Senate debates

Tuesday, 22 November 2022

Matters of Urgency

Gas Industry

5:03 pm

Photo of Glenn SterleGlenn Sterle (WA, Australian Labor Party) Share this | | Hansard source

I inform the Senate that the President has received the following letter, dated 22 November 2022, from Senator McDonald:

Pursuant to standing order 75, I give notice that today I propose to move: "That, in the opinion of the Senate, the following is a matter of urgency:

That the Senate reaffirms the need for investment to ensure future domestic gas supply and that the Government's axing of policies to increase supply, coupled with its internal divisions on gas market policy, will only drive gas prices higher.

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 to each of the speakers in today's debate. With the concurrence of the Senate, I shall ask the clerks to set clock accordingly.

5:04 pm

Photo of Susan McDonaldSusan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | | Hansard source

I move:

That, in the opinion of the Senate, the following is a matter of urgency:

That the Senate reaffirms the need for investment to ensure future domestic gas supply and that the Government's axing of policies to increase supply, coupled with its internal divisions on gas market policy, will only drive gas prices higher.

It has become apparent over the last few weeks that this is a Labor government of old, not of Hawke or Keating or Curtin but of the disastrous Rudd-Gillard-Rudd days. Labor has been marred by cabinet leaks, indecision and warring cabinet ministers. This has culminated in the latest failure: domestic gas policy. They've shot themselves in the foot and now they're complaining it hurts.

Back in September, after the Jobs and Skills Summit, the Prime Minister unequivocally ruled out any thought of a new mining tax, and yet, less than two weeks ago, it was leaked that this was back on the table—another broken promise from a broken government. It is 'mining tax 2.0'.

Labor's own budget has forecast gas and electricity price increases of over 40 per cent and 50 per cent over the next two years. What was their solution? It was to cut critical funding to projects designed to provide a greater gas supply. In the October budget they axed the Beetaloo Cooperative Drilling Program, a program designed to secure gas supply from the Beetaloo basin—a basin that could supply over 200,000 petajoules of gas. That's 200 years worth of supply.

In the same budget they slashed more than half of the funding for the Cooper and Adavale basins plan. Over $30 million allocated to increase domestic gas supplies was gutted, further stranding investors trying to increase our domestic gas supply. To make matters worse, Labor has showered green lawfare offices, like the Environmental Defenders Office and Environmental Justice Australia, with almost $10 billion in handouts.

What we have is a government in crisis. Labor has no plan to address the cost of living and no plan to address rising electricity prices. All we have are thought bubbles. Furthermore, state governments that are now baying for reservations, price caps and government interventions are the same states that have locked gas away, reducing supply to the domestic market. The hypocrisy is astounding, for it will not be states like Victoria who suffer under a price cut or resources tax; it will be states like Western Australia and Queensland, who already produce gas for domestic users.

Instead of working to get more gas out of the ground to help Australian families and industries, Labor is laying siege to the resources sector from all sides. Mining companies are now warning that up to 33,000 jobs are at risk from a potential new mining tax 2.0 from Labor, as well as from its irresponsible industrial relations legislation. That would imperil projects valued at up to $77 billion, spreading an investment uncertainty contagion. The mining sector has identified 140 projects subject to pre-final investment decisions that would be at risk from new taxes and ill thought through industrial relations changes. More broadly, with Labor reviewing the EPBC Act and creating additional barriers for approvals, potentially up to $100 billion in investments and 174,000 jobs are now at risk from the Minister for the Environment's politically charged project reviews.

We know that the surest way to secure, affordable, reliable gas is through increasing supply. The coalition knows this. Minister King knows this. Unfortunately, some of her cabinet colleagues cannot fathom the thought of investing in gas supply. The coalition developed our strategic basins program to target projects that brought domestic gas supply online—projects in the Beetaloo, Cooper, Adavale, North Bowen and Galilee. These projects were backed by industry and, with government support, had the potential to bring hundreds of petajoules of gas to market. The coalition invested over $360 million in our strategic basin plans and the National Gas Infrastructure Plan—funding to ensure Australian households, consumers and manufacturers have access to affordable gas.

Gas is and will continue to be a necessity for decades to come, through power generation, manufacturing, industry, agriculture and energy transitions. Labor need to stop their internal bickering and guarantee more gas supply now.

