A Queensland company has so far received $770,000 to conduct a feasibility study into building a new coal-fired power station, as the auditor-general investigates the grant.
Shine Energy will get up to $4 million from the federal government to look at building a new coal-fired power station in north Queensland, fulfilling an election promise.
Department of Industry, Science, Energy and Resources senior official Rachel Parry revealed to a Senate estimates hearing on Tuesday the company had already received $770,000.
Labor senator Jenny McAllister was surprised, pointing out the opposition was trying to stop the feasibility study through a disallowance motion in the Senate with the support of the Greens.
Department secretary David Fredericks wouldn't reveal what would happen to the money should the motion succeed.
"We'll be able to deal with that eventuality if and when it occurs," he said.
Senator McAllister also raised issues with the grant process.
Labor had referred the grant to the Australian National Audit Office after revelations Shine Energy was asked to apply for the money after the government had announced it was successful.
Senior government minister Simon Birmingham said the grant process was not without precedent.
"It's consistent with the grant guidelines," he said.
"The department is co-operating with the ANAO, who I'm sure will find that to be the case."
Mr Fredericks reminded senators the money was a grant for a feasibility study.
"Spoiler alert, it's not feasible - that will save you a bit of time and money," Greens senator Larissa Waters replied.
Australian Associated Press