Monday, 19 June 2017
Matters of Public Importance
I inform the Senate that, at 8:30 am today, two proposals were received in accordance with standing order 75. The question of which proposal would be submitted to the Senate was determined by lot. As a result, I inform the Senate that the following letter has been received from Senator Hanson:
Pursuant to standing order 75, I propose the following matter of public importance to be submitted to the Senate for discussion:
The need to understand why the Japanese pay less for our gas than we do.
Is the proposal supported?
More than the number of senators required by the standing orders having risen in their places—
I understand that informal arrangements have been made to allocate specific times for each of the speakers in today's debate. With the concurrence of the Senate, I shall ask the clerks to set the clock accordingly.
We need to understand why the Japanese pay less for our gas than we do. The Japanese consumer pays less for our gas than the Australian consumer. We need to understand why if we are to do something about it.
In May 2017 the price for gas per unit was, in Tokyo, $7:11; in Sydney, $10.05; in Adelaide; $9.34; in Brisbane, $9.82; and, in Melbourne, $9.50. The fact that the Japanese consumer pays less for our gas than we do is even more shocking when you consider their price of $7.11 also includes things we do not pay for like turning the gas into a liquid so it can be shipped, the shipping cost and, finally, the payment of an import duty to the Japanese government.
Another shocking fact is that the Japanese government estimates it will over the next four years make $2.9 billion from the import duty on Australian gas while we make nothing with the exception of a royalty on the North West Shelf Project. Not only does the Japanese consumer pay less than we do for gas; but their government makes more than our government does on Australian gas. What has gone wrong? Can we do anything about it?
I asked myself how it is possible that Australia, as one of the largest exporters of gas in the world, has a gas shortage and the world's highest gas prices. The answer is simple. Firstly, we lack a disclosure regime which would require companies to provide information on average production costs, average sales costs and reserves based on a standard oil price. This means petroleum companies have all the information and the government has only part of the story, making it impossible to develop sound policies. The government and Treasury are overly reliant on what business tells them.
Secondly, we have given away our natural gas resources for peppercorns, with the results that the owners of our gas are foreign-owned multinationals and some Australian companies keep the domestic market just short enough of gas to maximise prices.
Thirdly, we accept a situation where foreign-owned petroleum multinationals pay more in political donations to the major parties than they pay in corporate income tax. In 2015-16 Chevron paid no corporate income tax, but they did manage to pay $53,365 to the Liberal Party and $44,950 to the Labor Party.
Finally, the government is reluctant to address failed policies of the past, because of worries Australia's reputation will be damaged by changing the rules after investment decisions have been made, even though foreign-owned multinationals have breached their social contract with Australia through decades of non-payment of corporate income tax.
The problem is we already have a sovereign risk because our gas and electricity prices are the highest in the developed world, causing loss of competitiveness and jobs. Once we lose manufacturing jobs, we will not get them back. The government needs to decide whether it will choose Australians over foreign-owned multinationals.
We are at a tipping point where high gas prices and uncertainty about gas supply are causing Australian manufacturers like brickworks to import bricks, and they are evaluating whether to move our production offshore—possibly to Malaysia.
The tragedy of high gas prices and shortages is that they could have been prevented. All we needed was good government policy, and I am here to say that it may not be too late, although we will never really see low gas prices again. I want to see a 10 per cent royalty regime put in place on all gas projects where none now exists. In this way, we will see some payment for our gas. I want to see an Australian domestic gas reservation policy introduced, which will mean that 15 per cent of all gas in Commonwealth waters that is not already covered by the Western Australian domestic gas reservation policy be provided to the government at cost price. This will increase the supply of gas in the long term and will lower prices.
We need to build import gas terminals so that we can bring cheap gas from areas of Western Australia to the east coast. I commend the AGL energy company for their feasibility study, which will see the first gas import terminal in Australia. Unfortunately, the gas they plan to import from other countries is cheaper than ours and will not be available until 2021. I ask the government to abandon plans to spend $60 million on unconventional and costly gas in the eastern states and to divert that money to encourage the building of another gas import terminal. In September 2016 the largest floating liquid gas plant and storage facility, Prelude FLNG, moored in Commonwealth waters. It is not too late to require this project to be subject to a domestic gas reserve policy, because they need government approval to anchor in Commonwealth waters. The policy of not ring-fencing Petroleum Resource Rent Tax, PRRT, credits to the exploration project where the expenses were incurred is costing us billions of dollars in revenue. Let's be clear that the mountain of PRRT credits owned by multinationals will mean that no corporate income tax will ever be paid for our offshore gas projects.
It is common knowledge that electricity and gas prices are increasing at a rate beyond the capacity of individuals and businesses to pay. If the government does not intervene in a meaningful way in the next few weeks then the Turnbull government will allow Australia to sleepwalk into recession.
