Bruce Scott (Maranoa, National Party) Share this | Link to this | Hansard source

I rise this morning to address the Australian Energy Market Amendment (Gas Legislation) Bill 2006. The purpose of the bill is to bring about an agreement of all Australian jurisdictions committed to bringing the regulation of the electricity and gas markets under a new national governance arrangement. This is important because the national gas laws will reduce the regulatory burden on industry. It will improve service provisions, it will bring about certainty and it will protect the long-term interests of consumers. That is extremely important.

This national governance arrangement will be important to the energy industry. It will be particularly important in my electorate because of the jobs that are associated with the gas industry; the generation of electricity from gas is an important job generator in my electorate.

One of the important aspects of this legislation is that it recognises the fact that gas, like electricity, is not just confined to a market within a state. Energy now flows across borders—both electricity and gas—to provide an energy source in other states. That is never more apparent than in the south-west corner of my electorate in the Cooper Basin, where there is a Santos investment at the Ballera gas field which flows to Moomba in South Australia. Santos also provides a gas pipeline to New South Wales. That gas also flows through a network of pipelines to Brisbane, Mount Isa and Gladstone. This is a clear demonstration of how the gas that comes out of the Cooper Basin in Queensland is transported through those pipelines into other states and into those energy markets.

This bill will give great confidence to companies that invest in exploration in the gas industry and will also aid in the development of markets flowing from the gas that they find. It also will ensure that there is national competition in the marketplace—which we all want to see. I know consumers will benefit from that. It gives certainty to those investment companies and their shareholders that there is a competitive market out there. This bill will give them the confidence of knowing that there is a market and that there is regime that will encourage competition and further exploration.

The Surat Basin is an underdeveloped coal basin in my electorate. It has great potential, not only for the extraction of coal but also in the production of coal seam methane. Coal seam methane is a very clean form of energy. It is a technology that, in the last 10 to 15 years, has been refined and developed largely by Australian companies. I think we are going to see more and more coal seam methane extracted from coal fields. This is important in that, should those coal seams one day be exploited, they will be a safer mine to operate, because the coal seam methane has been extracted from the coal bed, making it a less dangerous environment in which to operate underground coal extraction.

Origin Energy is the company in my electorate that is involved in the extraction of coal seam methane. It plans to build two power stations at the site where it is extracting this coal seam methane. One will be at Spring Gully. I hoped the company would put in a second one there, but there is some debate at the moment about whether that will proceed or whether it will be located at what is known as the Braemar interconnection site for the electricity grid that is being established in these fields to feed electricity into the national electricity market.

I recently had a briefing in my home town of Roma, and Santos, BHP, General Electric and Energex have been the recipients of some $75 million from the Commonwealth government to bring together a range of technologies that will see them build a 100-megawatt power station utilising coal seam methane as its energy source. The $75 million is important because it will assist in the construction of that power station, a zero emissions power station.

With the debate about climate change and emissions, not only here in Australia but also world wide, it is important that we are able to prove and to see proven these known technologies, and it will be this power station at Fairview, north-east of Injune in my electorate, that will be the first in the world to bring together all those known technologies with the support of government money to build that power station. Importantly, the power that is generated from that power station will then be fed into a power link grid to take it into the national power grid, which then obviously feeds into the national electricity market. It is a very important project, once again demonstrating this federal government’s commitment to investing in new and clean technologies that reduce emissions. In this case, it is the generation of power from coal seam methane gas, and it is another example of the federal government’s commitment to addressing the issue of emissions within Australia.

