Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Labor will be supporting the Australian Energy Market Amendment (Gas Legislation) Bill 2006. I do not propose to detain the House for too long but will be briefly outlining the reasons for the opposition’s support. The legislation is the federal government’s part of the bargain in establishing the national framework to regulate access to gas pipelines. The national gas regime proposed in this bill was negotiated between the Commonwealth and the states and territories through the Ministerial Council on Energy. It is the latest stage in the implementation of the principles and the letter of competition policy to the gas industry. We believe it will have real benefits for consumers and provide certainty for the industry. It is certainly the case that we should have certainty wherever possible in these matters, and for this reason the Labor Party is happy to give this bill bipartisan support.

Cheryl Cartwright, the CEO of the Australian Pipeline Industry Association, said in the Australian Financial Review on 26 May last year:

Because investment in gas transmission is so long-term, investors need to have some certainty that regulators are not going to step in and change rules part way through.

As Cameron O’Reilly, the Executive Director of the Energy Retailers Association of Australia, said a few months after that on 29 September 2006:

Investment decisions for regulated business are long term, so achieving greater certainty is in the interests of all parties, especially owners.

Everyone is having to make guesses or judgements about where things are at and the hardest area to be in making those guesses is generation.

That is why the opposition indicates that it is happy to support this bill, so that the industry has an indication that it is the policy not only of the government of the day but also of the alternative government.

The proposed national regime will replace the current nine different regulatory regimes operating across the country. It is another step in implementing the Ministerial Council on Energy’s reform agenda, which will ultimately see a national gas law, NGL, and national gas rules. The regulatory framework will underpin the proposed national gas law due to be in place by 30 June 2007. Under this cooperative regime, state and territory laws will confer functions and powers to the Commonwealth minister and agencies, including the Australian Energy Regulator, the Australian Competition Tribunal and the National Competition Council. The bill ensures that the Australian Energy Regulator can perform the functions and powers conferred on it by the national gas Commonwealth law and regulations, as well as for the Australian Competition Tribunal, the National Competition Council and the Commonwealth minister. In addition, the Federal Court will be given jurisdiction to deal with matters arising under the new laws.

My attention was drawn to an article yesterday in the Australian Financial Review entitled ‘Gas regulation at flashpoint’, in which a number of commentators in the industry state their concern about the powers to be conferred on the Australian Energy Regulator, particularly the powers to investigate matters of competition. The article by Annabel Hepworth states:

But the industry fears the draconian nature of the draft laws will stymie gas network investment needed to meet the soaring demand for power and will increase compliance costs, which would be passed on to consumers in higher gas bills.

Industry—which hopes the proposals will be redrafted—and users have in recent weeks been having detailed discussions with government officials about the draft laws. Federal Industry Minister Ian Macfarlane yesterday told The Australian Financial Review that the talks had been “constructive” and that he had met separately with industry groups to discuss key concerns.

Obviously, that is an issue of concern to the industry; therefore, it is an issue of concern to the opposition. The opposition will be supporting this bill, but I encourage the minister or his representative to address these matters in summing up the debate because it is important that we encourage more investment in the gas pipeline industry and that we take no steps to discourage it. On balance, we will be supporting this bill because we are confident that it will be an encouragement to industry and not a discouragement, but the minister does need to address the matters raised by industry in that article.

The national gas law will include a form of regulation under which pipeline owners can negotiate commercial outcomes with access seekers, subject to competitive pressures. Only when these negotiations fail will the Australian Energy Regulator become involved and offer a binding arbitration to resolve the access dispute. The states and territories are to pass complementary laws to give effect to these changes, effectively transferring their power to regulate these matters to the Commonwealth. The regulatory framework proposed in the bill will operate alongside the new national gas law, which will be passed by each state and territory. South Australia will be taking the lead early this year through the National Gas (South Australia) Act 2007 and the other states will then follow.

I know that some in the industry have expressed concern that access under the national competition policy is a disincentive to investment and a disincentive to laying more pipes. I have not been convinced by these arguments. We would need to see evidence that this is the case in the gas industry. In matters of national access, a genuine balance needs to be reached. To ensure maximum competition, we need to get the balance between granting access to competitors and not providing a disincentive to investment.