Pensioners cannot continue to pay 11 per cent of their non-discretionary income on gas and electricity. Australians in work cannot manage electricity and gas bills that double from one quarter to the next. I am not interested in clean energy targets. I want gas and electricity prices brought down right now so that Australian businesses can stay in business and so that Australians will have jobs. Small businesses like a fish and chip shop cannot pay $7,000 a quarter for electricity and survive. Small hotels in rural towns cannot pay $17,500-plus a quarter for electricity and keep the doors open. We have a national emergency and drastic measures are required. Nothing is working, including the partnership between industry and government known as AEMO, the Australian Energy Market Operator. It is 60 per cent owned by government and 40 per cent by industry. AEMO has failed Australians and the government stands by and lets it continue. AEMO failed to change the electricity rule when China Light and Power, which owns 30 per cent of Australia's electricity generation, blocked the change from 30 minutes to 5 minutes, which means that Australians pay too much electricity. Once again, the sale of our precious assets to foreigners is costing us dearly. These critical assets should never have been sold and we must stop any future sales.
We face a national emergency. Will the government wait for an energy-policy-induced recession to occur in Australia or will it back now? I will be seeking the support of like-minded crossbench senators to take the necessary action to pull back from disaster. I will be discussing with them a jointly sponsored private senator's bill to enact a domestic gas reserve policy.
We hear it daily from people talking on our radios, people across the country, and just from talking to people in general on the streets: they cannot continue the way they are going. Businesses are shutting. The rising costs of electricity and gas are devastating to a lot of families, pensioners—everyone right across our country. I have sat down with and spoken to Minister Canavan with regard to this. He was enlightened on quite a few issues, because he knew nothing about them.
I think it is important, if we are going to be able to provide gas for all Australians and for industries and manufacturing—because manufacturing consumes about 30 per cent of all gas—that we provide it at a cheap, reliable, affordable price. We need to build more terminals and we need to be able to say, 'You want our gas from WA? You have to give us at least 15 per cent before you can actually ship it out of this country and make more out of it from other countries.'
There is a great quote from American newspaperman HL Mencken: 'For every complex problem, there is an answer that is clear, simple and wrong.' And so it has been too often in this chamber in the debate about our energy crisis—because we are facing an energy crisis and we are facing a gas crisis. But, day after day, I have seen senators come into this chamber and point the finger at just one element of the problem.
The truth is that the energy crisis will not be simple to solve, and the gas crisis will not be simple to solve either. The gas crisis has arisen as a result of complex causes over a number of years. What is needed is strong national leadership to respond to it. Unfortunately, with this challenge, as with so many policy debates, I have very little confidence that this government is going to be able to provide national leadership of that kind, because on energy, more than any other problem, this government seems unable to move beyond shallow, populist bickering towards a serious examination of the genuine policy challenges that face the nation. On energy, more than any other policy question, this government is drawn time and time again to debates and arguments which seek to prosecute a culture war rather than a policy solution.
Unfortunately, in the last 12 months in particular, we have seen Mr Turnbull, who once styled himself as a rational person, a sensible contributor to the energy debate, leap back to this old and familiar mode of debate from the coalition when it comes to energy. Mr Turnbull's intervention in the energy crisis after the storms which hit South Australia was embarrassing—absolutely embarrassing. For a man who once prided himself on being a sensible contributor to Australia's energy debate to argue, as he was willing to do, that the worst storm ever recorded in South Australia had no role in the blackouts which faced that state but, instead, that those blackouts were a result of state government policy was a shameful and embarrassing contribution to the debate. But it is a contribution that has characterised the approach taken by the coalition at every point, at every opportunity, since.
Australia's gas market is in crisis. Our industry is paying far more than international prices for new gas—upwards of $20 per gigajoule, whereas it is just $8 per gigajoule internationally. It is not just a question of the cost of supply; there are some industrial consumers reporting they are unable to access gas at all, and this will have real consequences for Australian industry and consumers. It has impacts on the retail energy market. It is impacting not only energy prices and security today but also the viability of new gas-fired power stations. If someone were seeking to develop a new gas-fired power station today, they would have real doubts about their ability to secure long-term supplies at a reasonable price. There are many incentives, as Dr Finkel has documented, for gas plants to run on a peaking basis only, and that is impacting on the average price of electricity in the NEM.
There are manufacturing processes which can only take place if gas is available as a feedstock. There is no substitute; unlike the NEM, there are no alternatives. We have been hearing cases of even large manufacturing companies being unable to get the supplies that they need. The chair of our competition watchdog, Mr Rod Sims, has said that this is now a worst-case scenario. He said:
I do think companies will go out of business because of this and I think that will be a crying shame.
There have been simplistic suggestions that the root cause of all of this has been some of the restrictions that have been placed on gas exploration at a state government level. As I have indicated, I think this is overly simplistic, but it is difficult to talk about gas without talking about the conflicts that have arisen in the past decade between landholders and resource developers.
