Mathias Cormann (WA, Liberal Party, Shadow Parliamentary Secretary for Health Administration) Share this | Hansard source

I, and also on behalf of Senator Cash, Senator Back, Senator Eggleston and Senator Adams, move amendment (1) on sheet 6028 revised:

(1)    Page 207 (after line 18), after clause 167, insert:

167A  Application of EITE to liquefied natural gas production

        (1)    The emissions-intensive trade-exposed assistance program must determine that liquefied natural gas (LNG) production is a highly emissions-intensive trade-exposed activity.

        (2)    The activity definition of LNG production for the purposes of the emissions-intensive trade-exposed assistance program must apply to the entire LNG production process, including:

             (a)    the production of the raw natural gas from an underground reservoir; and

             (b)    the transformation of the natural gas, including but not limited to:

                   (i)    pre-treatment of the raw natural gas; and

                  (ii)    liquids (water and condensate) removal; and

                 (iii)    removal of acid gases (such as carbon dioxide and hydrogen sulphide); and

                 (iv)    dehydration and mercury removal; and

                  (v)    any flaring or venting of hydrocarbons and any fugitive emissions (for example from, but not limited to, compressor seals, valves and so on); and

                 (vi)    the liquefaction of the natural gas into LNG; and

             (c)    the short-term buffer storage of LNG, where the volume of that buffer storage is designed specifically for the purpose of enabling efficient loading into the transportation system, such as ocean going tankers, at a frequency and rate determined by the facility’s off-take requirements; and

             (d)    the loading of the LNG into a transportation system such as ocean going tankers; and

             (e)    the supply of utilities such as, but not limited to, compressed air, nitrogen, steam and water where these are used in support of the activity; and

              (f)    the regeneration of any catalysts or solvents used within the activity boundary; and

             (g)    the provision of support operations such as, but not limited to, on-site office, warehousing, and accommodation and the supply boats and aviation services where these are used primarily to support the above activities and in the absence of government supplied support infrastructure.

        (3)    The emissions-intensive trade-exposed assistance program must provide for additional free Australian emissions units (a supplementary allocation) to be issued in respect of LNG production projects at an effective rate of at least 80 per cent.

        (4)    For the purposes of this section, a supplementary allocation of free Australian emissions units is the number of free units required to be issued to a person in relation to a project to bring the aggregate number of free units issued in respect of that project in the previous year to a number equal to the specified percentage rate of assistance.

To put it into context at the outset, we circulated these amendments at a time when it looked as if these bills could well pass the Senate, possibly as early as last Friday. All five of us from Western Australia have been on the record as making it very clear that we thought that this was a very flawed piece of legislation that will not help to reduce global greenhouse gas emissions; that it will be bad for the economy and jobs; that we do not think it should be finalised before the climate change conference in Copenhagen; and that we should defer further consideration until early next year.

Having said that, given the risk we perceived last week that this legislation may well get up, we were very concerned about some specific flaws in this legislation that relate directly to our home state of Western Australia. As senators for Western Australia, standing up for our state, we circulated, in the interests of time, a range of amendments that we will be dealing with today. Given the changes that have occurred in terms of the official position of our party this morning, we will not be going through them perhaps to the same extent that we otherwise might have had to given what I suspect will now happen with the legislation.

Talking about LNG in particular, if there was a truly global scheme the LNG industry would do very well. I note a quote from the economic modelling conducted by Treasury in relation to the Garnaut scenarios:

For the Garnaut scenarios, a single policy measure—a global emissions trading scheme covering all economies and all gases starting in 2013—was used to drive emission reductions across the global economy. This stylised global policy framework allows the greatest flexibility to find and exploit the cheapest mitigation opportunities, rather than prescribe the regions and sectors in which emission reductions should occur.

That is the core criticism that we on this side have of the government rushing ahead with its flawed Carbon Pollution Reduction Scheme. If the Australian ETS was part of a truly global ETS then it could be an effective way of helping to reduce global greenhouse gas emissions and to maximise Australia’s contribution to reducing global greenhouse gas emissions, and the LNG industry in Australia would do very well. Because there is no proper global framework and at this stage no prospect of an appropriately comprehensive global scheme there will be all sorts of negative consequences and, specifically in relation to the LNG industry, some costs would be imposed on the LNG industry in Australia which would not have to be carried by the LNG industry in other parts of the world.

On the basis of the net positive impact that increased Australian exports of LNG would have in helping reduce global greenhouse gas emissions because they would substitute for coal in China and India for example, we think that this should be recognise by having LNG elevated at least to the top tier of emissions-intensive trade-exposed industries—that is, the so-called 94.5 per cent category. The amendment that we move essentially would effect that. We also think that the activity definition that the government has put forward in relation to the so-called supplementary allocation should be locked in as the activity definition for all allocation purposes and it should not be subject to being opened up by the independent expert review through the back door—that is, the government should not be able to wind it back through the back door. Finally, given the important net positive contribution LNG can make to help reduce global greenhouse gas emissions we believe that a floor of 80 per cent should be incorporated for supplementary assistance rather than the suggested 50 per cent.

By way of general summary, if the objective of the government truly was to help reduce global greenhouse gas emissions and to maximise the contribution that Australia can make to help reduce emissions then clearly the LNG industry would be seen as being able to make a significant contribution to that. There is a great opportunity here for a win-win situation where we can go for economic growth at the same time as helping to address our global environmental challenge. From the point of view of my home state of Western Australia this is particularly relevant because we have some significant LNG projects under way and there is the potential for a number of other very significant LNG projects to go ahead in the future. Rather than constraining the growth of this industry by imposing additional costs not placed on our competitors, the government should be facilitating its growth in the interests of both our economy and the environment.