Martin Ferguson (Batman, Australian Labor Party, Shadow Minister for Primary Industries, Resources, Forestry and Tourism) Share this | Hansard source

I rise to address the House on the Energy Legislation Amendment Bill 2006. In doing so I move:

That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House condemns the Government for:

(1)

its failure to implement energy market reform in a timely manner, including its lack of action in implementing the recommendations of the Parer Report of 2002 and the  Productivity Commission report of 2004; and

(2)

its lack of commitment to microeconomic reform and to strengthening Part IIIAA of the Trade Practices Act 1974”.

The opposition, as will be made clear by my remarks, welcomes this bill, but I simply say it is only part of the job that needs to be done with respect to energy reform in Australia. The bill, after all, does implement the policy that the opposition took to the last election, developed by my colleague the former shadow minister for resources and energy, the member for Hunter. It states:

In natural gas, industry remains engaged in battle with the ACCC over a range of regulatory issues. Australia still lacks all the necessary ingredients for the development of a mature and fully competitive gas market and, yet again, Parer’s recommendations have been ignored.

The opposition policy statement went on to say:

No initiatives have been taken to tackle the various barriers to enhancing upstream competition and nothing has been done to address regulatory risk, whether it be real or perceived.

…            …            …

Labor will retain a strong Gas Code, but, consistent with the COAG Review, will pursue two significant changes to provide greater certainty for new investors. We will provide for: Binding and up-front coverage rulings; and up-front agreements locking in key regulatory parameters for extended, but agreed periods of time.

That is what this bill is about. Unfortunately, it has been a long time coming. Let us be very clear about this: it still does not go far enough in implementing the many energy market reform measures that are still outstanding. I think it is about time that the Prime Minister actually fronted up to the issues that need to be attended to today. The issue of nuclear power is a futuristic debate. There are regulatory decisions and base load energy decisions to be made in Australia in the foreseeable future, not at some distant point in time. That is what this debate is about—it is about our requirement as a nation to put a system in place which provides for a national grid and for sufficient energy capacity to meet Australia’s demands in the foreseeable future.

Whilst these charges are welcome, as a community we have to get our heads around the real, tough energy decisions that have to be made, especially on the east coast of Australia. That means making immediate decisions going to base load capacity. It is also about ensuring that we have an environment in place which fosters and encourages ongoing exploration for oil and gas in Australia. I simply do not think the government is doing enough on that front. That was rammed home last night at the minerals industry council dinner, where the Chair of the Minerals Council of Australia correctly reminded the government that, despite a number of endeavours, it has failed to put in place a flow-through share scheme. That scheme is important because it is about encouraging necessary investment, especially for small and middle sized explorers in Australia. It is about doing something for those hardworking medium and small sized exploration companies that do not just represent the top end of town.

I think we have to take this criticism on board because we have still failed to front up to some of the real, tough issues going to taxation reform in Australia. The opposition have already said in the last 12 months that that is an issue we will seriously consider in the lead-up to the next election because it has been identified as a priority by the energy market companies.

This aside, the bill will amend part IIIA of the Trade Practices Act to provide new incentives for investment in gas pipelines or, more accurately, to remove the existing barriers to investment—and that is important. There are two mechanisms provided for in the bill. The first is an ability to obtain an up-front ruling on whether fuel price regulation in the gas access regime should apply to a new pipeline. If a pipeline does not meet the coverage criteria, it will be granted a full exemption for 15 years, which is called a ‘binding no coverage ruling’. The second mechanism is a price regulation exemption, also for 15 years, for new pipelines bringing foreign natural gas to Australian markets, subject to certain obligations.

Both mechanisms involve a prior competition and public interest assessment by the National Competition Council before a final ministerial decision can be made. We believe that is a sound accountability mechanism. It is about having proper regard for due process before the minister is required to tick an appropriate recommendation. The mechanisms are not just welcome to encourage investment in gas supply and gas transmission infrastructure but necessary to guarantee Australia’s future. They are very much needed for the purpose of locking in Australia’s future economically.