It is probably fair to say that many stakeholders who were seeking to develop their gas resources would have handled things very differently if they could have their time again. Ventures that are wishing to develop these resources need to engage seriously with both landholders and local communities. There needs to be a serious conversation about a fair return in exchange for access and there needs to be a serious conversation grounded in data about the risks that are presented to their assets and the impacts that developments may have. There needs to be a satisfactory resolution of the conflicts that have arisen between landholders and resource developers. But, in any case, allowing wholesale development of fracking would not solve this problem. We would not be able to get the resources on line in time and, in any case, this is not a simple supply problem.
We are producing a lot of gas. Australia is presently the world's second-largest LNG exporter, and it is expected to become the largest exporter by 2020. This has come about because our suppliers are overextended. They are diverting gas from domestic markets in order to fulfil overseas contracts. In the eastern markets, we have gone from using approximately 700 petajoules a year to needing about 2,200 petajoules a year, and this is largely because of the huge export operations that are running out of Queensland. These operations entered into long-term overseas contracts as part of building a bankable case for the export facilities, but new ventures have not been able to produce sufficient gas to fulfil these obligations. They are buying gas that would otherwise have been used to supply the domestic market. This was not what was anticipated when these projects were first put forward. The environmental impact statement, for example, for the Santos project says:
The project ... is not diverting gas from local markets to export markets ... the project has no direct implications for domestic prices.
That same venture now relies on third party gas from the domestic gas market for 60 per cent of its exports.
The situation has been worsened by the uncompetitive arrangements in some parts of the eastern gas market. The ACCC conducted its review into the east coast gas market and released its report early last year, and the problems it identified are still in place. Transparent contracts remain the exception, not the rule. The Finkel review observed that no-one can really say what the current market price is, because there is no visibility on the contracting arrangements. There are issues with pipelines and networks. The ACCC said:
Pipeline pricing exacerbates the effect of supply tightness on wholesale gas prices. There are currently very few constraints on monopoly pricing by pipeline operators.
These are serious structural problems in the market and none of these factors is particularly new. This crisis should not have taken government by surprise, yet, as with so many things in the energy sector, they seem to have been taken by surprise—caught on the hop. The ACCC reported last year. Labor has been calling for action for years. At our last national conference back in 2015, we adopted a gas export national interest test. That test would commit a future Labor government to ensure that Australian suppliers would not be hurt by the LNG export industry.
So this has all been on the table. It has all been known. These problems have been understood for some time, and yet we have from this government almost no response. We have the complete pretence that, through a casual conversation between the Prime Minister and some of the market participants, it would be able to resolve this. Well, nothing came of that—nothing at all. We now find ourselves with a domestic gas security mechanism proposed by the government that will be delayed in its implementation and that seems to have many features that suggest it will be fairly ineffective in responding to the problems that confront us now. My great concern is that the division within the government on this and the broader energy market will make it unable to respond to the crisis.
Following on from Senator McAllister and her comment about, 'Labor saw this in 2015 and we are going to do this and we are going to do that': I wonder if Senator McAllister has spoken to the Victorian Premier, Mr Andrews, who has put a total ban on all sorts of conventional and more modern ways of gas extraction?
Senator McAllister interjecting—
They have. They have put a total ban on it. That is a fact. That is the way Victoria is treated under a Labor government: cut off the tap, cut off the exploration, do not do anything and all will be right, mate. Well, no, it will not, Mr Andrews—no, it will not.
Why is Japan buying gas cheaper than Australia? That is a very good question. It all comes down to two things: demand and supply. In 2009 the then Labor government approved the construction of three LNG gas plants in Gladstone for export. I repeat: for export. Australia is now the world's second largest exporter of LNG behind Qatar, providing approximately 12 per cent of the world's gas. It is expected to become the world's largest exporter by 2020. The development of the gas export market has meant Australian producers have had to compete with overseas buyers. Australian gas prices have also risen because gas production is becoming more expensive and because of the reduction in supply due to moratoriums—by, as I said, Victoria, the we-will-not-produce-gas state. You would think at this time of the year you would want a bit of heating and cooking gas down there!
Respected independent industry expert EnergyQuest continues to report:
International comparisons are not simple. Much of the public commentary about local and international gas prices does not provide an apples-for-apples comparison. Misleading commentary has been happening for a long time and is usually produced by anti-fossil fuel activists or parts of the manufacturing lobby. Critics usually compare landed spot LNG prices with Japan with delivered contract gas prices in eastern Australia. I will repeat that: critics usually compare landed spot LNG prices in Japan with delivered contract gas prices in eastern Australia. However, there is really no comparison between the short-term spot price of an LNG cargo and a long-term contract with guaranteed supply and prices.
The LNG spot market in Japan is a global market with possible supply from up to 18 LNG exporting countries. In other words, when Japan sets its gas price, they have up to 18 countries exporting gas to Japan. Unlike eastern Australia, the global LNG market was oversupplied, so prices have been depressed—although they are now rising again. By comparison, the east coast spot market is a purely local market that lacks the liquidity and scale of Japan. It is essentially a day-to-day balancing market. Its prices reflect whatever relatively small quantities of gas are available on a given day. That is important. As such the spot price is not a good guide for long-term contract prices.
