Stewart McArthur (Corangamite, Liberal Party) Share this | Hansard source

In opening my remarks I commend the thoughtful speech of the member for Batman and his assessment of this very complex subject. I would contest the view that the government has not moved quickly enough, because of the difficulties of cooperation with the states and drafting this legislation. I am pleased to contribute to the support of the Australian Energy Market Amendment (Gas Legislation) Bill 2006. I congratulate the Minister for Industry, Tourism and Resources, the Hon. Ian Macfarlane, for bringing this historic legislation to the parliament.

This bill is historic because it allows for the introduction of a truly national system of regulating gas pipeline infrastructure, and this system will be the national gas law, or NGL. The national gas law will help to underpin an efficient national energy market and will make a substantial contribution to the management and attraction of investment in the gas pipeline infrastructure.

Before I comment on the detail of the bill and the national gas laws this bill will help to bring about, can I note the key concepts of interest. Firstly, these reforms will reduce the burden of regulation, red tape and paperwork for gas infrastructure providers by providing a set of consistent national laws pertaining to the gas pipelines. The terms and conditions and standards that gas pipelines operate under will be compatible across state borders. That is exactly what the member for Batman was talking about: gas from the north of Western Australia to the eastern seaboard. This will be a major breakthrough for the industry and for consumers. All gas users will benefit from these arrangements, whether they are small business users, mums and dads paying for gas hot water and ovens in their homes, or big industries.

Currently gas service providers are required to hire large armies of in-house legal professionals to wade through the mounds of different, inconsistent, contradictory legislation, regulation and red tape operating in different states under nine different regulators. Under the current regime, companies hire government relations lobbyists to negotiate with state and federal regulators and consumer representatives. The introduction of a consistent national system will substantially reduce this burden on business.

Having one national regulator—the Australian Energy Regulator—instead of nine regulators that currently make decisions to determinations will also result in an improved consistency of regulatory decision making and provide increased certainty for service providers. Contributing to the reduction in red tape, the reforms will introduce a new form of light-handed regulation which regulators may apply. I particularly note the light-handed regulation approach of the government. The other point I would like to make is that the reforms will encourage investment in gas infrastructure by delivering greater certainty to service providers. As a result of the increased certainty, firms should be more prepared to invest in new gas infrastructure to provide for Australia’s future energy needs.

To put this bill in its proper context, it represents the long way Australian governments and the energy industry have evolved over the last 20 years. The gas industry has changed from being a set of autonomous, inefficient state run instrumentalities, with prices subject to being influenced by the political process. In Victoria we had the old state run Gas and Fuel Corporation. There was little investment in new infrastructure, innovation or service delivery for gas. Unions were able to exert undue influence on the management of the corporatised organisation at a significant cost to investment and the consumer. Under such a model there is insufficient incentive to invest in new generation capacity and the upgrading of infrastructure. Vote-seeking state governments often feel obliged to cap or restrict energy prices offered to consumers as essential services. They tinker with the price, eroding funds that might otherwise be available to fund investments in infrastructure and new generation capacity. As a result, infrastructure was run down and the system failed to plan for future energy needs.

What a different position we have today following the advent of the national competition policy, the privatisation of the gas industry in Victoria and the implementation of full retail competition. The combined evolution of the gas industry has been remarkable. No longer will the public expect governments to build, own and manage gas generators and deliver gas to industry, shops and homes. It is recognised that this is a big business that is better provided by the competitive private sector. Competition is encouraged to offer the best prices and innovations in product that respond to consumer needs. Importantly, we have a situation where companies feel confident to invest in laying gas pipelines and establishing new sources of gas generation.

In south-west Victoria, located just outside the boundaries of the Corangamite electorate near Port Campbell, we have seen some of this investment in the development of the Woodside Otway gas project. The Otway gas project has involved the construction of a remotely operated offshore platform tapping into gas fields off Victoria’s southern coastline, offshore and onshore pipelines that transport the gas and a gas-processing plant located about six kilometres north of Port Campbell.

The Otway gas project is a joint venture between the majority stakeholder Woodside, Origin Energy Resources, Benaris International NV and CalEnergy Gas (Australia). The Otway gas fields are estimated to contain natural gas sufficient to provide, over the next 10 years, more than 10 per cent of the annual demand across south-east Australia measured at current levels. Natural gas from the project is being sold to retailer TXU, condensate from the project will go to Shell’s Geelong refinery and liquefied petroleum gas will be sold to Victorian distributors.