We all appreciate that Australia is a gas rich nation. There are over 140 trillion cubic feet of known reserves. For the last 20 years we have been finding gas faster than we have been producing it; but, unfortunately, most of it is remote from markets, and that represents an additional challenge to the Australian community. Of Australia’s natural gas resources, 95 per cent is in the remote north-west, but 90 per cent of Australia’s population lives on the eastern seaboard and most of the country’s energy-intensive, job-creating industries are in the south-west and the east. I do not think we can put it more starkly: it is not just a question of finding gas but also how we access it as a nation for the purpose of running industry in Australia and for domestic requirements in our households. That is why we need to be thinking about strategic national energy market infrastructure, not tomorrow, but today and, in doing so, promoting investment in things like natural gas transmission.

Natural gas is the best transition fuel for a lower carbon economy, with proven reserves more than capable of meeting the nation’s energy growth needs over the next few decades. This raises a number of important issues: firstly, enhancing the competitiveness of gas in the domestic market; secondly, achieving greater interconnection of major supply and demand hubs; and, thirdly, expanding domestic gas markets in electricity generation, process energy, gas to liquids and chemicals—some of which the government just does not want to debate. This is despite reports recommending that we rigorously pursue and consider some of these recommendations, such as gas to liquids.

It is a debate now, not a debate for the future. But when do we hear the Prime Minister or the Minister for Industry, Tourism and Resources fronting up to these debates? They would sooner have a debate about nuclear power, which is a futuristic debate, rather than a debate about the base load energy requirements of Australia at this point in time.

In opening up new markets for natural gas, it is critical to underpin the development of remote gas production, processing and pipeline infrastructure for natural gas supply security. This is an important issue of security for Australia. It is about security of supply; it is about security of access. Just consider the dangers in the Middle East. Surely that says to the Australian community that we have to be a bit cautious. We have to invest to make sure that, if something goes wrong beyond Australia’s shores in accessing oil, for example, we have alternatives in place. That is why this debate is so important to Australia.

I therefore suggest to the House that, without investment in that infrastructure today, Australia’s gas resources could be too expensive to get to market in the future and, unfortunately, be locked away forever or be destined only for export markets as LNG. That is not to deny that those export markets are not important to Australia; they are exceptionally important to Australia for our economic development. But let us also start thinking about home and what we need as a community, not just the export dollars that can be gained from selling LNG to China. If the Prime Minister thinks it is commercial sense to get gas to Shanghai, it is about time he started to think about getting gas to Darwin, Sydney or Melbourne. That is about looking after the Australian community. I would have thought that a Prime Minister would be thinking about the immediate future of Australia’s access to energy. Yes, it is good to sell LNG to Shanghai but it is also important to have a serious debate about how we get gas to Darwin and Sydney and suiting our own domestic needs.

I say that because I do not think we can assume that gas exports will necessarily create additional domestic industries or energy infrastructure. It is not doing that at the moment. We are just processing it and exporting it. Yes, we are earning good export dollars, but let us also think about creating additional downstream industries, employment and training opportunities and energy infrastructure opportunities for Australia as a nation. Do not just export base products; do more in Australia.

I therefore say to the House that the government has to do more to develop value-adding gas chemicals and gas to liquids industries and to expand domestic gas infrastructure to complement the LNG industries. This is the debate the Prime Minister does not want to have. Next month he is going to China. He is very proud of our achievements in the export of LNG to China. But, if the Prime Minister wants a debate about energy, we want to hear at home what the Prime Minister thinks we should do to develop value-adding opportunities in Australia. That is about jobs and training in Australia; that is about sufficiency and security of supply. Why shouldn’t we be seriously thinking about a gas to liquids industry in Australia, expanding our own gas infrastructure and securing our own future?

So I simply say to the House today: let us have the debate about energy and about security of supply. They are the debates that determine our future economically. We as a nation, like every other nation, depend on energy to maintain a high standard of living, to attract investment and, in doing so, to secure our future for employment and training opportunities and our capacity to look after people in retirement, to educate the young and to ensure that we have decent health care systems in place—just to name a few requirements and expectations of government.