5:09 pm

Photo of Jenny McAllisterJenny McAllister (NSW, Australian Labor Party, Assistant Minister for Climate Change and Energy) Share this | | Hansard source

It is really something, isn't it, to be lectured to by the National Party, of all of the parties in this chamber, about division? It's peak Senate; we should probably offer Senator McDonald an extension of time to talk about this more, because this is the group of people who could have done something about this—or any number of things—in the nine years that they were part of the government. But they didn't use their nine years for that, did they? They actually just spent most of their time in government bickering with one another about who was going to get to be the DPM. That was their big priority: working out who was going to get the big position. They didn't pay attention to the very significant policy issues that required the attention of the government and that required the attention of the National Party—and that the regions would have appreciated, had they been dealt with. They didn't do any of those things; they just fought amongst themselves about who was going to be the Deputy Prime Minister.

The truth is that energy prices are of course a very real challenge for our economy. We are currently dealing with the most significant shock to energy markets in 50 years, and that is a direct result of Russia's illegal and prolonged attack on Ukraine. The IEA said this about it:

Energy markets and policies have changed as a result of Russia's invasion of Ukraine, not just for the time being, but for decades to come.

So if we think about the context that we're dealing with, it's a pretty sad reflection on the opposition that their choice is to come in here and make a pretty narrow partisan and political point. Exactly: there is a national interest to be dealt with here and it needs to be taken seriously. Australian households, businesses and industries are grappling with the impact of this, and responding to it is made all the more difficult because of the chaos and dysfunction that afflicted the last government—particularly on the question of energy policy.

Since coming to government, we have been taking steps to remedy that. In the first days after the Albanese Labor government ministry was sworn in, we had to deal with a very significant crisis emerging in the energy market—in the electricity market. That was successfully navigated in a collaborative and orderly way, using the institutions of the market and by working with colleagues in the states and territories. We have since had to deal with the gas supply issue—which, again, we have dealt with in orderly and collaborative way. And now we are dealing with pricing.

The truth is that Senator McDonald likes to talk about their legacy on gas, but the Morrison government's gas fired recovery failed to get more gas into the system. It was all talk and no action. They said that they'd enforce 'use it or lose it' conditions on gas licenses and that actually didn't happen. They said they'd develop a gas reservation scheme and that didn't happen. They said they'd avoid a shortfall in the domestic gas market, with new agreements with the three east coast LNG exporters, but they didn't bother to extend the Australian Domestic Gas Security Mechanism or the heads of agreement before the last election. It was a lot of talk and not much delivery.

We understand that this matters for Australians and we're taking prudent, responsible and careful action to reduce energy price pressures on Australian households and on Australian industry, without undermining investment. As the IEA points out—and almost any other serious commentator—these are extraordinary times. Energy markets around the world are being reshaped, and the government is working on options to bring prices down. Greater transparency in the market is urgently needed, and the solutions lie not just in one place—there is no silver bullet—they lie across the energy supply chain. So the ACCC is advising the Treasurer on how the gas industry's voluntary code of conduct is operating and how to ensure reasonable pricing. As the Treasurer has said, our first preference is not a tax outcome here; our first preference is a regulatory outcome. But it makes sense to leave other options on the table until we conclude a view; it's not wise to rule other options out.

The budget contains $67 million to modernise energy market regulation and to increase the ACCC's scrutiny of gas markets. Any additional action that we take on energy prices will be balanced against the need to maintain investment confidence and to support Australian industry and households.

5:14 pm

Photo of Lidia ThorpeLidia Thorpe (Victoria, Australian Greens) Share this | | Hansard source

Fossil fuel companies in Australia are amongst the dodgiest polluters in the world and are destroyers of First Nations cultural heritage. For decades they have been aided by a succession of Labor and Liberal governments.

Supply is not the issue here. Don't be fooled! Don't be a fossil fool! We export around 80 per cent of Australia's gas. The idea that we simply need to increase supply is a complete joke, but it's a joke that governments have adopted as energy policy over the last decade. More gas production just means even more exports and profits for oil and gas companies, like Santos, Woodside and Chevron. This is a government that is captured by these fossil fuel companies, allowing them to continue destroying our lands, water, air and sacred sites, facilitating manufactured consent rather than ensuring traditional custodians provide free, prior and informed consent.