While I am not convinced that this bill will be a disincentive to the laying of gas pipelines, we do need to get the balance right across the market generally. I am glad that the honourable member for Batman is here, because I know he also has strong views on this. We saw the recent—

Don Randall (Canning, Liberal Party) Share this | Link to this | Hansard source

Mr Randall interjecting

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

Especially on you!

Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Especially on the member for Canning. The honourable member for Batman is not the only one who has strong views on the member for Canning, but he is also not the only one who has strong views about the national—

Don Randall (Canning, Liberal Party) Share this | Link to this | Hansard source

You have strong views on the deputy speaker!

Mrs Bronwyn Bishop (Mackellar, Liberal Party) Share this | Link to this | Hansard source

I think we will have some order in the chamber.

Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I think Deputy Speaker Bishop does a fine job. I have a strong view on that.

Government Members:

Government members interjecting—

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Order!

Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

We recently saw the high-profile Fortescue and BHP case. I am not convinced the system got this one right. The Treasurer failed to exercise his right to override the decision to grant Fortescue access to the railway line, which was a pity. His failure to act had the same consequence as if he were to have acted—deemed refusal—but it would have been better if the Treasurer had come out and explicitly outlined his reasons. That is why the government should, in my view, accept the recommendations of the Export Infrastructure Task Force. The task force recommended an efficiency override for applications for the declaration of export related facilities under the national access regime. The task force said that this test would ‘minimise the risk that access regimes would disrupt the very areas of the economy that have performed best in the management of export related infrastructure’.

My personal view is that there is a strong case for some legislative prescription which would codify what is and is not part of the production process and therefore provide more certainty for investors. I stress that we should not lose sight of the fact that the national access regime is a very important part of national competition policy. It is a positive development that has opened up access to infrastructure in this country, but we cannot for one second let it become a disincentive to investment. We need to get the balance right both in this bill and in national competition policy generally. It is a positive development that there will be a coherent national approach to the access regime for gas pipelines. It will be a light-handed regulatory approach, which is appropriate. We do not want to discourage investment in pipelines. Some 95 per cent of Australia’s gas production is located in the north-west of Australia, but 90 per cent of the population lives in the south-east, so we need pipelines to get the gas from the north-west to the south-east.

Establishment of secure national gas market infrastructure is vital to meeting Australia’s growing national energy demands. The speedy passage and implementation of this legislation is in the nation’s interest, and it is critical to ensuring our energy market and its export potential. There are over 140 trillion cubic feet of known natural gas reserves. The private sector now owns the majority of this resource. Transmission pipelines and substantial private sector investment will be required going forward.

These reforms are being implemented against the background of unprecedented demand for energy resources. The Australian Bureau of Agriculture and Resource Economics estimates that, by 2030, electricity generation will need to grow by 73 per cent to meet demand and that gas demand will increase by 50 per cent. The bill we have today will pave the way for the $30 billion in investment that the energy industry estimates will be required over the next 15 years for energy infrastructure projects. This bill will be an important first step in reaching that investment.

While Labor supports the bill and the implementation of the national gas law and the national gas regime, the federal government must push ahead with a second wave of gas reform, which is scheduled to come on line before 1 January 2008. There is much more to be achieved with competitive gas reforms.

The example of the benefits of these reforms is best seen by our experience in the electricity market. Average world prices have fallen by 19 per cent since the early nineties, delivering real benefits to businesses and to households. I noted again in today’s Financial Review, as opposed to yesterday’s, a report by Adrian Rollins and Duncan Hughes, which reports on a Productivity Commission finding that the potential benefit from further competition reform would result in an increase in gross domestic product by almost two per cent, adding about $17 billion to the national economy. Of course, gas is a very important part of that energy reform which is necessary.

The Productivity Commission’s 2005 Review of national competition policy reforms has put this in the context of the importance of pushing forward with the ministerial council’s energy market reform agenda. It says:

Given the long lead time involved in bringing new generating capacity on line, it is also important to get the timing, location and nature of investment decisions right.

By getting the national access regime, the NGL and the next wave of reforms in place in a timely fashion, the energy industry will have more confidence in the long-term investment decisions that they need to make.