We should also think about why other countries can do it but not Australia. What I am talking about in terms of gas to liquids and value-adding gas chemicals has been done beyond Australian shores. We have always been a nation that has prided ourselves on our intellectual and scientific capacity to be ahead of the game, but now we are sitting back and leaving it to other nations to pursue these value-adding opportunities and basically undermining our own security for the future.

We have to understand that it is a tough global market. We must have security of supply of energy, and we have to be competitive. Although I do not accept that we cannot do it, Australia’s competitors in the global gas market, including Qatar, are way ahead of us already. Rather than sitting back, we must grasp the opportunity. Our resources are there, and they are abundant. Let us do something seriously about taking that next step. We should pursue some downstream opportunities and lock in security of supply, given the uncertainty in the international market on a range of issues such as the problems of the Middle East and of oil.

These are serious issues, and Australia as a nation has to get serious about exploring these opportunities. How do we address this challenge? I think it is fair to say that this bill goes part of the way. Without a doubt—as reflected in the opposition’s policy at the last election—it goes some of the way towards removing the impediments to increased investment in interconnection and barriers to gas on gas competition. The private sector now owns the majority of Australia’s gas transmission pipelines and substantial private sector investment will be required over the next decade and beyond. It is therefore in our national interest to encourage, not deter, this investment. That is why the provisions of this bill are welcome and are supported by the opposition.

Whilst pipeline infrastructure developed since the late 1990s—Eastern Gas and SEA Gas pipelines—has ensured continuity of supply following the Moomba incident, it is clear that more could and should be done to facilitate linkage of uncommitted gas pipelines to markets, to improve security and reliability of supply as well as to encourage gas on gas competition. That goes to the question of a price signal. The absence of a carbon price signal is also undermining the competitiveness of gas, thereby holding back demand and investment and forcing regulatory intervention. Consequently, in this looming crisis, the opposition accepts the need to provide greater certainty for investors as gas plays catch-up in the market. And that is what we are talking about at the moment—we have abundant gas but, as a nation, we are playing catch-up. Regulatory burdens are growing, not shrinking, and competition regulators are under increasing pressure to provide long-term income guarantees for infrastructure investors. The existing cooperative gas access regime has created barriers to efficient investment in new pipeline infrastructure, and this bill will hopefully encourage more efficient investment and provide investors with regulatory certainty.

The bill also recognises appropriately the additional complexity of international gas infrastructure projects such as the Papua New Guinea gas pipeline and provides investors with regulatory certainty. Both mechanisms will have a positive impact on securing investment in gas pipeline infrastructure for Australia’s long-term energy security needs. But, unfortunately, energy market reform is happening too slowly.

Let us take by way of example just where COAG has got to this year. Whilst the commitment to progressive national roll-out of smart meters from 2007 is to be commended, it is heavily qualified and only time will tell whether the initiative is truly national. Beyond that, we are promised a recommitment to earlier COAG reform proposals and a new high-level, expert energy reform implementation group. I must say we have heard it all before. It is not the first time we have heard talk of this type of activity, but nothing seems to come to fruition.

I note that this new committee is due to report back to COAG before the end of 2006 on a range of energy market issues, including options for a national grid, structural weaknesses in the electricity market and financial market measures to support energy markets. These are pretty fundamental issues, but again I say to the House: when do we hear the Prime Minister talk about these issues? Decisions on this front underpin economic activity in Australia. It goes to whether or not we can continue to remain competitive and attract investment to Australia. We have to compete on the basis of being very competitive on the price of energy in Australia and security of access and supply, so I think there is some urgency for the Minister for Industry, Tourism and Resources to pursue this energy reform. All too often it has been put back.

