Kerry O'Brien (Tasmania, Australian Labor Party, Shadow Minister for Transport) Share this | Hansard source

The incorporated speech read as follows—

The Labor Party welcomes this bill.

It does, after all, implement the policy that the Federal Labor Party and my colleague, the member for Hunter, 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 up front coverage rulings and binding up front agreements locking in key regulatory parameters for extended and agreed periods of time.”

But this bill has been a long time in coming and it still does not go far enough in implementing the many energy market reform measures that still remain outstanding.

The bill will amend Part IIIA of the Trade Practices Act 1974 to provide new incentives for investment in gas pipelines, or more accurately, to remove existing barriers to investment.

There are two mechanisms.

The first is an ability to obtain an upfront ruling on whether full price regulation in the gas access regime should apply to a new pipeline.

If a pipeline does not meet the coverage criteria, it will be granted a full exemption for 15 years—called a binding no-coverage ruling.

The second mechanism is a price regulation exemption, also for 15 years, for new pipelines bringing foreign natural gas to Australian markets, subject to certain obligations.

Both mechanisms involve a prior competition and public interest assessment by the National Competition Council before a final Ministerial decision can be made, and that is a sound accountability mechanism.

They are welcome mechanisms to encourage investment in gas supply and gas transmission infrastructure for Australia’s future.

And they are 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 is remote from markets.

Ninety five per cent of Australia’s natural gas resources are in the remote northwest, but 90% of Australia’s population live on the eastern seaboard and most of the country’s energy-intensive job-creating industries are in the southwest and the east.

I can’t put it more starkly than that.

That is why we need to be thinking about strategic national energy infrastructure today and promoting investment in things like natural gas transmission.

Natural gas is also 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 cleaner coal.

That means:

• Enhancing the competitiveness of gas in the domestic market;
• Achieving greater interconnection of major supply and demand hubs; and
• Expanding domestic gas markets in electricity generation, process energy, gas to liquids 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 be locked away forever or destined only for export markets as LNG.

In Mr Howard’s Australia it’s commercial to get gas to Shanghai but not to Darwin or Sydney.

Nor can we assume that gas exports will necessarily create additional domestic industries or energy infrastructure.

More needs to be done to develop value-adding gas chemicals and gas-to-liquids industries and expand domestic gas infrastructure to complement the LNG industry.

Australia’s competitors in the global gas market, like Qatar, are way ahead of us already.

How do we address this?

Well, this bill goes some of the way towards removing the impediments to increased investment in interconnection and barriers to gas-on-gas competition.

The private sector now owns the majority of Australia’s gas transmission pipelines and substantial private sector investment will be required over the next decade and beyond.

It is in our national interest to encourage, not deter, this investment and that is why the provisions of this bill are welcome.

Whilst pipeline infrastructure developed since the last 1990s (Eastern Gas and SEAGas) ensured continuity of gas supply following the Moomba incident, it is clear that more could and should be done to facilitate linkage of uncommitted gas supplies to markets, improving security and reliability of supply as well as encouraging gas-on-gas competition.

The absence of a carbon price signal is also undermining the competitiveness of gas, thereby holding back demand and investment, and forcing regulatory intervention.

Consequently, in this looming crisis, Labor accepts the need to provide greater certainty for investors as gas plays catch-up in the market.

Regulatory burdens are growing not shrinking, and competition regulators are under increasing pressure to provide long-term income-guarantees for infrastructure investors.

The existing cooperative gas access regime has created barriers to efficient investment in new pipeline infrastructure and this bill will encourage more efficient investment and provide investors with regulatory certainty.

The bill also recognises the additional complexity of international gas infrastructure projects like the PNG gas pipeline and provides investors with regulatory certainty.

Both mechanisms will have a positive impact on securing investment in gas pipeline infrastructure for Australia’s long term energy security needs.

But as I said before, energy market reform is happening too slowly. Let’s look at where COAG has got to so far this year.

Whilst the commitment to progressive national roll out of smart meters from 2007 is to be commended, it is heavily qualified and only time will tell whether the initiative is truly national.

Beyond that, we are promised a recommitment to earlier COAG reform proposals and a new “high level, expert” Energy Reform Implementation Group.

