well as copper, lead and zinc smelters.

All of this taxpayer investment, we're assured, is in Australia's national interest, as strategic assets are supported through a difficult global environment where direct government intervention has become the order of the day.

Labor's determination to maintain a capacity to make stuff here is clear.

Precisely where it might draw the line on taxpayer bailouts, is not.

The opposition jumped on Tomago's threat to close as evidence the energy transition is failing. "The reckless pursuit of 82 per cent renewables by 2030 just isn't working," claimed shadow energy minister Dan Tehan.

The Coalition would be in a stronger position to criticise if it had an alternative solution to deliver lower power prices. Or any settled position at all on the net-zero energy transition.

The government says this is evidence of the need to build more renewables, something it argues would happen faster if it could speed up approvals for wind and solar projects if only the Coalition would support its updated environment laws.

Rio Tinto real villain, says Labor

The NSW government also has a role to play here.

Rio Tinto is the majority owner of the Boyne Island aluminium smelter in Queensland, which has a far more certain future, thanks to a "partnership" agreement struck with the state government there last year.

The deal involves Queensland subsidising renewable energy supply for the smelter from 2029, at an undisclosed cost to the state's taxpayers.

The federal industry minister is reluctant to publicly pressure his comrades in the NSW Labor government too hard, but he's been pointing to the Queensland example as a successful model. Hint, hint.

The real villain here is Rio Tinto, according to federal Labor.

Ed Husic, who was industry minister at the time the company signed up to the government's green energy fund in January, let rip yesterday on ABC's Afternoon Briefing.

"Australia has been very good to Rio Tinto," he said. "Rio Tinto has made a lot of money out of Australia and what are we getting out of it? On the west coast they blow up historic Aboriginal artwork and significant artefacts and on the east coast they're undermining smelters."

Husic won't be the one negotiating a fresh offer to Rio. But he's not alone in his view.

The anger towards Rio Tinto within the government is very real. Even if it's about to tip more money in to keep the struggling smelter alive.

David Speers is national political lead and host of Insiders, which airs on ABC TV at 9am on Sunday or on iview.