Climate change is here. The climate science spells it out clearly. At the recent COP we heard stories from First Nations people across the globe who are being displaced, leaving their ancestral homes and losing their ancestral bones because of climate change. The International Energy Agency itself has said that if we are to have any chance of sticking to 1.5 degrees of warming and protecting our cultural heritage there can be no new oil and gas projects. This sounds simple, right? But the government are more interested in protecting their corporate donor mates in the fossil fuel industry than taking meaningful climate action. This government had $42.7 billion in fossil fuel handouts in its recent budget, while we are in a cost-of-living and climate crisis and while First Nations people in the Beetaloo and across the country are fighting to protect their country against fossil fuel companies.

Just yesterday, the Greens tried to stop the government lending their mates in the Victorian government $32 million for a dodgy gas development on my country, Gunnai country. It will be at Golden Beach: pristine, beautiful country that's part of Ninety Mile Beach. The audacity of the Victorian Labor government to talk treaty while they log our country and drill into our oceans, destroying our lands, waters, totems and sacred sites. (Time expired)

5:17 pm

Photo of Paul ScarrPaul Scarr (Queensland, Liberal Party) Share this | | Hansard source

Whenever I follow a Greens senator who has talked about economics and about supply and demand, I refer to my book on basic economics to see what that tells me about supply and demand issues. Senator Thorpe seems to think this is not a supply issue. It absolutely is a supply and demand issue. What happens when you constrain supply? When you constrain supply, prices go up. It is economics 101: when you constrain supply, prices go up. That is what we have seen in the Australian gas market. It is basic economics 101: you constrain supply and prices go up.

The tragedy of this situation is that Australia has an ample supply of gas. It's just a question of getting it out of the ground and getting it to market. That is where there has been a failure of state governments, in particular the state government of Victoria. With respect to that, in that context, it is so disappointing to hear the rhetoric coming from some government ministers in the other chamber. In particular, I refer to the comment made by the Minister for Industry and Science, Mr Ed Husic, and quoted in an article by the great political editor of the AFR, Phillip Coorey. The article is entitled 'Labor, unions rupture over gas prices'. Minister Husic said:

It's team Australia or team greed—the choice is up to the gas companies.

That's what he said. He cast a general slur upon all of those companies, including great Queensland companies, which spend millions and millions of dollars on gas exploration, having invested in important infrastructure in places such as Gladstone, in my home state of Queensland. 'It's all about team Australia or team greed.' That's what the minister says. He casts a general slur over those involved in the oil and gas industry.

I ask, through you, Mr Acting Deputy President Smith, where was the minister for industry when those companies were struggling with gas prices near the floor and were writing off billions in investment and incurring billions and billions in losses? Where was his 'team Australia or team greed' rhetoric? Nothing. Crickets. Absolutely nothing. But now the market has turned he wants to cast a slur on the gas companies. What he should be looking at is the state government of Victoria and how it has not taken the action necessary to increase gas supply in the east coast market.

I want to quote from an op-ed piece written by Mr Ian Davies, who actually is involved in the gas industry and knows something about the gas industry. I think this article, which appeared in the AFR a month or so ago, contains all you need to know about this argument. He says:

The key to reducing the gas price is to unlock the upstream industry's potential to deliver more gas …

That's the key. This is a supply issue. The gas is there in the ground. We need to get it to market. That's the key. And again I quote from this outstanding op-ed:

Simply blaming upstream gas suppliers for all of the economy's woes is not only wrong, it is cynical, political and lazy.

That's what Mr Davies says. He is involved in the gas industry and has been for a long period of time. That's the response to the slurs from the minister for industry who invokes greed et cetera instead of looking at the underlying cause, and the underlying cause is a lack of supply.

The Narrabri Gas Project in New South Wales could provide half the market of gas for residents and businesses in New South Wales, but it's taken 10 years and more; we're still waiting for that gas project to come online. That's the issue. It's an issue of supply. Those opposite—ministers in this government—are engaging in this rhetoric, which I refer to as cynical, political and lazy. They're demonising the gas industry, instead of looking at ways supply can be increased.

I will end with this quote from Mr Davies's article:

We are a sophisticated and wealthy nation with sophisticated and complicated markets. Let's act like it.

5:22 pm

Photo of Pauline HansonPauline Hanson (Queensland, Pauline Hanson's One Nation Party) Share this | | Hansard source

The National Party have put forward today's urgency motion. This is the same party who held the resources portfolio between 2013 and 2022 and failed to introduce a domestic gas reserve policy in Commonwealth waters. If a domestic gas reserve policy had been introduced, Australians would not be facing a shortage of natural gas or high priced electricity. Budget Paper No. 1 shows Australians will receive more from beer drinkers than foreign owned multinational companies exporting liquefied natural gas.