In December 2003, the Ministerial Council on Energy announced its reform program. It included a reform program that was supposed to take three years to be fully implemented. Of course, that was four years ago. In August last year, the Ministerial Council on Energy announced that some of the proposed energy reforms would be pushed back from 1 January this year to 1 July this year. It was the Ministerial Council on Energy that in 2003 set in trail what was supposed to be a three-year time frame for establishing a national regulatory regime for electricity and gas. Here we are early in 2007, we have already fallen behind the MCE’s timetable, and the commencement of the national gas law has been pushed back to 1 July this year.

I am not seeking to make a political point here; I do not hold the Commonwealth government entirely responsible for that. This is a matter of some negotiation between the different levels of government. This is not a matter for the blame game and certainly on this side of the House we are not going to play the blame game. But all governments need to do better.

Don Randall (Canning, Liberal Party) Share this | Link to this | Hansard source

Mr Randall interjecting

Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I am glad the honourable member for Canning agrees that this is not a matter for the blame game. All governments need to ensure that there are no further delays in the implementation of the national gas law. Any delay creates uncertainty which can be both crippling for those seeking to make long-term investment decisions and concerning for them.

Labor understands the need to set the right regulatory framework that promotes competition and efficient economic outcomes in the gas industry. Labor supported the Commonwealth’s first instalment of reforms through the Energy Legislation Amendment Bill last year, although the opposition were keen to remind the minister at the time about the Commonwealth’s sluggishness in moving forward with the next wave of economic reform and the strengthening of the Trade Practices Act, and we would renew that reminder today.

Getting the national regulatory framework right is essential for the investment climate surrounding gas transmission and generation. The second wave of Ministerial Council on Energy led reforms is being developed by the ministerial council’s retail policy working group in consultation with a stakeholder reference group. The nation does need to move forward urgently with more microeconomic reform. We cannot rest on the laurels of previous achievements. We cannot say that national competition policy is over and there is no more reform necessary. One thing that the Prime Minister and I would agree on is that there is an ever-receding finishing line on economic reform; there is always more to do. This bill is one step in that ever-receding finishing line. The government needs to progress quickly to ensure the second wave follows soon thereafter. I commend the bill to the House.

Dave Tollner (Solomon, Country Liberal Party) Share this | Link to this | Hansard source

Under the oversight of the Ministerial Council on Energy, Australia has made substantial progress towards an efficient and effective national energy market over recent years. The Australian Energy Market Amendment (Gas Legislation) Bill 2006 represents a significant legislative step towards a national regime for the regulation of gas pipeline infrastructure complete with national regulatory and national rule-making bodies. This is crucial to Australia’s future economic energy security and economic growth.

The Ministerial Council on Energy will apply the new national gas law and national gas rules in all participating jurisdictions by 30 June this year. The national gas law will reduce the regulatory burden on industry, improve service provider certainty and protect long-term interests of consumers by introducing a new light-handed form of regulation for gas pipelines. It will empower the Australian Energy Regulator as the national regulator for gas access to improve the consistency of regulatory decision making, enable merit review by the Australian competition tribunal of key regulatory decisions, introduce strict requirements for timely regulatory decisions, increase information transparency and maintain incentives for investment in new pipelines established by the Ministerial Council on Energy in June 2006.

The new gas access regime will be underpinned by lead legislation enacted in the South Australian parliament. Early next year, the South Australian parliament will enact a national gas act and the national gas law will be the schedule to that act. The reformed gas regime is established primarily in the national gas law, which will be established in South Australian law and applied through application acts in all other participating jurisdictions except for Western Australia, which will pass mirror legislation.

A draft of the national gas law was released for consultation on 7 November last year prior to the Ministerial Council on Energy meeting agreeing to a final version. This bill amends the Australian Energy Market Act 2004, which will now apply the national gas law in the Commonwealth’s jurisdiction, ensuring that the new gas access regime will apply throughout Australia, including offshore areas and external territories. Under the current gas access regime, nine different regulators make decisions. That leads to uncertainty and inconsistency in the application of regulations. Under the new national gas law, the regulation of all gas transmission and distribution pipelines—except in Western Australia—will be undertaken by the Commonwealth through the Australian Energy Regulator. This will obviously lead to a more efficient and consistent regulatory decision-making process.

