THE Gillard government is keeping open the prospect of a $335 million grant for Queensland independent Bob Katter's CopperString power project, even though it has failed a key requirement for the funding.
Despite Mr Katter not backing Labor to form government after the 2010 election, the Prime Minister, Julia Gillard, still promised him, in writing, up to $335 million for the project, provided major north Queensland energy customers chose to use it.
But last October, Xstrata chose a rival consortium to power its Mt Isa operations and, in December, the Queensland government-owned Ergon Energy also entered a power purchase agreement with a rival.
Mr Katter said he was scheduled to meet the Treasurer, Wayne Swan, this week on the issue but had already been reassured the ''door was not closed'' on the money. ''It is still reserved in the budget,'' he said.
Mr Katter is hoping his Australian Party will win enough influence in next month's Queensland election to resurrect the plan, and wields influence in Canberra because he has hinted he could support a government led by Kevin Rudd.
Mr Katter's brother-in-law is a key player in CopperString Pty Ltd, which is planning to build the $1.5 billion transmission link between Townsville and Mt Isa.
CopperString is half-owned by the construction contractor Leighton and CuString Pty Ltd. CuString is 95 per cent owned by John O'Brien, who is married to Katter's sister, Geraldine. The remaining 5 per cent is held by Mr O'Brien's son, Joseph - Bob Katter's nephew.
A spokesman for the Treasurer, Wayne Swan, said the government's ''commitment to securing north Queensland's energy supply remains a priority … that's why we have been working with the Queensland government, the CopperString consortium and other parties to open up these opportunities.''