Commercial and industrial users do not rely on the spot market to meet their ongoing gas requirements. The average price of landed—not delivered—spot LNG imported into Japan, contracted in May 2017, is AU$7.50 per gigajoule. Looking at the east coast spot price for gas delivered to the relevant capital city today, the prices are: $9.33 per gigajoule in Sydney, $8.69 per gigajoule in Adelaide, $7.24 per gigajoule in Brisbane and $10 per gigajoule in Victoria—the declared market. These prices include pipeline transportation costs, which are a focus of the Commonwealth led reform to lower pipeline costs. That is very important. To get the gas to the consumer, we need efficient pipelines and a reduction in costs there.
The best way to ensure affordable and reliable gas for the domestic market is to increase gas supply, including from unconventional gas sources and improved gas market competition, transparency and operation. I want to focus on the unconventional gas sources—that is fine, but make sure we look after the environment. We have had a big argument in many regional areas of New South Wales and Queensland about coal seam gas. We in the National Party, along with our Liberal colleagues, have said, 'Make sure there is no interference with underground water, look after the environment and abide by the science and the EPAs of each state to see that it is all done correctly.'
In March 2017 the Australian Energy Market Operator released its 2017 Gas Statement of Opportunities, which drew attention to the domestic gas market's tightness and forecast shortfalls of between 10 petajoules per annum and 54 petajoules per annum in the residential, commercial and/or industrial sectors from 2019 to 2020 for New South Wales, Victoria and South Australia. In response to potential shortfalls of domestic gas supplies, Prime Minister Turnbull held urgent meetings with gas producers. Following these meetings the Prime Minister acted decisively and, on 27 April, announced the introduction of the Australian Domestic Gas Security Mechanism, the ADGSM.
Given the abundance of gas resources, Australians expect to have their gas needs met. It is unacceptable for Australia to become the world's largest exporter of LNG but not have enough to meet the gas needs of Australian households and business. The ADGSM takes effect from 1 July. I commend the Prime Minister for saying simply this: we are a huge producer of gas, but why export it all and leave a shortfall here for our domestic consumption? That is crazy. The ADGSM takes effect on 1 July. It will apply across all LNG producers and operates alongside other key gas market reforms underway, including the Australian Competition and Consumer Commission's gas market transparency work and the peak supply guarantee given by gas producers.
The ADGSM is a targeted and temporary measure of last resort designed to restrict LNG exports in the event that supplies are unable to satisfy domestic market needs here. In other words, this is a government intervention saying that if the market is failing here because of multiple reasons, such as the Labor government in Victoria, then it is time for the government to intervene. Any restrictions or offset requirements would only be placed on export operations that are, in effect, drawing down supply in net terms from the domestic gas market. LNG companies required to operate under restrictions will have flexibility to find commercial solutions that meet their domestic market responsibilities, such as swapping cargoes out of portfolios or on the spot market. All LNG companies will be treated the same.
The exposure draft of the mechanism was released on 5 June 2017. The government is in the process of considering feedback from states and territories, gas producers, exporters and consumers, including large industrial gas users, before finalising regulations and guidelines. The government continues to strongly support the ongoing operation of Australia's world-class LNG industry and acknowledges the industry's commitment to work collaboratively on this issue of national significance.
As I said, it is about supply and demand. The MPI under discussion refers to Japan. There are some 18 countries competing for the market in Japan—lots of competition—hence their price is cheaper than ours. Several years ago I went to Narrabri to inspect the Santos project. They were under exploration. They had the gas coming out of the ground. It was flared out of a pipe. It was just being burnt into the air 24 hours a day, seven days a week, 365 days a year, because under state law they cannot flick a switch, turn on the gas-fired generator in Narrabri and power 300 houses. Instead, the gas is just flared out of the pipe and burns into the atmosphere and is wasted. That to me is a terrible waste, and that needs to change.
Here we are, swimming in gas in Australia—we have heaps of resources. Down the east coast we have enough gas resources to power a city with a population of a million people for over 5,000 years. So, no matter what type of gas extraction we use, we need to do it properly, look after the environment and see to Australia's needs—because this gas actually belongs to the people. Under the state collection royalties, it is owned by the Crown. The people own the gas. To see a shortfall here in Australia is crazy.
I commend Mr Turnbull and his leadership for intervening in the market and saying: 'We're not just going to export it all overseas and leave a shortfall here. We need to take action to see that we have a big enough supply here so that all Australians have ample gas to get us through our wintertime, for cooking, for our motor vehicle needs or whatever.' I think it is a case of good government that we have intervened to ensure that we keep enough gas supply here until more supply is brought on the market here. It will no doubt reduce the price as well.