This project has delivered significant investment to south-west Victoria and has generated employment in construction. Woodside has worked closely with the community and the Corangamite Shire Council, and the company should be congratulated for the way it has gone about the project. I raise this as an example because such investment would likely not have occurred under the old state based management of gas and fuel. These private companies have been encouraged to invest in exploration and construction of gas-processing plant because of the freeing-up of the gas industry over recent years and allowing this gas to be exported to other states.

As we move to institute a truly national energy market under the oversight of the Ministerial Council on Energy, all state and federal energy ministers and this parliament will provide greater certainty and security for companies such as Woodside to invest in Australia and increase our production capacity to meet the needs of our industries and consumers.

This bill is an essential part of the process of establishing the new national gas law and implementing the cooperative Australian Energy Market Agreement between the Commonwealth and the state governments. The national gas law will be established in South Australian law and will be adopted by other states through the application acts. The Western Australian government will pass mirror legislation. The South Australian parliament needs to see this legislation adopted by the Commonwealth, meeting our role in the agreement to provide for that parliament to introduce the national gas law.

The bill will apply the national gas law to Commonwealth-responsibility offshore areas and external territories. The bill also provides Commonwealth legislative consent to the conferral powers and functions under the national gas law in three Commonwealth bodies: the Australian Energy Regulator, the National Competition Council and the Australian Competition Tribunal. I note the national gas law is currently being finalised in consultation with stakeholders. The law will provide for the regulation of access to gas pipelines by users and remains consistent with the recommendations of the Productivity Commission’s 2004 report, Review of the gas access regime.

The National Competition Council will provide recommendations to ministers about which pipelines should be classified as being covered under the national gas law regulation for access. The NGL will only impose access regulation where the coverage criteria are met: access promotes a material increase in competition; the pipeline is uneconomic to duplicate; and access is consistent with safety and is in the public interest. Gas pipelines that are classified as uncovered will operate subject to the provisions of the Trades Practices Act and market forces, providing greater security to infrastructure owners—and I emphasise that particular aspect of the bill.

I note that in particular the greenfield pipeline incentives which have been contained in the current gas access regime will continue to operate in the new gas access regime under the national gas law. Greenfield pipelines are new pipelines or proposed pipelines for which there was not previously a market for the gas output. Under the national gas law, these greenfield pipelines may apply for a 15-year no coverage recommendation, which, if granted, will provide an exemption from all regulation for 15 years from the time the pipeline commences operation. The exemption is a big step forward in providing investment certainty to private enterprises which are considering laying down new gas pipelines. Where a private firm at its own cost lays down a pipeline to transfer gas from processing site to market, that firm should be secure and confident that it owns the asset and can determine whether or not others gain access and if so at what price and under what conditions.

This is the core issue underpinning the debate in the infrastructure access regime and was an important recommendation of the Productivity Commission’s June 2004 Review of the gas access regime. I particularly draw the relationship with the access of railways in the northern part of Western Australia, where I made a contribution at an earlier time. In my view, the capital that has been invested in either pipelines or railways should have a return to the particular investors.

The greenfield pipeline incentives will support new investment in pipeline infrastructure, helping to provide energy and security to gas consumers. The Productivity Commission found that, without the greenfield pipeline incentives, the gas access regime may potentially discourage new investment.

Some key changes that will be part of the new gas law compared with existing arrangements will include introducing a new, light-handed form of regulation for gas pipelines, empowering the Australian Energy Regulator as the national regulator for gas access to improve the consistency of regulatory decision making, enabling merits review by the Australian Competition Tribunal of key regulatory decisions, introducing strict requirements for timely regulatory decisions, increasing information transparency and maintaining incentives for investment in new pipelines established by the Ministerial Council on Energy in June 2006. These changes will have the impact of reducing the regulatory burden on pipeline owners and will reduce risk.

In concluding, can I note with satisfaction that this bill enjoys bipartisan support and is supported by state governments, which happen to be under Labor rule. There is a convergence of views across the political divide on the importance of freeing the gas industry from regulatory burden and providing enhanced security for new investments in order to provide for the nation’s future energy security. Australian governments have come a long way since the 1980s in moving from a state run gas system towards an efficient, competitive, privately managed gas industry operating in the free market with light-handed regulation. Australian industry and consumers have benefited from the major reforms to the gas industry, which have encouraged private investment, and we have seen new sources of gas generation coming on line to supply our nation’s energy needs. I commend the bill to the House.

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