The investment will see the coal seam methane extracted and used to generate electricity, but the carbon dioxide that is produced when that coal seam methane is burnt in those turbines will be extracted at the exhaust level and then returned underground, whence it came. This coal seam methane area is something like 700 to 800 metres below the ground, and when the carbon dioxide is returned to the coal bed it actually attaches to the coal. Unlike the methane before it is extracted, which is quite volatile and mobile, the carbon dioxide that is returned to the coal bed actually attaches to the coal. It actually makes the coal seam much safer should it ever be extracted. Being such a deep deposit, it is probably unlikely that we will see it extracted in our lifetime. But we should never say never in life. Should it ever be extracted at some time in the future, it will be a much safer deposit because it will not be as volatile as it currently is with the coal seam methane in the coal bed.

The other important thing is that the water that is extracted as part of the process of extracting coal seam methane will be used for the cooling of the power station. So we will have a power plant, in situ, that is using coal seam methane technology to generate power and the water that comes up with the coal seam methane will be used to cool the power plant. That is a tremendous step forward, given that water is such a valuable commodity in Australia today. We know just how valuable it is wherever we live in Australia—whether it is in the outback or in an urban situation. The water that is currently in many of these extraction sites is evaporating into the atmosphere and will now be used in a productive way to cool the power plant, rather than evaporating into the atmosphere and being wasted. The power generated feeds into the national grid, which provides an opportunity for the investment company to sell power into the national power market, thereby creating an enormous number of jobs.

I am quite excited about this project because it is the very first not only in Australia but also in the world. This project uses the known technology of extraction of coal seam methane. It generates power at the site, strips off the water and uses it for cooling the power plant. But, importantly, the carbon dioxide created by the power that is generated will not be emitted into the atmosphere as the emissions are pumped back down the hole and will ultimately rest in a carbon sink. Once this technology is further developed it will afford the opportunity for other power plants, such as coal-fired power plants, to utilise it and bury the carbon dioxide that they would otherwise emit into the atmosphere. I am not quite sure whether that will come about. We have to prove the first step of the technology and get it to work. We will then have an opportunity to return the carbon dioxide which comes from coal-fired power stations to the coal bed and have zero emission power stations. It is a win all round. This amendment bill will, I am sure, bring about greater security for the generation of power in Australia and will give security and confidence not only to companies that invest in the exploration of gas but also to the investors who invest in pipelines across Australia. The regulatory regime is constant across state borders and I believe that will help to further develop the industry. I support the legislation.

Peter Garrett (Kingsford Smith, Australian Labor Party, Shadow Minister for Climate Change, Environment and Heritage) Share this | Link to this | Hansard source

Kingsford Smith) (10.13 am)—I am grateful to have the opportunity to welcome the Australian Energy Market Amendment (Gas Legislation) Bill 2006 today. The proposed national regime will replace the nine different regulatory regimes operating across the country and streamline access to gas pipelines. That is certainly long overdue and welcome. The amendments contained within the bill confer the powers of regulation and management of the proposed national gas regime to Commonwealth agencies and to the federal minister. I note that the bill’s provisions reflect the agreement undertaken by Commonwealth, state and territory governments at the Ministerial Council on Energy. The regulatory framework proposed in this bill, of necessity, now relies on the states and territories passing complementary laws. That is something which, in due course, ought to happen to enable a regulatory framework of this scope to be enacted. The timing of this bill, designed as it is to allow for the establishment of a national framework to regulate access to gas pipelines, could not come at a more crucial moment, because gas has come in for a hard time in the parliament and in public debate over the last couple of weeks.

As debate has raged over how we should deal with the threat of climate change, with the spectre of a potential four-degree increase in temperature hovering and the creation of a world described by NASA scientist Jim Hansen as ‘practically a different planet’, the Howard government has taken a surprising and disappointing stance and, at times, seems to almost completely discount the contribution gas is capable of making to address climate change. Given the consequences of even a two-degree increase in temperature, it is extraordinary that the government would be dismissive of such a vital source of energy—yet that is exactly what it has been doing.

Whenever the issue of baseload power provision has been raised by anyone in parliament, on television, radio or in print, the federal government has fallen over itself time and time again to say that only coal or nuclear power have the capacity to provide baseload power in Australia. It is the case that the Prime Minister and other ministers mention gas on a couple of occasions here and there, but the general thrust of the government’s position and comments, including statements made by the Prime Minister in question time, is that it will fall upon coal or nuclear power to provide baseload power in the future.