There has been the Parer report, meetings of ministers and COAG discussions. It just seems to stumble from one meeting to another meeting without an end gain. It should be pointed out to the House that what the communique does not say is that this new committee is the Prime Minister’s latest attempt to address his inertia and that of his energy minister, the Ministerial Council on Energy and the National Electricity Market Ministers Forum on real energy policy issues. I also accept there is some criticism to be levelled at state ministers. Some of them do not want to make progress on this, because it is all too hard. So it is the combined responsibility of state and federal ministers to get on with the job. The truth is that very little has been done over the last five years. The fact is that we are no further advanced on national energy market reform than we were when the Parer review was announced. Guess when that was? It was June 2001, along with the establishment of the Ministerial Council on Energy and the national energy market. So reports were done but no action has been taken.

The Parer review was released in December 2002. Interestingly, an audit shows that only a handful of its recommendations were ever implemented. It was August 2004 when the Productivity Commission review of the gas access regime was released. COAG now promises us a response by the end of 2006—a full 2½ years later. After Parer in 2002, it took until July 2004, with legislation introduced in mid-June 2004—at the eleventh hour—to set up the Australian Energy Regulator and the Australian Energy Market Commission. It then took another year to agree on who would head it, where it would be located and how it would interface with the ACCC. Operations did not actually commence until July 2005. I would hate to see it if they were in a hurry. Just think about the lack of activity and commitment from government to progress the implementation of the recommendations and outcomes of the Parer review. The government’s answer to the problem is to go back to June 2002 and to make the same mistakes again—a new national body, a review of the same issues and still no action or leadership. I suppose someone will do well out of it in a consultancy, but we as a community go backwards while government sits idle on fundamental energy reform.

I believe what is really needed is action and national leadership—people being pushed and prodded to actually do something. Well over a year ago, I stated—and I have said it many times since:

Internationally competitive supplies of energy are critical to Australia’s global competitiveness in a range of manufacturing and value adding industries, and while the success of the reforms of the 1990s cannot be denied, nor can the fact that much more needs to be done.

That is the challenge out of this debate. There has been some progress, but much more needs to be done. COAG, to be fair, recognised this by commissioning the Parer report, but we all appreciate that little action has been taken by government since that report.

The Parer report correctly and appropriately identified all the deficiencies in our energy markets, but barely any of its recommendations have been implemented. That is where our problem is; that is where the logjam is. It actually goes to a failure to implement the recommendations of a report that was very seriously considered not just by the private sector involved in the energy market but by the Australian community at large and, most importantly, by industry at large. They want action. It is no good just having reports if you do not proceed to implement the recommendations of those reports. This speaks for itself.

The facts show that our electricity and gas sectors remain burdened by excessive regulation, overlaps in regulatory roles, slow and cumbersome code change processes, anti-competitive marketing practices, poor market design and poor, if any, planning mechanisms. Just think of the complexity of those issues. One would have thought there was some urgency at government level to make serious progress in trying to find solutions to some of those problems. The opposition reminds the government today that it is time for the government to get moving, once and for all, on both the Parer recommendations and the Productivity Commission recommendations. I recall that my colleague and former shadow minister for resources, the member for Hunter, also said this many times during the last parliament when he had responsibility for energy, so this is not new. We have been continually standing in support of the need to do something about the recommendations embodied in the Parer report which was welcomed as a report of substance by the Australian community.

One of the biggest issues for the natural gas industry is the expansion of its markets. This is a big issue for Australia because natural gas is part of the answer to its concerns about petrol prices and supply security. You need only go out to the shopping centres today to understand the importance of this issue. People are worried about the Middle East and security of supply and they are worried about the price of oil and its impact on their household budgets. I contend that the government is out of touch with the triple whammy facing Australians around the kitchen table these days—higher interest rates and mortgage payments, industrial relations changes undermining their wages and capacity to look after their families and, we all appreciate, record high petrol prices. Action is required to see what we can do as a nation domestically with respect to this challenge.

This government, I think it is fair to say, treats tax cuts as go-away payments for motorists worried about petrol prices. It hopes with a few tax cuts that the concerns of the community about petrol prices will disappear. Everyone in the House knows that the concerns of the community about petrol prices are simply not disappearing. There is nothing in this budget to bolster Australia’s fuel supply security or to look to the long term. This is a short-term budget. I am talking about the big issues that secure our future. Where do you see any discussion of those issues either in question time or in the budget documentation and appropriation bills currently being debated in the Main Committee? There is nothing being done by the government.

