Australian Resources Minister Martin Ferguson has thrown a lifeline to a contentious coal-fired power plant project in Victoria's Latrobe Valley that is subject to a legal tussle with state environmental authorities.

Mr Ferguson has granted the HRL Project a six-month extension and will also pledge $100m of Commonwealth funds for CarbonNet — a carbon capture and storage project in the Latrobe.

The Australian Greens are strongly opposed to the controversial HRL power plant project.

In granting the project a six-month extension, Mr Ferguson will make it clear that this is the last lifeline for a project that began under the Howard government.

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