Victoria, Australia 09 July 2017 -- (From news reports) -- A $7.5 million feasibility study will investigate a proposal to burn thousands of tonnes of household and industrial waste to create energy at the Australian Paper mill at Maryvale near Morwell in Victoria's Latrobe Valley.

The waste, collected mainly from kerbside municipal bins, would be transported from Melbourne's south-eastern suburbs and Gippsland, either by truck or train.

A dedicated railway line connects the Maryvale site to the extended Gippsland rail network.

Australian Paper spokesman Craig Dunn said up to 650,000 tonnes of landfill would be burnt to create steam to run machinery at the paper mill.

"This is really proven technology used extensively in Europe," Mr Dunn said. "It's a really good opportunity for Australian Paper to potentially bring much greater stability around our future energy needs given the increasing prices around electricity and gas,"

The paper mill is one of Victoria's largest industrial users of gas, with an annual gas bill of $8 million.

If deemed economically viable, the project would be subjected to strict environmental and engineering assessments.

"Because it would be a complicated process, there are a lot of logistics involved," Mr Dunn said.

The Japanese-owned Nippon Paper Industries has invested more than $1 billion in Australian Paper since acquiring the company in 2009.

In 2015, it announced a big restructure after posting a fourth year of consecutive losses, under pressure from cheap imported paper from countries in South East Asia

It has since cut $3 million from its maintenance budget by reducing labour costs by 12 per cent.

Mr Dunn said if the mill freed up its gas supply that volume would go to the rest of the market.

"That should be helpful in terms of the broader market dynamics and pricing potentially," he said.

The company says the diverting waste from landfill to create steam energy would save 500,000 tonnes of CO2 per year.

The Gippsland Federal National MP Darren Chester said Australian Paper had undergone a significant business turnaround in recent years, yet still faced challenges with the rising price of gas.

Australian Paper is the largest private employer in the Latrobe Valley, employing 850 people directly and supporting 2,400 jobs.

Given recent job losses at the now closed Hazelwood power station, and planned job cuts in the local timber industry, Australian Paper is considered critical to the future success of the Latrobe Valley.

"Should the critical planning and pre-construction work be successful, we could develop a regional cluster structure for local bioenergy and biochemical production," Latrobe City Mayor, Kellie O'Callaghan said.

The project would cost $600 million.

"It would create up to 800 construction jobs and more than 40 ongoing positions," Peter Williams, Australian Paper Chief Operating Officer said.

The Victorian and Federal Governments and the company have each provided $2.5 million for the feasibility study which will take 12 months to complete.

"We are supporting manufacturers like Australian Paper to diversify its operations and create new jobs and industries for the local region," Victorian Industry Minister, Wade Noonan said.