The Environment Protection Authority shut down SKMs Laverton North recycling storage facility last week the second shutdown in five months because of public safety concerns, only allowing the company to begin operating again at the site on Saturday.
Councils were reluctant to talk publicly on Sunday morning, with the state government saying it had helped local authorities develop alternative plans to cope with a possible collapse of SKM.
But one council told The Age that it would have no choice but to send its recycling to landfill if SKM stopped operating.
With just three recycling operators in the Victorian market, many councils are forced to go with the cheapest offer, which is often SKM, which currently has about 50 per cent of the market in the state, according to Coral Ross, president of the Municipal Association of Victoria.
"Councils have got an obligation, under the Local Government Act, to achieve best value for the community," Cr Ross said."So it's not that the councils are not doing the due diligence at all."
Cr Ross said another problem that councils faced was their contracts with SKM were locked in, in many cases until mid-2020, leaving local governments unable to hire a new recycling contractor, even if they were unhappy with SKM.
But on Sunday, Environment Minister Lily DAmbrosio was encouraging councils to try to strike deals with other recyclers when their contracts with SKM expired.
Theyre a rogue operator, Ms DAmbrosio said.They have been unreliable in managing kerbside waste and the EPA did the right thing ... to step in and put a notice on them.
Their non-compliance, their breaking of the rules, will not be tolerated.
Ms DAmbrosio said that Februarys shutdown, when more than 22,000 tonnes of recyclables went to landfill, had prompted the state government to work with councils on alternative arrangements.
Were working toward diversifying the sector with new plant and equipment, getting new facilities in place, the minister said.
When we first had these matters that came up earlier this year, a lot of work was put in place, identified with local councils, to put contingency measures in place.
Those contingency measures are available right now, if things dont go according to what the contracts require SKM to do.
The minister would not provide details on the contingency measures and what they might mean for households.
Liberal environment spokesman David Morris said the latest recycling scare showed the Andrews Labor government had been asleep at the wheel on the issue of waste, since it took office in 2014.
In the past 4 years, weve had a complete policy vacuum and were really starting to see the impact now, Mr Morris said.Unless we get some immediate action, were going to be in real trouble.
Theres no plan B at this stage and if they do nothing else this week, for goodness sake get a plan B in place."