Low-enthalpy geothermal groundwater resources occur at relatively shallow depths in the Upper Cretaceous/1'ertiary sedimentary sequence in the on-shore Gippsland Basin. The main stratigraphic unit containing hot groundwater is the Latrobe Group. Groundwater temperatures in the range 30 to 70C have been recorded from depths between 500 and 1000 m. The hottest groundwater is in the Latrobe Valley and Lake Wellington depressions. Geothermal gradients in these areas range from less than 2C/100 m to over 10C/100 m (compared to a world average of about 3C/100 m). A number of theories have been advanced to explain the geothermal anomalies including exothermic reaction such as oxidation of coal, mixing with deeper, hotter groundwater and high geothermal fluxes along fault zones. Variations in geothermal gradients can also result from type and thickness (and hence thermal conductivities) of the sedimentary pile, depth to consolidated basement rocks, and influence of groundwater flow patterns including proximity to recharge zones. The hot groundwater in the Gippsland Basin has substantial potential as a source of energy for direct heat applications such as process heating, space and water heating for buildings, and agricultural and aquaculture. Geothermal energy has a number of environmental advantages over traditional sources of energy. It is clean, safe, causes minimal land disturbances and in most cases is naturally renewable.