Martin Ferguson (Batman, Australian Labor Party, Shadow Minister for Transport, Roads and Tourism) Share this | Hansard source

Like the member for Solomon, can I say on behalf of the opposition that the Australian Energy Market Amendment (Gas Legislation) Bill 2006 is welcome. It is long overdue, because it is about a national framework to regulate access to gas pipelines in Australia. The bill will implement an agreement reached between the Commonwealth and state and territory governments on the need for a national framework through the Ministerial Council on Energy, so at least one ministerial meeting is actually producing a few outcomes and is trying to work with state, territory and Commonwealth governments towards a common framework.

On that note, state and territory governments are reminded that they will need to pass complementary laws to fully give effect to this national framework. But, whilst this bill goes a long way to improving the regulatory framework for the Australian gas market, there is still much work that needs to be done to allow it to reach its full potential—and that is the challenge to the ministerial council. There is a challenge not to one level of government but to all state and territory governments and the Commonwealth to do more to enable us as a nation to realise our full potential on this front.

While the Prime Minister is out there applauding the merits of nuclear power, the real question is: what has he done for the gas industry and, more importantly, what intentions does he have with respect to the gas industry that we need to articulate in the lead-up to the next election? Or is he going to allow this opportunity to pass us by like a ship in the night, just as so many economic opportunities in Australia are passing by because we have a tired old government over there which has seen better days?

This is important because the east coast of Australia, as a matter of urgency, needs to make baseload and peak load energy decisions within the next two years; otherwise the lights will be going out. The truth is that no-one is prepared to invest, because of the government’s failure to introduce national emissions trading, a requirement that would give investors certainty about carbon pricing in the future. This uncertainty has become, now more than ever, a barrier to investment because the private sector wants to understand and have certainty about the investment regime that will apply not only now but also in five, 10, 20 and 30 years. This issue has to be worked out in a balanced way.

The greenhouse debate is complex and we have to make changes, but we have to make sure we have balanced outcomes; otherwise we will drive jobs offshore. That requires all of us to have a sense of responsibility. Yes, there is a certain amount of political rhetoric at the moment about the climate change debate, but Australia has to be very careful. If this goes wrong, we will undermine economic prosperity based on continued economic growth in Australia and job and training opportunities for our nation. If you undermine them then you are also diminishing your capacity to build the necessary infrastructure, adequately resource our schools and childcare centres and also provide proper health care and the opportunity for people to retire with a fair standard of living in Australia. These are complex issues.

We also have to front up to the fact that it also means you need leadership not only in working out emissions trading—a complex issue—but also in being prepared to back that system by making some hard decisions on baseload energy requirements in Australia. That is about coal-fired power stations in association with the gas industry. The truth is that, because of inaction in recent years, we as a community—Australians—are paying more for our electricity today because of the ad hoc measures currently in place and arbitrary hedging by market participants to offset unknown greenhouse risks in the future. We are already paying for it because of a lack of action by government at all levels in Australia.

There is a simple requirement, but the fact is that the Prime Minister has refused to adopt national emissions trading. I believe that is now costing Australians money on their power and gas industry bills, as is his failure to push ahead with the many other reforms necessary to deliver a truly national energy market, including both electricity and gas.

The Prime Minister thinks he can get off the political hook with international debates about global emissions trading and nuclear power. He needs to get on with the job of implementing a national emissions trading system and then let the national electricity energy market decide on the lowest cost abatement technologies. What is wrong with letting the market prevail? There is no doubt in my mind that nuclear power just does not stack up, but gas and renewables like hydro, biomass and geothermal will.

No industry understands more than the gas industry the importance of technology neutrality in the national energy market because, in many ways, it is the sector most disadvantaged by the plethora of current greenhouse measures at a state and territory level. The opposition will take to the next election, as it took to the last, a national emissions trading policy—one that will be technology neutral and finally deliver a level playing field to the benefit of the gas industry.

Meanwhile the Howard government will still be about picking technology winners and debating a futuristic international emissions trading scheme that will do nothing to solve investment uncertainty here at home and will not facilitate us making those baseload and peak load energy decisions that we need to make as a community now. That effectively means that we could end up not making or delivering the $35 billion worth of investment decisions needed to meet the sharp rise in energy demand over the next 10 years in Australia.