When I introduced the Offshore Petroleum and Greenhouse Gas Storage Amendment (Benefit to Australia) Bill 2020 to get more natural gas for Australia, not one party supported me. We can only blame the parties that have formed government for the high price of gas which has killed manufacturing in Australia and which is driving electricity prices higher. I'm not going to let the Nationals virtue signal on natural gas when, in government, they helped foreign-owned companies avoid paying tax in Australia. If the Nationals had stopped taking $55,000 a year from oil and gas companies for corporate membership of their party, they might have been free from the criticism of conflict of interest.

Australians expect their government to act in their best interests. That won't happen while the big parties take millions from the oil and gas companies. As I keep reiterating, until we deal with the gas of the North West Shelf and get these multinational companies to pay their fair share of tax in Australia and get a gas supply from Western Australia to the east coast of Australia or build more pipelines to service the needs of Australians, we are going to lose more industries and more manufacturing because of the lack of gas. This has been ill thought out and ill prepared by governments who have not fought for the benefit of the Australian people. It's an absolute crying shame that they never supported my bill, the Offshore Petroleum and Greenhouse Gas Storage Amendment (Benefit to Australia) Bill, which was in the best interests of all Australians.

5:24 pm

Photo of Matthew CanavanMatthew Canavan (Queensland, Liberal National Party) Share this | | Hansard source

Firstly, I just want to briefly respond to Senator Hanson there. It is not correct to say that the former Liberal-National government did not impose a domestic gas reservation policy. One of the last acts I did as resources minister was to establish a change in the policy of the federal government so that any new gas field developed in Australia would have a domestic reserve requirement. I stand by that decision. And we very much hope that some of these new gas fields are developed, to help supply gas to Australians.

In terms of comments Senator Hanson made about offshore oil and gas fields, we really have only a few of those in Australia—some off the Western Australian coast and some off the Victorian coast, with a little bit up in the Northern Territory. The reality is that those in the west and the north are not connected to the eastern coast, and there is not a shortage of gas in our north and west, so an offshore reservation policy there would not have alleviated the situation we face here in eastern Australia.

That being said, in Western Australia there is already a 15 per cent domestic gas reserve requirement, which supplies them with gas—properly so. All of the gas from the Bass Strait, the other big resource we have, is supplied domestically. The Bass Strait reserve already does go to domestic supply. A domestic gas reservation requirement would not have changed that.

The problem we, as a nation, have and have faced for some years is that the Bass Strait, as a region, has been declining in terms of its gas reserves, especially of the low-cost gas which comes when you produce oil. That has increased prices and costs for the users of gas in eastern Australia.

We have been desperate to find new sources of gas. Of course, we have the coal-seam gas in Queensland, which helps, but it is a relatively high-cost form of gas production. And what we desperately need is to find more oil.

That is why the decision in the budget, only a few weeks ago, to slash funding for the development and exploration of new gas fields is so disappointing to the manufacturing industry in this country, and to anyone who wants to see power bills, energy bills, come down in Australia. Effectively, this government is crying crocodile tears for the manufacturing industry right now. They are purporting to have sympathy for the factory owners, for the small businesses, for just mums and dads who are struggling to pay their bills right now. But, on the other hand, they are doing nothing—not taking the actions they could take—to alleviate those circumstances. If the government were serious about bringing down gas prices and making sure we keep manufacturing jobs in this country, why would they have cut over $50 million from the development of the Cooper and Adavale basins to develop more gas for Australians?

The truth is: Australian governments have always been involved in the development of new oil and gas fields in this country. In the Bass Strait, it was the Menzies government at the time that provided a production credit, a drilling credit, to then BHP and Esso to develop that field. It served Australia well for 50 years.

Drilling for new oil and gas fields is extremely risky. In the early stages of the development, it is very hard to make the sums stack up—even more so, when you have a government calling in 18 coal and gas projects right now. The risks of paying lots of money—hundreds of millions of dollars—upfront to drill, when you don't even know if you're going to get approval at the end of it, make it very difficult.

There is a public good in developing our own resources, because let's be clear—and I agree with Senator Hanson: the gas companies don't own the resources; they are owned by the Australian people. So, because they're owned by us, we should seek to develop the knowledge and understanding of those resources so that we can attract further investment from companies to develop them. They are our resources.