The bill will empower the Australian Energy Regulator and two other Commonwealth bodies—the National Competition Council and the Australian Competition Tribunal—to take crucial decisions within the new gas access regime. The bill amends the Trade Practices Act 1974 to confer new functions and powers and impose new duties on these three Commonwealth bodies when applying the national gas law. The Australian Energy Regulator, the National Competition Council and the Australian Competition Tribunal will have important roles in overseeing and reviewing the national gas law to boost competition while protecting the interests of gas consumers. All those decisions in all jurisdictions will be reviewable by the Australian Competition Tribunal to better protect the interests of both consumers and investors in the gas sector.

This bill allows the greenfield pipelines incentives in the current gas access regime to continue to operate in the new gas access regime. These incentives support new investment in pipeline infrastructure within Australia or crossing our territorial waters to other countries, increasing Australia’s energy security and benefiting Australian gas consumers. The national gas law will also allow those companies owning pipelines subject to competition to negotiate commercially and economically efficient outcomes with access seekers with direct involvement by the regulator. Only where negotiations fail will the Australian Energy Regulator arbitrate to resolve the access dispute. Through this bill, the Commonwealth is taking a legislative lead in establishing this regime. This process has the full support of the Ministerial Council on Energy and represents a bipartisan, cooperative and national approach to regulating access to gas pipeline infrastructure. The national gas law is currently the subject of a rigorous consultation process engaging all of the relevant stakeholders. Officials from the Ministerial Council on Energy are currently considering submissions made concerning the national gas law and will be finalising legislation taking into account all of those issues raised by stakeholders.

As members in this place know, I hail from Darwin in the Northern Territory. We passed legislation through this place only this week in relation to the Greater Sunrise unitisation agreement between Australia and East Timor.

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

Did you speak on it?

Dave Tollner (Solomon, Country Liberal Party) Share this | Link to this | Hansard source

I certainly did speak on it, Mr Ferguson. I am very keen to stand up here and talk about gas issues. The reason that I am very keen to stand up here and talk about gas issues is that Darwin—my electorate—is fast developing into a significant gas and energy hub in Australia. We already have natural gas being piped from the Bayu Undan field in the Timor Sea—Bayu Undan has some 3.4 trillion cubic feet of gas—to an LNG plant in the Darwin harbour. It is hoped that, following this legislation, there will be increased activity at the Greater Sunrise fields in the Timor Sea. I think there are 8.7 trillion cubic feet of gas in that field. There are significant amounts of gas in the Timor Sea that should be piped to Darwin.

It would be my desire, although you cannot interfere in commercial decisions, to see some of that gas used for domestic use—and not just by Northern Territorians but by other Australians. If at some point down the track a far-sighted company wants to build either a gas pipeline or a high-voltage DC transmission line which would allow Darwin to generate electricity and move that electricity interstate, those proposals would receive my strong support. Irrespective of whether these things happen, a large amount of economic activity is generated by the gas industry in my electorate. The more activity that happens in the Timor Sea and the Bonaparte Gulf and other places, the better it is for our economic future in the Northern Territory.

That is why I support these amendments. I want to see a flexible and uniform regime for gas pipelines across Australia that will give companies certainty and greater ability to invest in these assets around the country. It is very, very important for my electorate. I am very pleased to support this bill and I commend it to the House.

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

Stewart McArthur (Corangamite, Liberal Party) Share this | Link to 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.

Michael Hatton (Blaxland, Australian Labor Party) Share this | Link to this | Hansard source

I am delighted to follow the member for Corangamite and to endorse the Australian Energy Market Amendment (Gas Legislation) Bill 2006 as he has endorsed it. Why? Because this bill is about centralism not federalism. This bill is about the Commonwealth, in cooperation with the states, taking over power to control a national gas pipeline. I am glad that recalcitrants in the coalition—not that the member for Corangamite could be typified in that way—have finally come to see that the old federalism of the Fraser period, the old approach to Australian affairs, where whatever powers the states had had to be locked up forever for the states to simply have what they had at the start of 1901, has ended. This bill is yet another nail in the coffin of that type of approach to national affairs.