Thank you, Acting Deputy President Reynolds. I happened to be over in your home state of Western Australia only a few weeks ago for a very important Senate inquiry which I initiated into the petroleum resource rent tax. That particular day—Senator Smith put in an appearance, if I remember rightly—we had some of the CEOs of the biggest oil companies in the world, operating out of Australia, come and give evidence on why they do not want the petroleum resource rent tax changed. You were also there, Senator Reynolds, I understand.
What was interesting about that day was two other things that happened that morning. The first thing that happened was the government released its own internal review into the petroleum resource rent tax at the exact time—9 am—that the Senate inquiry began. So none of us had time to read the government's review. Nevertheless, we had good evidence from companies. The second thing that happened was that the Prime Minister, Mr Malcolm Turnbull, released the concept that he may some kind of gas reserve or gas price here. What did the big petroleum companies do, both in the media and at the inquiry? They screamed blue murder. Why? It is simple: they do not like being told by the government what they should and should not do. They have not had a government interfering in their business in this country for many decades now.
Let me give you a good example. The petroleum resource rent tax came in in the 1980s. It was a tax designed essentially for petroleum products. Pretty much the only people that pay it in this country now are BHP and the international subsidiaries of multinationals that operate in Bass Strait. Although it was designed for petroleum products, it is mostly applied now to big LNG projects, the massive projects off the North West Shelf in Western Australia. Because it is so incredibly generous in the concessions that it gives these big companies, each year they get to compound all their exploration expenditure at 15 per cent plus the bond rate and every dollar of their operations expenditure at five per cent plus the bond rate. The situation we have in this country now is that $238 billion of tax credits are sitting amongst the big petroleum companies, so they do not want to change the petroleum resource rent tax.
Why is the government not stepping in and saying: 'That is a massive source of revenue. All we need to do is tweak those uplift rates and we'll bring in tens of billions of dollars'? This is the punchline: the government—and it is not just yours, Acting Deputy President; it is previous governments as well—are only interested in two things, and this applies directly to the gas policy here in this country. The first thing they are interested in is investment and the raw dollars they are bringing in investment into this country because it helps to balance the payments and the current account figures. Of course, that contributes to GDP growth, so those big numbers are important. Secondly, they are interested in jobs. They are interested in jobs that are attached to these investments. Are they interested in getting the taxpayer of Australia a good return on the resources that we essentially give to these companies? No, they are not.
So I ask the question: why are not we getting a bang for our buck? We are selling the gas, the oil, the condensate and the other products to these big multinational companies, right? That is what a royalty is. Incorrect. Under the PRRT, they have now clocked up $238 billion of tax credits. That means that the $238 billion of revenue that they may earn in the future they will not have to pay tax on because of these extremely generous concessions that have been in place now for decades.
But no-one wants to change them, because governments are interested in only two things: investment numbers in the current account and jobs. Well, if we actually took a far-sighted view or policy prescription we would say, 'No, we need a fair return as well on the resources that are owned by Australian people, and we need a fair policy for our domestic gas markets.' But that would require courage from the government to actually take these people on, and that is not something I have seen from the big parties since I have been in politics. On top of that, we have these layers of trade deals that make it extremely difficult for government to be discriminatory at all against foreign producers.
In fact, it attracts state-to-state dispute settlements as well as investor-state dispute settlements. Even in my home state of Tasmania, there was a furore when the price of rock lobsters went to over $100 a kilo because they were all being exported. Suddenly all the local restaurants and local punters had to pay that kind of money for their own rock lobsters. So, it is not just gas. This is the global world that we live in, and if the free market is our religion and our ideology then we are never going to change any of this. So, I think the government needs to be pushed and actually look at this, much more importantly, from a long-term perspective— (Time expired)
The export gas industry in Queensland has really driven economic growth over the past decade. We have seen particularly in Gladstone the development of export facilities by a number of companies that have created thousands of jobs in that area and economic opportunity for the region. Since those facilities came into operation they have employed substantially fewer people than they did during the construction phase. That has also been the case in the downstream operations, largely in western Queensland, where they benefited from some booming economic activity during the construction phase.
It concerns me, having spent time in Gladstone and having seen what it was like while these facilities were booming, that some of these facilities have gone from employing a couple of thousand people to now fewer than 200. You get a sense of the economic downturn that has occurred as a result of these production facilities moving into operation. But we also are seeing a flow-on effect from these export contracts that have been signed to justify the development of these facilities. We are seeing a domestic shortage that is impacting on industry and affecting jobs. That is of significant concern to me.
I would like to acknowledge the contribution of Senator McAllister, who gave a very thoughtful analysis of the situation and also provided some solutions to the challenge we face. For me this debate highlights a couple of issues. One is the hypocrisy of Senator Hanson on this issue. I will deal with that in a bit more detail later, but I will just say that Senator Hanson is happy to say one thing in this chamber but another thing when she is in western Queensland and in communities that are being impacted by coal seam gas exploration.