That is just not correct. Consider the international experience. The truth is that, in 2000, gas provided 54 per cent of Russia’s energy needs, 52 per cent of the Middle East’s energy needs and 16 per cent of North America’s energy mix. Gas is more than capable of providing a share of Australia’s baseload power and, importantly, it is also extremely flexible.

The fact is that most of the growth in our energy consumption is in demand for intermediate and peak power. That is really where the demand for energy comes from and that is where the demand for energy must be met—in intermediate and peak power. It is on those hot summer afternoons, when everyone turns up their air conditioning full blast—that kind of demand—where gas and also solar power are particularly well suited. In fact, gas is such a flexible source of power that it can be used to provide baseload power, the power that is needed to keep everything quietly ticking over during the night and, with the flick of a switch, it can be used to provide a couple of minutes of peak power or 12 hours of intermediate power.

Apart from its flexibility, gas also has between 30 per cent and 50 per cent less carbon emissions than coal. That is quite a significant reduction. Furthermore, all the work that has been done to develop clean coal technologies, such as geosequestration, could also potentially advantage gas, as many of the same principles can apply to bearing the carbon load from gas as apply to bearing the carbon load from coal.

Traditionally, we have not used gas to provide baseload power in Australia because the price of coal has been so low. The price of coal-fired baseload is around $30 per megawatt hour, compared to around $38 per megawatt hour for gas-fired generation. This has meant that, whilst domestic gas prices in Australia are amongst the lowest in the OECD and the lowest in the world, gas is still more expensive than coal under existing policy settings. Despite its flexibility and availability, Australia has gas reserves of more than 110 years worth at current rates of production, and this does not include the large volumes of Queensland and New South Wales coal seam gas.

Yet just last week the Minister for the Environment and Water Resources, Mr Turnbull, told the Sydney Morning Herald that it would be ‘short-sighted and selfish for Australia to use its large gas reserves to cut emissions in Australia, because the rest of the world did not have that luxury’. That is an extraordinary position to take, particularly as Australia’s greenhouse pollution is expected to soar by some 27 per cent by 2020. If we wish to avoid this kind of emissions expansion—and the need for us to reduce emissions is indeed urgent—then we clearly need to invest in gas and other clean energy sources here in Australia.

It is difficult, I think, for people to understand why the Howard government is so keen to perpetuate the myth that only coal or nuclear power can provide baseload energy demand. I believe the Minister for the Environment and Water Resources needs to stop talking down Australia’s gas and renewable energy sectors and start doing his job. This is not about the gas industry’s technological inadequacies—and the bill before us clearly shows what the potential for gas is—but the minister for the environment’s indifferent approach on climate change is seriously to be regretted.

We argue that any government that takes the risks inherent in climate change seriously must also take the role of gas in the country’s energy provision very seriously. Federal Labor certainly does, as does the industry itself. Just two days ago AGL announced its decision to join the Chicago Climate Exchange. This is further compelling evidence of the lost economic opportunities created by 11 years of climate change denial and complacency under the Howard government.

AGL’s historic announcement demonstrates the company’s commitment to tackling climate change but also highlights Australia’s isolation from global efforts to cut greenhouse pollution. As it turns out, clean energy companies are continuing to seek opportunities outside of Australia. AGL’s move to the Chicago Climate Exchange shows how many golden opportunities are being missed. The fact is that Australia should and could be the regional hub for emissions trading and clean energy but, instead of a hub, there is a hole. Nothing can happen. Australian financial institutions are blocked until Australia ratifies the Kyoto protocol and establishes a national emissions trading scheme.

