The company, a multinational fuel and power conglomerate, proposes to build a 150-kilometre slurry pipeline from the Latrobe Valley around Western Port to Crib Point where the coal can be separated from the slurry using rollers.

Exergen claims it can "clean" Latrobe Valley's brown coal to make it the equivalent of black coal, which is already exported from NSW and Queensland.

It says it has devised a process called "continuous hydrothermal de-watering" to convert brown coal.

The process involves rapidly dehydrating brown coal through heat and pressure, said to dramatically reduce carbon emissions and make it fit for export.

Western Port environmental groups say the plan to export coal from Crib Point realises their worst fears. Rosemary Evans of Crib Point Action Group, which is campaigning against Boral Asphalt's plan to build a bitumen storage facility near Woolleys Beach at Crib Point, said she was not surprised by the proposal.

"We have always argued that the Boral proposal is the thin edge of the wedge," Ms Evans said.

Although the Exergen plan made front page headlines in The Age newspaper last week, the State Government had already mooted its interest in Gippsland coal exports two months ago when it released its Freight Futures document.

"The emergence of interest in the export of products derived from brown coal from Gippsland may also influence the timing of a stage 1 development at the Port of Hastings," the report states.

"Research is under way to establish large-scale coal-conversion facilities in the Latrobe Valley. Longer-term research is also under way into clean-coal technology that could result in brown coal exports from the Latrobe Valley."