Hansard debates

Mrs McARTHUR (Western Victoria) (15:26): I rise today to speak on the Petroleum Legislation Amendment Bill 2020, which I support, but not without hesitation. My largest reservation is that it is simply far too late, that years have been wasted with investment in gas exploration turned away and with households and businesses suffering the consequences of lower supply and higher prices. My further concerns I will come to in the discussions of the amendments which Mr Rich-Phillips has put forward.

The first point I must make really should be an obvious one, but I think it is often not sufficiently appreciated. We hear a great deal of debate on both sides about nuclear power, about coal-fired power and its future and about the opportunity for and huge limitations of renewable generation through solar and wind technologies. Yet all of these relate only to a portion of our energy needs, those which can be met through electricity. The terms energy and electricity are used almost interchangeably and yet they are fundamentally distinct. Even the most enthusiastic advocate of renewables appreciates that, in the short term at least, exponential expansion of wind and solar generation capacity will only have a small impact on the overall energy balance in this country and indeed around the world. The reason is simple: two of society’s largest users of energy do not use electrical power. Energy for heating is predominantly sourced from fossil fuels, as is the energy necessary for almost every form of transport.

This is not just about domestic gas use in our homes; it is about the huge manufacturing concerns which underpin our economy and even smaller producers who cannot use electricity in their processes. In Western Victoria this is clear. In agriculture our dairy farms, dairy processing plants and feed mills are dependent on natural gas for energy provision and for the manufacturing processes. Producers like Fonterra in Cobden simply cannot switch to electricity to dry milk. AKD Softwoods in Colac needs gas to kiln-dry timber. This huge volume of energy simply could not be replaced by electricity. Even if renewables matched our total existing generation capacity one day, there would be nowhere near enough electrical power to replace petrol cars with electric cars or to swap domestic gas for electrical heaters. In peak periods we use three times more energy from gas than from electricity, and the demand is constantly growing. August last year saw the single highest level of use ever recorded in Victoria, and on average there are around 40 000 new connections to the network every year.

Yet in the face of this reality the Andrews government has maintained its ban on onshore conventional gas exploration, with consequences as damaging as they were unnecessary. It does not take an economic genius to notice that steady or rising demand and falling supply will lead to higher prices, and that is exactly what has happened. This is despite the fact that last year Australia overtook Qatar as the largest liquefied natural gas exporter in the world, increasing sales from 15.4 million tonnes to 75 million tonnes in the last decade. There has been a huge national increase in production, and yet prices for Victorian consumers, businesses and households alike are rising.

Worse still, there are now serious proposals to build gas import terminals in sensitive areas like the Mornington Peninsula. How has this happened? What has gone wrong? It is extraordinary that we live in the midst of a gas boom yet consumers and businesses in Victoria are paying more. How have we arrived at the situation where we are considering imports from other countries and pumping gas from other states, wasting huge sums in transmission networks which can make that gas six times as expensive as locally produced gas? Why do we have the highest power prices in the country and a gas price which has tripled since 2014?

The simple answer has been Victoria’s inexplicable ban on conventional onshore gas exploration. Industry could not build new supply close to where customer demand is greatest, hence the absurdity of high-cost pipeline imports or expensive and potentially environmentally undesirable import infrastructure.

Western Victoria Region has abundant resources of natural gas. We have got it; we should use it. We can increase supply and reduce prices, bringing lower energy costs for consumers and benefits for business, which will encourage investment and increase job creation. I am pleased therefore to support this bill, but I cannot let this moment pass without noting how long overdue it is and putting on the record again the fact that it is ordinary Victorians who have paid for this error, not the politicians or bureaucrats who have maintained the flawed policy.

I want to touch also on why this absurd situation lasted for so long. It was not for the lack of warning. On Victoria’s ban Rod Sims, chairman of the Australian Competition and Consumer Commission, said in 2018:

There’s a lot of gas that could be brought to market for less than $7—

a gigajoule—

and that would do the market so much good.

Malcolm Roberts, CEO of the Australian Petroleum Production & Exploration Association, said:

The best—indeed the only—way to put downward pressure on local prices is to expand supply …

The Australian Energy Market Operator said:

Without additional gas supply, there is a potential shortfall in meeting annual Victorian gas consumption from 2022.