It's like owning a block of land. When you own a block of land, you try and market it; you want someone to buy it. You might put some fences around it, you might do some stick-picking on it, to make some buyers interested in coming along and potentially developing it. It's the same principle here. It is our oil and gas. Those are our resources. We should be doing that early work, that exploratory drilling, to de-risk those projects, to bring up the knowledge of them, so that we can attract investment and bring down power bills and keep manufacturing jobs in this country.

The government's decision to slash funding from those activities is so short-sighted. And it is so hypocritical, because we had the Treasurer out there today saying that somehow he wants to find a solution for the manufacturers and the gas industry in this country, and yet, in his budget, only a month ago, he slashed the very funding of development of resources that could help alleviate those resource issues. If only our factories could be powered by the hypocrisy of this government, we would never have another problem. We'd solve climate change! There is an infinite supply of hypocrisy from those opposite, but we can't bottle wishful thinking and use it to help to protect jobs in this country. We actually have to get our hands dirty and drill and support those people who work hard for our nation to develop our country. That's why we supported the gas industry when we were in government. I just wish this one would do the same.

5:30 pm

Photo of Slade BrockmanSlade Brockman (WA, Liberal Party) Share this | | Hansard source

I too rise to speak on this matter of urgency, and I'm very happy to follow my colleagues Senators Scarr and Canavan on the matter of gas policy in the this country. I think it's very important, following on from Senator Canavan in particular, to pick up on his point that we have two very different gas markets in Australia. We have an eastern states gas market, which is currently facing extraordinary cost pressures. But we also have the Western Australian gas market that has been described recently in a major newspaper as 'providing Western Australia a low energy price paradise'. Western Australians are the largest gas consumers of any Australians.

Do these things happen as a result of accident? No, and as you would know very well, Mr Acting Deputy President Dean Smith, they happened as a result of government policy led by Sir Charles Court of the Liberal Party. In fact, rather than the current gas reservations policy, it was the 'take or pay agreement' that Sir Charles Court put in place with the North West Shelf Project that enabled Western Australia to develop the situation it currently has where it has internationally recognised low gas prices and sufficient supply to meet industry demands. I would like to see that industry demand increase—in fact, I would like to see more growth in Western Australia as a result of our very cost-effective gas prices.

Not only did that gas policy provide Western Australia with a very solid foundation of its own energy supply system, but it also meant that we could supply our major trading partners and allies with a very important export commodity. Japan, a nation recognised widely as a positive environmental advocate internationally, is the largest importer of LNG from Western Australia. Some 48 per cent of LNG from Western Australia actually goes to Japan, which is widely seen as having very strong environmental credentials. We don't only export to Japan; we also export to other very important trading partners: South Korea, Taiwan, Singapore, China, India. Western Australian LNG quite literally powers the world, and that is a very positive thing.

These projects don't come at no cost. These projects require significant investment upfront for returns that may come decades down the line. The Scarborough project in Western Australia has a cost of some $12 billion. Investors need to decide to invest that money a long, long time before any return from that investment is forthcoming. On the west coast we've seen those investments flow over a consistent period of time thanks to good government policy, starting with Sir Charles Court. On the east coast, sadly, we can't say that has been the case. As Senators Scarr and Canavan pointed out, an underinvestment, particularly in a state like Victoria—in fact, you can't even call it an underinvestment because it's been a regulatory block, governments refusing to allow business to unlock the resources that do exist—has resulted in this current situation where we have a massive spike in gas prices.

The greatest irony then is when we see this government flailing around. What solutions has it actually managed to come up with? Well, it's come up with no solutions. It's come up with a few thought bubbles that really puzzle me: price caps. As Senator Scarr said, when have price caps ever solved a supply problem?

Photo of Paul ScarrPaul Scarr (Queensland, Liberal Party) Share this | | Hansard source


Photo of Slade BrockmanSlade Brockman (WA, Liberal Party) Share this | | Hansard source

Never, and 2,000-plus years of history demonstrate that point. What other solutions have they come up with? A new mining tax, a new tax on gas companies. Do they really see that as being a solution to a price problem on the east coast? Thirdly, they've come up with a regulatory fix. I don't think anyone on this side in this place has any faith in this government coming up with a sensible regulatory fix.

Photo of Sue LinesSue Lines (President) Share this | | Hansard source

The question is that the motion moved by Senator McDonald be agreed to.