AGL’s Managing Director, Paul Anthony, has stated that his company’s membership of the Chicago Climate Exchange allows it to ‘trade allowances with other companies around the globe seeking to reduce their own carbon footprint and access the global buyers for its many carbon offset projects’. It is clear the government’s failure to act is costing jobs and threatening our precious environment. A discussion paper released almost five years ago by the gas to liquids task force recognised the potential for gas to liquids technology. It stated:

There is a significant potential market for ultra clean diesel, and this provides an opportunity in the future for GTL—

gas to liquids—

diesel.

So what is preventing the gas industry from taking a more substantial role in Australia’s energy mix? Firstly, investment in energy infrastructure requires very long lead times and certainty. The Howard government’s failure to provide the security of a carbon signal has resulted in both the coal and gas industries being frustrated in making investment in the provision of new power plants because, while the government may pretend that climate change is not real—or, at least, not very urgent—the gas and coal industries know that a carbon signal is coming. They know they are moving into a carbon-constrained economy, and they are not willing to commit substantial sums of money—indeed, as much as billions of dollars in assets—that may become stranded in this new environment. That is why, secondly, the gas industry needs a carbon price signal and a carbon emissions trading scheme to trade the carbon in. That is why on 7 February this year Grant King, Origin Energy’s Managing Director, told ABC radio that his industry wants to see a carbon trading scheme. He said:

We’d like to see a commitment to introduce an effective carbon-pricing regime. We believe that that needs to be sooner rather than later. That’s necessary to ensure that companies who are making major capital investments which have 20, 30, 40-year lives can make decisions knowledgeable of the future regime in relation to carbon-pricing.

This is also why on 22 February 2007 the CEO of the Petroleum Producers Association, Belinda Robinson, told her Australian Oil and Gas Conference that she was bewildered by the federal government response to climate change. She said:

We do need to explore all options for all energy supplies that are cleaner and greener than we’ve had in the past but they’re out there; they’re 10, 20 years away. The bewildering part has been that we’ve got gas now, there’s no new technology that has to be advanced to be able to deliver on greenhouse gas emission reductions with gas.

I think that says it very clearly. While the Howard government has continued to marginalise the gas industry by refusing to recognise its capacity to provide baseload, intermediate and peak power demands, and has refused to acknowledge its lighter carbon load, Mr Howard has simply continued to talk up the prospect of a future nuclear powered Australia. In this future—and it is a distant future that arrives only in the 2030s or later—Australia has dozens of nuclear reactors dotted along the eastern seaboard. According to Dr Switkowski, they will meet one-third of Australia’s energy needs.

It is unclear how Australia will manage the tonnes of nuclear waste produced by such an intensive nuclear industry, nor is it clear where the waste will be stored, nor do we know where the reactors will be, and the cost involved in producing that power remains very expensive—and then, of course, the issues of risk around nuclear non-proliferation have somehow resolved themselves overnight, although we are not told how. Although all of these issues remain in abeyance, gas, which has the capacity to provide us with energy right now, is underrated and maligned.

Of course, it is a fact that Australia’s emissions have been rising exponentially, but apparently that also is not a problem. If you believe the Prime Minister, nuclear power in the future will answer all of our energy needs. Nothing could be further from the truth. In fact, pursuing this nuclear future will not only drive up our carbon emissions through inaction on multiple fronts necesary—and the mining, milling and building of nuclear power plants will create emissions—but will also radically increase the risk of accidents and proliferation and open up the prospects of terrorism on Australian soil. That is why this Labor Party under Kevin Rudd resolutely rejects nuclear power.

When we look at the Australian Energy Market Amendment (Gas Legislation) Bill, we recognise that the replacement of nine different regulatory regimes operating across the country with one proposed national regime to streamline access to gas pipelines is necessary and welcome. But when we examine the potential and clear role that gas could play in assisting us to meet our greenhouse gas emissions in Australia at a time when climate change is an issue of significant importance, we can see very clearly the failures inherent in the Howard government’s approach.