These are just three of a plethora of quotes I could produce here to demonstrate the unanimity of industry experts and economists over the last few years. I want to add just one more, which I have used before in this place but which remains a favourite of mine. It is from the federal Labor Party resources spokesman, Joel Fitzgibbon, who said that conventional gas exploration, and I quote:

… should be accelerated. The clock is ticking—

he said—

and if we don’t get more gas out of the ground we are going to be facing higher energy prices and the shedding of manufacturing jobs …

I could not have put it better myself, but that was Joel Fitzgibbon from the Labor Party.

I worry that this policy was maintained because of misplaced ideology, the quite incorrect association of conventional gas exploration with hydraulic fracking and the nebulous belief that in some way freeing the use of this fossil fuel would hamper the development of renewable energy. The first point is clearly nonsense to anyone with an understanding of the technology involved or indeed any knowledge of the history of oil and gas extraction. The second is not only incorrect; it is actually the opposite of the reality. This government’s own report, commissioned from Ernst & Young to examine the Victorian renewable energy target, made clear that gas was essential in allowing a smooth transition to renewables from current coal generation. How is it possible that this government, despite their own commissioned study arguing that gas supply is needed to support increasing renewable energy, could have continued to keep the moratorium in place? From a wider environmental argument too they slowed the transition to gas energy generation in place of coal, which will approximately halve the emissions produced.

Even as it became increasingly clear the position was unsustainable, the necessary work was not done to move quickly to restore investment in gas exploration and production. There was warning here too. In 2015 the Victorian Auditor-General recognised that the regulations and documentation necessary for resuming exploration required updating. And yet apparently none of this preparatory work was done to green light development as the requisite back-covering scientific expert reports were received.

I have long argued against this moratorium on the grounds of its cost to households and businesses and the damaging effect it has on investment and job creation. It was no surprise to me when the Australian Petroleum Production and Exploration Association said the moratorium sent a strong message to the gas industry that it was not welcome in Victoria—and unsurprisingly, investment went elsewhere. Nor did I miss the fact that our state is likely to have lost out on federal funding. The $2 billion deal done with New South Wales by federal minister for energy, Angus Taylor, could well have been on offer here too, had the Andrews government shown any movement on the exploration ban.

As a councillor in Corangamite shire, I worked to convince colleagues of the benefits of onshore gas exploration for the economy of the south-west, and within the Liberal Party I helped co-author the policy that we took to the last state election, which would have seen this appalling moratorium reversed long before now, had we been elected to government. Our policy of course was better, and at this point I wish to address the amendments.

We committed to sharing royalties with landowners. This is the best way to stimulate development and to allow the appropriate benefits for landowners and the local economy. It is only right that farmers and others should receive the appropriate commercial payments for all mining and petroleum activities on their land. It protects them too in negotiation with oil and gas companies, who will be well versed at driving a hard bargain. The percentage chosen is sufficient to compensate or reward landowners and therefore to smooth the process, to win consent and to stimulate development as well as preventing all benefit from being removed entirely from the local community. In a similar vein, I believe it is consistent to allow them, as property owners, the ability to veto any development on their land.

I am content this is an appropriate approach. Cr Neil Trotter, mayor of Corangamite, is clearly in support. He understands the importance of gas to the south-west economy, particularly to agriculture, and its potential to bridge the gap in electrical generation as we move towards the greater use of renewables. Moreover, he understands the local economy and the interests of landowners and the reality that it is only these amendments which create a balance between rewarding landowners and accelerating development and allowing them the veto right consistent with their farming interests and fundamental property rights. The most important thing also for farms, with the inconsistent weather situation and also international markets, is to be able to have any form of off-farm income. That is an enormous benefit to agriculture at this time.

For these reasons, the amendments are both necessary and important to the timely development of existing Victorian gas resources and the fair treatment of the landowners in the areas involved. We have no time to waste here. The economic damage done already is great, and we cannot afford to prolong it. For this reason, while I support the bill, my final word is in support of the coalition amendment to allow the moratorium’s removal ahead of time. We have no time to waste, and you cannot possibly argue that it takes a year to get regulations in place. You have had years to get regulations in order with, as my colleague Mr Rich-Phillips said, a multimillion-dollar scientific study supposedly of the merits of it. During that time, the government should have sorted out what regulations would be necessary to make sure this could be acted on immediately after we passed the ability to lift the moratorium.

Lifting the moratorium is vital for this state, it is vital for my electorate, it is vital for business expansion and it is vital for the agricultural industry. It is just a no-brainer and it should have been done a long time ago, but at least if we pass our amendments we can get on with the job quickly and get people back in work. I would have thought that was one of the best things we could do in this state of COVID. Anything we can do to create jobs and create better economic activity in rural and regional Victoria is essential. I support the bill, but particularly the amendments.