There has been another significant move in this area. The member for Corangamite well knows this; he has picked it up on his radar. There is $10 billion of Commonwealth government money going into a national water plan. Guess what? It is a Commonwealth takeover of state powers. It is centralism.

This mob over here spent decades railing against the concentration of power at the Commonwealth level. I have to tell you, Mr Deputy Speaker—and the member for Corangamite might well appreciate this—when Labor were last in power we saw that the disparate arrangements that we had in compartmentalised approaches to state run pipelines and state electricity grids needed to be entirely renovated. We saw that there needed to be a revolution in energy supply and in cooperation between the states and, if it demanded it and if it needed it, that had to be centrally driven. This is one of those wonderful cases where ideology fragments in the face of practicality, where the old way of doing things is completely shattered. I think what has been done on water is the right approach to take for a continental Australia with continental problems.

Colonial Australia understood it. When the first ships came out, individual colonies developed that were isolated in time and space from each other. They ran their own affairs. From the 1850s onward they developed their own legislative assemblies and legislative councils. There was a change of structure in terms of power relationships between the governors and the parliamentary entities. We know how difficult it was to get a country unified in 1901. That took 10 full years.

We might think of 10 full years as a long time—certainly the last 10 years plus has been a long time with the coalition in government here in Canberra, a long time for those people who have been on the end of that particular stick. But it was a 10-years-plus process to cohere the Australian states and to get them to understand, to sign up through a referendum to a national way of doing just certain things—post and telegraphs, defence and one other: customs and excise duties. That was it from the start—three things.

But here we have an old ideologist in the member for Corangamite coming out of the states’ blocks, out of the Victorian blocks—and he was right to make the point about the energy use in Victoria—but seeing a broader view. I am glad that this kind of revelation could happen in the 21st century for both him and some of his other colleagues on what was railed against forever. In Australia, it is a great privilege to live not just in one country but in one continent, surrounded by seas. We have been compromised in our history time and time again because of the shackles of that very history.

We saw the debate in the parliament yesterday about the issue of a national curriculum and who has pinched whose idea about this. Just in passing: John Dawkins, in 1984, the then minister for education, was kicking off the process to try to knock the states’ heads together, to try to get a national approach with fundamental educational principles Australia-wide, to start the process to drive towards not only bringing in lots of people from overseas to study here and to build our educational capacity and earn more money but fundamentally and very importantly taking the first key steps with Dr Paul Brock, who was then his chief educational adviser, to get a national approach to our educational problems.

What has been the fundamental problem—the glacial approach in the 23 years since then? The fundamental problem has been the states’ bureaucracies wanting to hold tight to their constitutional certainties. That is what has caused the problem in relation to this. That is what has to be shattered in exactly the same way as the issues here of who owns what gas pipeline in Victoria, Queensland, New South Wales, South Australia or whatever. That has to be shattered in the national interest in order to get not just economies of scale but an approach that is entirely consistent in terms of our energy use and production for Australia as a whole—a centralist approach. Maybe sometimes it is necessary. Maybe that is why, as embryonic as it was in 1901, we formed a Commonwealth in the first place, where we could do things in a coherent, national way.

What we have done so far in this—and it has taken quite a while for this bill to actually get here, as the member for Corangamite and others know—is take steps along the way to a more unified electricity system, steps here to a uniform provision for gas pipelines across Australia and sensible direct provisions in this bill to assist a greenfields pipeline program for gas pipelines that were not there before. Western Australia has specific provisions under this bill. Everybody else is going to have to take their own approach to put in their own legislation. Western Australia is different. Why? Because it is half a continent. Why? Because there are such rich gas resources, not only land based but off Western Australia.

Back in the 1960s, as I know certainly from Claude Killick, who is the president of Condell Park branch—because he was out in the boat with the Yank captain, off looking for petroleum, and he ended up on Barrow Island—he saw the scans, around Barrow Island and the area they were mapping looking for petroleum resources, that were alive with gas resources.