This debate also highlights the emerging energy crisis we are seeing from the Turnbull government. They have no idea how to address it. We have seen no substantial response from this government to the Finkel review, which was delivered more than a week ago now, other than continued discussion and debate, which they are actually trying to pass off as business-like. Well, that is a different business meeting than any that I have ever been involved with, with the screaming match that has been reported in relation to former Prime Minister Abbott and one of his opponents. But we have also seen inconsistency from them over a number of months when it comes to the domestic gas issue. As recently as 6 March this year Senator Canavan was arguing against a gas reservation policy to alleviate the cost pressures in the domestic gas market. He was quoted as saying, about gas reservation:
I think they'd be a band aid solution which would be unlikely to be effective in the short term, and would be quite damaging in the long term. Let's hope we don't get there.
But less than two months later, on 27 April, we saw Prime Minister Turnbull announcing an Australian domestic gas security mechanism. To quote from his media release:
The Turnbull Government will secure domestic gas supply with the introduction of export restrictions to ensure the Australian market has adequate supplies before exports are permitted.
In their words, this government is applying bandaid solutions which they say can actually be quite damaging in the long term.
Industry needs certainty and not knee-jerk crisis summits and constantly changing policy from those opposite. Again, as we have seen over the last two weeks in the response to the Finkel review that was handed down, the Abbott-Turnbull 'war', that is at the heart of this government, has led to policy paralysis on energy issues and also on gas. The government is responsible for the parlous state of the electricity sector and emissions policy in this country. Wholesale power prices have doubled under the Turnbull government and retail prices are shooting up due to investment uncertainty being fuelled by this government. What we have seen is the triple whammy under this government: power prices are up, pollution is up and jobs are down. That will be the lasting legacy of this government. It is more interested in internal party politics than governing and creating solutions to this issue which will affect jobs across Australia.
It is important to reiterate the Labor policy on gas. Labor have been warning about the problems in the gas market for many years. Since 2015, we have advocated a gas export national interest test, and through 2017 we have been warning that more drastic measures were needed to address the short-term crisis that the Turnbull government has let develop under its watch. The government's policies on gas are not enough to secure supply certainty, reduce power prices and protect jobs for the long term. I believe that the gas shortage is going to get worse before it gets better.
Labor has been urging the government to copy our policies and to adopt them, which are: a permanent national interest test for the gas market so that Australian businesses and households are at the front of the queue; establishment of a domestic gas review board to consider whether any new gas export facility or proposal to expand an existing one would meet Australia's national interest; and requiring foreign companies to say how much gas they plan to make available for local manufacturers and households. Indeed, my own union, the Australian Workers' Union, have been advocates for a domestic reservation policy for a number of years. I think their stance on this has been vindicated, unfortunately, by what we have seen over the last couple of months.
What this motion also highlights, and what Senator Hanson's speech highlighted, is that One Nation will continue to sit on both sides of the fence when it comes to energy and coal seam gas. They hypocritically call for cheaper energy, yet also oppose coal seam gas exploration at the same time—they clearly want to have their cake and eat it too. One Nation's policy states—and this is directly from their website:
One Nation opposes CSG Mining until there is substantial evidence that it does not affect people's health, the environment, our farming and water.
Yet, here today, they are complaining about the price of gas that CSG mining creates. You would have to ask: where do they think the gas comes from?
We also know of a topic that has substantial evidence that it does 'affect people's health, the environment, our farming community and water'. It is, of course, climate change. But One Nation do not care about that. It is CSG that they have focused on. Senator Hanson has had many different views on coal seam gas, even just in the last three years. It really depends on which parliament she is running for. In an article titled 'Hanson to lead One Nation against Lockyer CSG', on 16 December 2014, then candidate for the state seat of Lockyer Pauline Hanson argued against coal seam gas mining. The article says:
Pauline Hanson has declared for the seat of Lockyer in the 2015 Queensland election saying she would fight for the farmers and against coal seam gas.
Ms Hanson, who returned recently to lead the One Nation party, made the announcement at a Crowley Vale farm in the electorate saying she was prepared to "go in all guns blazing."
This is the hypocrisy that we see from Senator Hanson on this issue: three years ago campaigning against this, ramping up community concerns about exploration, and now coming in here and bemoaning that it is being sold too cheaply overseas. While you cannot ignore the need for more exploration—sure it is not the most important issue in this debate—increasing gas exploration is one that is important if we are to see more supply to the domestic market.
Then we have to look at Senator Roberts. I daresay a conversation between Senator Roberts and Senator Hanson on this issue would be quite an exciting one. Senator Roberts has said that when it comes to the Finkel review 'the only priority should be making energy as cheap and reliable as possible'. Then we see Senator Roberts responding to Josh Frydenberg on energy prices:
Josh, the cause of power prices soaring is government intervention. The solution is not more government intervention.