The fact is that, without developing alternative fuel industries in  Australia, we will—let us be honest and clear; let us be stark about this—increasingly be hostage to supplies from the Middle East, West Africa and Russia. That is a worry to all of us. We cannot remain hostage to the Middle East, West Africa and Russia. We have to do something ourselves. Just think about the problems in Europe this year with access to Russian gas. It was actually turned off. We are sitting back thinking that we are relaxed and comfortable. I am not relaxed and comfortable about the energy debate because I do not think the government is doing enough.

I do not need to spell out the implications of that for energy security for Australia and for our economic future as a nation. Australians want to know that their government and the companies with stewardship of their resources have a plan to secure their energy supplies for the future and they want the prices to be affordable. But there is no plan and they are far from relaxed and comfortable about that.

The Howard government has failed Australians by letting the opportunity pass to create the right fiscal and regulatory environment to make gas to liquids a new industry option and a new fuel supply source for Australia. The answers are there for the Prime Minister and the Treasurer in the opposition leader’s fuels blueprint, just as they were on gas pipeline investment in Labor’s 2004 election policy. That blueprint is about a real debate on energy in Australia. It is about real, tough policy decisions and people have to start debating these decisions going to energy in Australia. If the government were serious about the gas industry and gas market reform, they would have seriously reviewed the PRRT regime, and considered special treatment of capital investment in gas to liquids fuel projects and associated gas production infrastructure. A bill about these issues will be before the House and debated in the foreseeable future. These issues are not attended to by government in that proposal.

The Commonwealth could also have faced up to some responsibility for resource related infrastructure instead of passing the buck to the states. Above all, they could have sent a clear signal to Australians that they are interested in their future fuel supply security and to the industry that this should be part of Australia’s national gas strategy. Australia’s competitors in the gas industry are way ahead of us, particularly in the Middle East where countries such as Qatar, already a formidable competitor for the Australian LNG industry, are now developing what we should be doing—gas to liquids projects to make clean transport fuels for the global market.

It is now almost five years since the government’s own gas to liquids task force highlighted the potential significance of such an industry to Australia’s economy, interestingly saying it could underwrite offshore gas supply infrastructure to bring forward the possibility of major new domestic gas pipelines to connect the national market, increase domestic gas competition and energise gas exploration. The potential benefits go beyond unlocking new resource wealth and creating new industry, more jobs and more exports; they appropriately include the opportunity for Australia to address this most pressing of problems—our transport fuel security. But, five years later, no action has been taken by the government.

There is a long list of issues that have to be attended to in the energy debate: regulation reform, the development of new opportunities and gas to liquids. I think we have to have this debate now. It has to be on the agenda and no-one can run away from it, because we have to make these decisions to guarantee security of supply and also to guarantee that we have energy at a competitive price to maintain our competitive opportunities internationally. It is for that very reason that I have moved my second reading amendment, which states:

“whilst not declining to give the bill a second reading, the House condemns the Government for:

(1)

its failure to implement energy market reform in a timely manner, including its lack of action in implementing the recommendations of the Parer Report of 2002 and the  Productivity Commission report of 2004; and

(2)

its lack of commitment to microeconomic reform and to strengthening Part IIIAA of the Trade Practices Act 1974”.

I think the second part of that second reading amendment says it all. When do you ever hear this government talking about micro-economic reform and productivity? They were the issues of the 1980s and the early 1990s; they are no longer on the agenda. As a nation, we are simply content to ride on the back of the resources boom, digging resources up and selling them overseas without taking the opportunity to secure a product innovation on research and development which guarantees Australia’s future for many decades to come. There is not always an uncertain question mark about when the resources bubble will burst. That is what we are all worried about. Yes, there is a resources boom and we are all benefiting as a nation, as reflected in the tax cuts, but where are the hard decisions about locking in productivity reform on ongoing innovation in this nation, which guarantees further training and job opportunities and a larger economic cake? I commend the second reading amendment to the House.

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