This new committee is due to report back to COAG before the end of 2006 on a range of energy market issues including options for a national grid, structural weaknesses in the electricity market, and financial market measures to support energy markets.

What the communique doesn’t say is that this new committee is the Prime Minister’s latest attempt to address the inertia of his energy Minister, the Ministerial Council of Energy, and the National Electricity Market Ministers Forum on real energy policy issues.

They have done virtually nothing over the last almost five years.

The fact is we are no further advanced on national energy market reform than we were when the Parer review was announced in June 2001 along with the establishment of the MCE and 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 and COAG now promises us a response by the end of 2006—a full two and a half years later.

After Parer in 2002, it took until July 2004, with legislation introduced in mid June 2004 at the eleventh hour, to set up the Australian Energy Regulator and the Australian Energy Market Commission, and then it took another year to agree on who would head it, where it would be located, and how it would interface with the ACCC, with operations not actually commencing until July 2005.

This government’s answer to the problem is to go back to June 2001 and make the same mistakes again—a new national body, a review of the same issues, and still no action or leadership.

That’s what is really needed—action and national leadership. Well over a year ago I said, and I’ve said it many times since:

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

COAG recognised this by commissioning the Parer Report, but little action has been taken by this government.

The Parer report identified all the deficiencies in our energy markets but barely any of its recommendations have been implemented.

Our electricity and gas sectors remain burdened by excessive regulation, overlaps in regulatory roles, slow and cumbersome code change processes, anti-competitive marketing practices, poor market design and poor, if any, planning mechanisms.

It’s time for this government to get moving on both the Parer recommendations and the Productivity Commission recommendations.”

And I recall that my colleague, the member for Hunter, also said this many times during the course of the last Parliament when he was the Shadow Minister responsible for energy.

Let me say that one of the biggest issues for the natural gas industry is the expansion of its markets.

And this is a big issue for Australians too because natural gas is part of the answer to their concerns about petrol prices and supply security.

Of course the government is out of touch with the triple whammy facing Australians around the kitchen table these days—higher interest rates and mortgage payments, industrial relations changes undermining their wages and conditions, and record high petrol prices.

This government treats tax cuts as “go away” money for motorists worried about petrol prices.

It did nothing in the budget to bolster Australia’s fuel supply security or look to the long term.

And it has done nothing in this bill.

The fact is that without developing alternative fuels industries in Australia, we will increasingly be hostage to supplies from the Middle East, West Africa and Russia.

I don’t need to spell out the implications of that for energy security.

Australians want to know that their governments, and the companies with stewardship of their resources, have a plan to secure their energy supplies for the future at affordable prices.

But there is no plan and they are far from “relaxed and comfortable” about that.

The Howard government has failed Australians by letting the opportunity pass to create the right fiscal and regulatory environment to make gas to liquids a new industry option and a new fuel supply source for Australia.

The answers are there for Mr Howard and Treasurer Costello in Kim Beazley’s Fuels Blueprint just as they were on gas pipeline investment in Labor’s 2004 election policy.

If the government was serious about the gas industry and gas market reform, they could have seriously reviewed the PRRT regime and considered special treatment of capital investment in gas to liquids fuel projects and associated gas production infrastructure.

The Commonwealth could have faced up to some responsibility for resource related infrastructure instead of passing the buck to the States.

Above all, they could have sent a clear signal to Australians that they are interested in their future fuel supply security and to the industry that this should be part of Australia’s national gas strategy.

Australia’s competitors in the gas industry are way ahead of us, particularly in the Middle East where countries like Qatar, already a formidable competitor for the Australian LNG industry, are developing GTL projects making clean transport fuels for the global market.

It is now almost five years since the government’s own GTL Task Force highlighted the potential significance of a GTL industry to Australia’s economy saying it could underwrite offshore gas supply infrastructure to bring forward the possibility of major new domestic gas pipelines to connect the national market, increase domestic gas competition and energise gas exploration.

The potential benefits 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 this most pressing of problems, our future transport fuel security.

But five years later no action has been taken.

There is a long list of failures that I could point to on energy market reform—the issues I’ve discussed today are just some of them.