In the Chevron project on Barrow Island, with its associated first attempt, really, in Australia to lock up the CO directly into the ground at the place where they produce the product, when I went there the initial cost of that program of sequestration was $36 million; the projected cost was about $60 million. It was a condition of their going onto Barrow Island to do this particular work in the gas area, from the state government of Western Australia, that they undertake the sequestration of the CO, and the work that has been done there is brilliant. But it is not just the Gorgon field that has been developed. We have a minimum of 60, maybe 100, years of resource security and gas supply just from the Gorgon field and its associated field. They are also exploring further out in those other rich areas that Claude Killick and others saw on their screens in the 1960s.

We have an immense resource that needs to be used well. We have a resource now as part of the Gorgon project that needs to be pipelined back into Australia. Most of that product goes overseas where we will earn income not just from Japan or China but largely from Korea and other areas. So it adds to what has already been done, but this is new capacity that is coming on line. There is also a direct pipeline to the mainland to feed into the national grid and be part of the national gas pipeline. It is a fundamentally important thing for Australia to build this capacity. Coal was our greatest export. What is our most underutilised resource? It is gas.

We have a major contract worth $25 billion to supply Guangdong province in China. That allowed Woodside to say: ‘We’ve got three trains set up on the Burrup Peninsula. We can now commit to a fourth train.’ Even though the contract was at a 30 per cent discount because the Prime Minister really wanted to push forward and get this project underway, the other ones that we have signed up to have meant building capacity—Woodside has a fifth train. We saw the recent development yesterday on the Sunrise agreement with Timor-Leste for the further development of those fields.

But we do not use our gas well enough in Australia. This government never gave the go-ahead to Chevron on the mainland to develop a gas-to-liquids regime. I know because I was briefed when I was running Labor’s regional committee. The person who did the briefing now works as chief adviser in this area to Martin Ferguson. She is quite brilliant in the area, as Chevron was in saying: ‘Here is an absolute resource that Australia has. We not only flog this stuff overseas; we should be developing a gas-to-liquids industry here in Australia based on that rich resource to feed in to all of our natural gas needs and our energy needs in Australia and do it on a national basis.’

I think it was short-sighted in the extreme for the government not to really give this project a go and put effort behind it to get it started, because we need new national schemes, not compartmentalised state approaches to these things. We need new drivers for our economy. Given the nature of Australia, it will always be in the energy area that governments really need to be pushed. I am glad to see that very shortly we are going to get an answer from the Minister for Industry, Tourism and Resources on a report that the House of Representatives Standing Committee on Industry and Resources brought down in the 39th parliament. We are now up to the 41st parliament, and I have been on the industry and resources committee from that 39th parliament. We have had to wait for these bills.

It is an old sort of approach here that the government blames the states and says they have taken all the time in terms of coming to an agreement. We know how recalcitrant the states can be, but we know that the Commonwealth should be the engine driver of this approach. It is right and proper to have an entirely national approach to this issue and have a coherent program. It is also right and proper that we drive from a national level. We need to have a national pipeline running from one end of Australia to the other and we need to feed into that national pipeline, not just for our domestic use as it is now and not just for the use of current industries. We need to build new Australian industries Australia-wide utilising our resources, because it is much more efficient with respect to greenhouse emission than utilising coal. We know that our coal-fired power stations supplied with natural gas from offshore Western Australia and mainland Australia will work better, fire better and be more efficient. Gasification of that process means that there is less greenhouse effect and therefore less global warming as well.

It is an excellent thing to see that the member for Corangamite has announced effectively today—inherent and inferential though it might be—that he has finally become a centralist and that he finally believes in the Commonwealth of Australia’s national powers demonstrated in this bill! Let us see it happen in a whole range of areas. Let us see that not just with water but with gas. Let us see it happen in education. Let us see the Commonwealth government really willing to take on the key issues that we have and from a leadership base say: ‘We not only believe in ourselves; we believe in the people of Australia and their willingness to cooperatively reshape the map of Australia politically by doing things from a totally national perspective.’ In deference to those who want to go on with the adjournment debate, I will finish my remarks there, but it is a wonderful day, Stewie, on which you have become a centralist!

Debate (on motion by Mr Neville) adjourned.