You cannot get a consistent line from One Nation on this important issue. A tweet from Senator Roberts on 8 February this year condemns the 'gutless Victorian Liberals' who 'want to ban gas drilling'. He is happy to target the Victorian Liberals on this issue but ignores the concerns that Senator Hanson has expressed. I think it should make for an interesting party room discussion between Senator Hanson and Senator Roberts. One Nation needs to get some consistency on this important issue. But once again it just shows how out of touch One Nation are. This is an important issue to Queenslanders and Australians. Jobs are at stake. They need a consistent line on it.
It is always interesting to hear what the Labor Party might and do what they might talk about. We have heard what the Labor Party's policy was in 2015 and 2017. In both years they were in opposition and they could not do anything. But what the previous speaker forgot to mention was the Labor Party policy in 2009. That was the time when the Labor government approved the construction of three LNG plants in Gladstone for export. In 2015, and now in 2017, they talk from opposition—when they do not have to do anything—about other policies. But if you go back to when they were in government and could do something about it, were they doing what the Labor Party is now talking about? No. They were issuing licenses for LNG plants for export only. The problems that the previous speaker and other Labor speakers have identified is really one of the Labor Party's own making. It is so typical of the ALP. They have all these wonderful suggestions and great policy ideas now that they are in opposition and do not have to deliver. But, when they had the ability to do it, what did they do? They issued licenses for export only. Perhaps, if there are other speakers in this debate, they might address this.
The potential shortfalls of domestic gas have been addressed by the Prime Minister. As most senators know, the Prime Minister held urgent meetings with the gas producers to try and resolve the issue without the government intervening. The Prime Minister then acted very decisively on 27 April and announced the introduction of Australian Domestic Gas Security Mechanism. Given the abundance of gas resources in Australia, Australians do expect to have their gas needs met; notwithstanding that the Labor government had licensed these gas producers for export only. It is unacceptable for Australia to become the world's largest exporter of LNG but not have enough gas to meet Australian households and businesses. The mechanism takes effect from 1 July. It will apply across all LNG producers and will operate alongside other key gas market reforms currently underway, including the Australian Competition and Consumer Commission gas market transparency work and the peak supply guarantee given by gas producers.
It is a targeted and temporary measure of last resort and is designed to restrict LNG exports in the event that supply is unable to meet domestic market need. Any restriction or offset requirements would only be placed on export operations that are in effect drawing down supply in net terms from the domestic gas market. LNG companies required to operate under restrictions will have flexibility to find commercial solutions that meet their domestic market responsibilities, such as swapping cargoes out of portfolios or on the spot market. All LNG companies will be treated the same.
As senators know, the exposure draft of the mechanism was released on 5 June, and the government is currently in the process of considering feedback from states, territories, gas producers, exporters and consumers, including the large industrial gas users, before finalising the regulations and guidelines. Hopefully, that will address the subject of this debate on why gas is more expensive in Australia than it is in Japan. Of course, it is a bit simplistic to compare one with the other. As Senator Williams pointed out, you must compare apples with apples in this debate, and I am not sure the debate as proposed does that.
I was interested in the previous speaker's comments about the union that supports the gas workers—the AWU, I thought he said. They have been in favour of some domestic gas regulation for some time. I wonder why the AWU did not make that a condition of the money—the huge donation—they gave to Mr Bill Shorten when they got the money from the industry super funds. Remember the $53 million they got from the Australian super funds? That was the retirement nest-eggs of mums and dads and these super funds gave it to the AWU, which in turn passed it on to the Labor Party in a much publicised event in which the AWU gave that money to Mr Bill Shorten. If the AWU were worried about domestic gas reliability, perhaps when they initially gave the large sums of money to Mr Shorten for his election campaign they should have made it a condition that the Labor Party would do something about the gas market when they were in government. It is okay to say anything when you are in opposition, but take a look at what they did when in government.
This whole debate, of course, is about cheaper electricity—cheap power. Australians simply cannot afford the sort of luxury that you see in Victoria, where the Victorian government—the Labor government there—with oodles of gas sitting under the ground has banned even exploring for gas. That sort of thing does push up the prices. As Senator Williams said before me in this debate, it is a matter of supply and demand. If you cut off the supply, obviously the prices go up, and Labor governments in Victoria are cutting off the supply by stopping even exploration for gas. In Australia we used to be so lucky, because, of all of the nations in the world, we had the best reserves of high-quality coal, and we used to use them during the forties, fifties and sixties to produce cheap power, which I know for certain brought one Korean zinc company to Australia to manufacture their zinc here. Why? Because we had the cheapest form of power. It was reliable. It was always there. It was good quality coal. We were fortunate as a nation to have that high-quality coal. But we have the Labor Party running around with their mates in the Greens saying that 'coal' is a dirty word—that we cannot have it. I am delighted that, first of all, we have an unexpected ally in Dr Bob Brown, the former leader of the Greens political party, who said that the coal-fired thermal power was the best centralised option we have. I do not often agree with Dr Bob Brown, but I certainly think he was on the mark when he made that very forthright and forward-thinking comment.