When it comes to energy security, Australia has only two issues—underinvestment in electricity infrastructure and overreliance on foreign oil and transport fuels. Government leadership at a national level, requiring states and territories to actually work in partnership with the private sector on these issues, could confront these challenges and effectively mean that we position ourselves as a nation to do the right thing on this tough front. Gas comes into play in both of those issues, and they are the same two issues I faced when I was in the resources portfolio from 2004 to 2006, when I read the speeches of my predecessor in the portfolio, the member for Hunter, because they are the same issues he raised in the previous parliament.

The truth is that energy market reform has moved at a snail’s pace under the Howard government. It is not as if they did not have a couple of good reports. The Parer report was an exceptionally good report. It actually laid out a road map for action, but it has gathered dust on a series of ministerial tables and no action has been taken to implement practical, forward-looking recommendations.

It also means that you have to have a hard look at the COAG processes. Let us look at where COAG has got to so far this year. While the commitment to progressive national rollout 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 the recent new Energy Reform Implementation Group report. On past action, you would not want to hold your breath. Action actually speaks louder than promises in COAG statements worked out by bureaucrats behind the scenes. It actually requires ministers of all political persuasions to do something than to go to COAG and ministerial meetings, sign a communique and then walk away, saying: ‘That’s done for another six months. The issue will disappear.’

It really goes to the issue of a promised recommitment to earlier COAG reform proposals and the recent new Energy Reform Implementation Group, under the chairmanship of Bill Scales, a person greatly respected in government and private sector circles. There is nothing wrong with the ERIG report, but the problem is that it is not a replacement for decision making or for the national leadership needed to address the inertia of the Ministerial Council on Energy—and that is all ministers of all political persuasions—and the National Electricity Market Forum. I believe they have done virtually nothing collectively over the last five years. The fact is that we are no further advanced on energy market reform than we were when COAG announced the Parer review in June 2001, along with the establishment of the MCE and the NEM.

The Parer review was released in December 2002, and only a handful of its recommendations have ever been implemented. It was August 2004 when the Productivity Commission review of the gas access regime was released. COAG promised a response by the end of 2006—a full 2½ years later. All I can say is that you would not want to see them if they were actually trying to work quickly. They try to say to us that they are men of action. Well, we are still waiting for a response, despite those commitments and 2½ years to actually do the job.

With ERIG, we have yet another review when what is really needed is action and national collective leadership. I suppose I should take some comfort from the fact that, by and large, the energy policies that the federal Labor Party took to the last election—and would have implemented by now—have stood the test of time. We can rewrap them and rebadge them for the next election, because this government has done nothing. Effectively, the ideas and proposals are there for implementation, but it requires leadership to put in place some of those recommendations.

I note that the ERIG review concludes, as did the Parer review in 2002 and another committee called the Gas Market Leaders Group, that one of the key tasks towards better market penetration for gas is an active upstream reform agenda. Four years ago the Parer report said:

In the first instance, the previously identified upstream reform agenda needs to be re-activated to ensure access to upstream facilities is available on competitive terms. This would involve ensuring the joint marketing of gas is constrained especially for gas coming from mature gas fields; and that exploration and production acreage management is further tightened to ensure prospective territory is available for exploration and development by new players if incumbents are less interested in bringing forward new supplies.

It is actually about freeing up the market. Four years later, the ERIG report says:

Competition in upstream gas markets, particularly intra-basin competition, could be enhanced with improvements to acreage management practices.

It continues:

Joint marketing often involves common terms and conditions such as pricing which may lock up the potential to implement short term balancing arrangements, and hence extract optionality, for efficient re-trading of imbalances.

But ERIG still makes no recommendations to address these issues other than—guess what?—further assessment. This is despite the fact that the reality is emerging in Western Australia, as we have seen recently, that it is easier to get cheap gas to Shanghai than to Perth and the south-west for domestic purposes in Australia. We do not need more assessments and reviews of these issues. We need action, and that is what Labor will do in government. Nevertheless, I am pleased to say that in June this year the government’s Energy Legislation Amendment Act did in fact implement part of the policy that the federal Labor Party took to the 2004 election—and I quote:

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.

No initiatives have been taken to tackle the various barriers to enhancing upstream competition and nothing has been done to address regulatory risk, whether real or perceived. Labor will retain a strong gas code but, consistent with the Parer review, will pursue two significant changes to provide greater certainty for new investors. We will provide for binding and upfront coverage rulings and binding upfront agreements locking in key regulatory parameters for extended and agreed periods of time.

It is strange that the opposition is actually praising a former member of the coalition to prod the government to do something, because he did a good job on this report. It is a report that we all have ownership of and responsibility for in order to implement its recommendations.