The Labor Party would ratify the Kyoto protocol. We would give Australian businesses and farmers access to income streams that flow from ratification and we would give Australians access to the international negotiations that are about to begin—negotiations that will determine how we move forward as an international community in our fight against climate change. This legislation is important, and it also emphasises why Australia’s gas industry has to be brought in from the cold and counted as a part of the solution to Australia’s spiralling carbon emissions.

Bob Baldwin (Paterson, Liberal Party, Parliamentary Secretary to the Minister for Industry, Tourism and Resources) Share this | Link to this | Hansard source

Minister Macfarlane brought the Australian Energy Market Amendment (Gas Legislation) Bill 2006 to the parliament with the support of our colleagues on the Ministerial Council on Energy to continue our progress towards an efficient and effective national regime for the regulation of gas pipeline infrastructure. By passing the bill, the Commonwealth parliament will play a lead role in facilitating the Ministerial Council on Energy’s cooperative gas access regime. This regime will be underpinned by lead legislation enacted in the South Australian parliament to which the National Gas Law will be a schedule. The National Gas Law will then be applied by all remaining jurisdictions, including the Commonwealth, but excluding Western Australia, through legislation known as applications acts. Western Australia will pass mirror legislation with content similar to the National Gas Law rather than applying the National Gas Law established by South Australian law.

This bill amends the Australian Energy Market Act 2004 to apply the National Gas Law in the Commonwealth’s jurisdiction, including the offshore area and external territories. It also amends that act and the Trade Practices Act 1974 to allow three key Commonwealth bodies—the Australian Energy Regulator, the National Competition Council and the Australian Competition Tribunal—to take on key roles within the regime.

Except in Western Australia, the Australian Energy Regulator will take on the role of regulator within the regime, in place of various regulatory bodies that are currently undertaking this role in different jurisdictions. This will lead to more efficient and consistent regulatory decision making. The National Competition Council and the Australian Competition Tribunal will also have important roles in overseeing and reviewing the proper operation of this scheme to ensure economically efficient, competitive outcomes in the gas market to protect the long-term interests of the consumers of gas. The involvement of these Commonwealth bodies is an essential part of this cooperative scheme, and the Commonwealth must provide groundwork for the passage of the National Gas Law in the South Australian parliament by legislating for these functions and powers to be exercised.

The National Gas Law is currently the subject of a rigorous consultation process engaging all relevant stakeholders. The Ministerial Council on Energy Standing Committee of Officials have released their policy response to issues raised during consultation on the exposure draft of the National Gas Law and they will be finalising the legislation, taking into account issues raised by stakeholders. The member for Prospect has raised industry’s concerns about the powers conferred on the Australian Energy Regulator by the National Gas Law, and particularly the Australian Energy Regulator’s ability to investigate matters of competition. These issues have been the subject of detailed discussions over some time, and the government will continue to work with the states through the Ministerial Council on Energy process to address stakeholder concerns and to ensure that the National Gas Law delivers an effective national gas regime.

The National Gas Law is designed to reduce the regulatory burden on industry and to facilitate investment in gas pipeline infrastructure. The National Gas Law will introduce a new, light-handed form of regulation that allows gas market participants to negotiate economically efficient outcomes without the direct involvement of the regulator, whilst creating a fair and effective access regime. The National Gas Law will also continue the greenfields pipeline incentives established by the Ministerial Council on Energy in June 2006, incentives which create certainty for investors undertaking risky greenfield and international pipeline projects.

In summary, passage of this bill will represent a significant legislative step towards a truly national gas access regime. The cooperative national gas law regime will ensure that Australia enjoys the benefits of a competitive and efficient gas market whilst minimising the regulatory burden on industry. This bill has the full support of Minister Macfarlane’s state and territory colleagues on the Ministerial Council on Energy; therefore, I commend the bill to the chamber.

Question agreed to.

Bill read a second time.

Ordered that the bill be reported to the House without amendment.