I come from a part of Queensland where there are unlimited quantities of high-quality black coal. What needs to happen for Australia—for all those people who cannot afford electricity at the rate we are going in Australia because of Labor-Greens policies over the years—is that we need to get that coal out of the ground and use it to create cheap power for Australians. We are exporting it to other countries, including Japan. That might answer the question of why Japan has cheaper electricity prices than Australia—because they are using Australian black coal to create power that is very inexpensive, comparatively. What we need to do is start using that coal resource we have. Think of the jobs it would create for the miners. I can never understand why the CFMEU is so opposed to it. They have clearly become ideological, rather than being about looking after the jobs of their workers.
I am delighted to see that Mr Tim Nicholls, the leader of the Liberal National Party in the Queensland parliament, made a firm commitment just last week to have, within 100 days of his election as Premier, a coal-fired power station, finally, with all of its approvals and hopefully based somewhere in the north of Queensland. I look forward to that. I know the Labor mayor of Townsville, Councillor Jenny Hill, joins me in welcoming that initiative. It will be great for the north, it will be great for Australia, and the sooner it happens the better. I wish the LNP leader in Queensland, Tim Nicholls, all the very best in his campaign and urge him to bring cheap electricity to my constituents in the state of Queensland.
We are in the middle of an energy price crisis. If high gas prices are not addressed immediately, we will see a tsunami of job losses not just in my home state but across the nation. That is why, during the March negotiations for the enterprise tax plan bill, I negotiated a number of gas measures aimed at reducing prices. I want to talk about one of these measures, the restriction of gas exports.
As mentioned by Senator Williams, the government is in the final stages of introducing an Australian domestic gas security mechanism, which empowers the minister for resources to restrict exports to ensure that there is a sufficient supply of natural gas for the Australian domestic market. A 2016 ACCC inquiry into the east coast gas market found that we have a distorted gas supply market and 'evidence of monopoly pricing' in gas transport. In that environment, we will not achieve reasonable prices by simply ensuring there is sufficient supply. In these circumstances, we need to ensure that there is an oversupply to counter the monopoly factors at play.
The draft regulations do not go far enough to ensure that we can achieve a domestic price which is comparable to or better than the Japanese long-term contract rate. The regulations must be amended to ensure that affordability, not just supply security, is a formal consideration. We cannot afford to tread softly. That time has well and truly passed, and on any test—a pub test, a national interest test, an economic benefit test—it is simply wrong and unsustainable that the price of Australian gas in Japan is actually half the price of Australian gas being sold here in Australia. We must address this as a matter of the utmost urgency.
As a servant to the people of Queensland and Australia I rise to speak to the matter of public importance proposed by Senator Hanson. Look at the crocodile tears flowing in this chamber! There is only one party that is the party of cheap energy, and that is Pauline Hanson's One Nation. Currently, Australian consumers actually pay around 60 per cent more for our own gas than Japanese customers do in Japan. This is doubly difficult to understand, as, in order to be exported, Australian gas first has to be liquefied; that should increase the price by around 25 per cent. It is fine to hear Senator Xenophon, the Liberal Party and the Labor Party, and the Greens especially, talking about energy prices, but they caused this.
Coming back to gas, just like runaway power costs, Australian working families are being ripped off with sky-high gas prices, due to overregulation forcing a decrease in supply and an increase in prices. Regulation also decreases competition, which leads to overcharging by a cartel of Santos, Origin and BHP. With less regulation, though, customers would pay less and companies would earn more. Further costs are being added by the quasi-monopoly control of gas transmission pipelines, mainly by the APA Group, which, from looking at a map, controls around 95 per cent of the gas pipelines in this country. Their return on equity for some pipelines is as high as 159 per cent—enabled by government regulation. No wonder they call Australia 'treasure island'. Why does this situation occur? Maybe it is because instead of tax, gas cartel members pay political donations to the major parties, as Senator Hanson itemised.
We need to remove restrictions on supply and demand. That would encourage efficiency. As Senator Hanson has said, we clearly need to allow companies to build gas import terminals, including revaporising plants, on the east coast, to allow us to transport our own gas around the continent and then return it to domestic consumption. Transport costs from Western Australia to the east coast would be around 70c per gigajoule, and revaporising costs would be around 75c per gigajoule. This would allow us to import gas which is currently selling for less than $4 a gigajoule, in comparison to the Sydney spot price now of $10.
The impact on our economy and living standards of runaway gas prices cannot be overstated. On top of the spiralling electricity prices created by the obsession with expensive, unreliable, intermittent wind and solar power, the current failed policies of the government, the opposition, the Greens and the Xenophon party must be changed as a matter of urgency before our economic growth grinds to a halt. Only One Nation is the party of cheap energy—Pauline Hanson's One Nation Party.