This legislation was a long time in coming, and we do not believe it goes far enough in implementing the energy market reform measures that are still outstanding. Still, they are welcome and much needed. Australia is a gas rich nation with over 140 trillion cubic feet of known reserves, and we have been finding gas faster than we have produced it for the last 20 years. But most of it, unfortunately, is remote from markets. Ninety-five per cent of Australia’s natural gas resources are in the remote north-west, but 90 per cent of Australia’s population live on the eastern seaboard and most of the country’s energy-intensive job-creating industries are in the south-west and the east. So there is a problem of getting it to where it is needed in Australia. That is the stark consideration of the challenge. That is why we also need to be thinking about strategic national energy infrastructure today and promoting investment in natural gas transmission and distribution markets. Four years ago, the Parer report said:

Where governments observe a public benefit in facilitating gas developments, competitive processes which do not distort the natural gas market should be used to achieve least-cost outcomes.

The Labor Party agrees. 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. We have to get more of it into the energy mix along with renewables and clean coal—an absolute priority for Australia is the issue of clean coal. But it is not about picking winners. This means, 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 to process energy, transport fuels and chemicals. The opening up of new markets for natural gas is critical to underpin the development of remote gas production, processing and pipeline infrastructure for future gas supply security. Without investment in that infrastructure today, Australia’s gas resources could be too expensive to get to market in the future and could be locked away forever or destined only for export markets as liquefied natural gas. In particular, much more needs to be done to get gas into the transport sector, our other energy security problem.

Gas in the form of LNG, compressed natural gas and gas converted into clean diesel is part of Australia’s transport future and essential to reduce our reliance on foreign oil and the difficulties of the Middle East. I believe the Howard government has dropped the ball on CNG refuelling infrastructure at a time when the community has never been so concerned about high petrol prices—or, even worse, shortages—which can occur because we are hostages to foreign oil. Natural gas has an enormous role to play as LNG and CNG and when it is converted to clean diesel using gas-to-liquids technology. It has been done overseas in Qatar; it can be done in Australia with leadership and the involvement of the private sector.

Australians want to secure their energy supplies for the future at affordable prices, and they are rightfully expecting their governments and the companies with stewardship of their resources to have a plan to achieve this. But there is no plan, and Australians are far from relaxed and comfortable about this huge economic challenge to Australia. It is now almost five years since the government held another review, undertaken by the Gas to Liquids Taskforce, that highlighted the potential significance of a gas-to-liquids industry to Australia’s economy. It said the government could underwrite offshore gas supply infrastructure and, in doing so, bring forward the possibility of major new domestic gas pipelines to connect the national market, increase domestic gas competition and energise gas exploration. What a win for Australia.

The potential benefits of course go beyond unlocking new resource wealth and creating new industry, more jobs and more exports. They include the opportunity for Australia to address the most pressing of problems: our future transport fuel security. Every nation around the world is worrying about this issue, but not Australia. If you go to Europe and talk about the problems of Russia and cutting off supplies of gas, you will see that people are in a state of panic about their energy security for the future—but not Australia. We are told that we are relaxed and comfortable about where we are going on this issue. Despite that recommendation on gas to liquids, five years later there has been no action. We have a tired, worn-out government which just wants to ignore its responsibilities and concentrate on winning elections without decent policy proposals for confronting our future and guaranteeing a prosperous Australia in the 21st century.

The Howard government has failed Australia by letting the opportunity pass to create the right fiscal and regulatory environment. Government action is needed to make gas to liquids a new industry option and a new fuel supply source for Australia. The private sector will follow, if you actually create the investment framework to encourage the investment. If the government were serious about the gas industry and gas market reform, it 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. This is a simple proposition for the government to consider in the ensuing months.

The government could have faced up to some responsibility for resource related infrastructure instead of just passing the buck to the states. They could have done a little bit on the ground to assist the private sector in opening up some of these far-flung regions of Australia. Above all, they could have sent a clear signal to Australia that they are interested in their future fuel security issues and that industry is part of the solution. This long list of failures has to be pointed out to the government because we are not just about energy market reform; we are about making tough decisions to guarantee our future on the energy front.

The issues I have discussed today are some of the failures, and industry, as well as the Australian community, deserves better leadership from the Australian government on these issues. Under the Howard government, microeconomic reform on the energy and gas front has actually gone backwards. Hawke and Keating set the agenda, and the government have run away from it. (Time expired)

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