Jenny McAllister (NSW, Australian Labor Party) Share this | Hansard source

There is a great quote from American newspaperman HL Mencken: 'For every complex problem, there is an answer that is clear, simple and wrong.' And so it has been too often in this chamber in the debate about our energy crisis—because we are facing an energy crisis and we are facing a gas crisis. But, day after day, I have seen senators come into this chamber and point the finger at just one element of the problem.

The truth is that the energy crisis will not be simple to solve, and the gas crisis will not be simple to solve either. The gas crisis has arisen as a result of complex causes over a number of years. What is needed is strong national leadership to respond to it. Unfortunately, with this challenge, as with so many policy debates, I have very little confidence that this government is going to be able to provide national leadership of that kind, because on energy, more than any other problem, this government seems unable to move beyond shallow, populist bickering towards a serious examination of the genuine policy challenges that face the nation. On energy, more than any other policy question, this government is drawn time and time again to debates and arguments which seek to prosecute a culture war rather than a policy solution.

Unfortunately, in the last 12 months in particular, we have seen Mr Turnbull, who once styled himself as a rational person, a sensible contributor to the energy debate, leap back to this old and familiar mode of debate from the coalition when it comes to energy. Mr Turnbull's intervention in the energy crisis after the storms which hit South Australia was embarrassing—absolutely embarrassing. For a man who once prided himself on being a sensible contributor to Australia's energy debate to argue, as he was willing to do, that the worst storm ever recorded in South Australia had no role in the blackouts which faced that state but, instead, that those blackouts were a result of state government policy was a shameful and embarrassing contribution to the debate. But it is a contribution that has characterised the approach taken by the coalition at every point, at every opportunity, since.

Australia's gas market is in crisis. Our industry is paying far more than international prices for new gas—upwards of $20 per gigajoule, whereas it is just $8 per gigajoule internationally. It is not just a question of the cost of supply; there are some industrial consumers reporting they are unable to access gas at all, and this will have real consequences for Australian industry and consumers. It has impacts on the retail energy market. It is impacting not only energy prices and security today but also the viability of new gas-fired power stations. If someone were seeking to develop a new gas-fired power station today, they would have real doubts about their ability to secure long-term supplies at a reasonable price. There are many incentives, as Dr Finkel has documented, for gas plants to run on a peaking basis only, and that is impacting on the average price of electricity in the NEM.

There are manufacturing processes which can only take place if gas is available as a feedstock. There is no substitute; unlike the NEM, there are no alternatives. We have been hearing cases of even large manufacturing companies being unable to get the supplies that they need. The chair of our competition watchdog, Mr Rod Sims, has said that this is now a worst-case scenario. He said:

I do think companies will go out of business because of this and I think that will be a crying shame.

There have been simplistic suggestions that the root cause of all of this has been some of the restrictions that have been placed on gas exploration at a state government level. As I have indicated, I think this is overly simplistic, but it is difficult to talk about gas without talking about the conflicts that have arisen in the past decade between landholders and resource developers.

It is probably fair to say that many stakeholders who were seeking to develop their gas resources would have handled things very differently if they could have their time again. Ventures that are wishing to develop these resources need to engage seriously with both landholders and local communities. There needs to be a serious conversation about a fair return in exchange for access and there needs to be a serious conversation grounded in data about the risks that are presented to their assets and the impacts that developments may have. There needs to be a satisfactory resolution of the conflicts that have arisen between landholders and resource developers. But, in any case, allowing wholesale development of fracking would not solve this problem. We would not be able to get the resources on line in time and, in any case, this is not a simple supply problem.

We are producing a lot of gas. Australia is presently the world's second-largest LNG exporter, and it is expected to become the largest exporter by 2020. This has come about because our suppliers are overextended. They are diverting gas from domestic markets in order to fulfil overseas contracts. In the eastern markets, we have gone from using approximately 700 petajoules a year to needing about 2,200 petajoules a year, and this is largely because of the huge export operations that are running out of Queensland. These operations entered into long-term overseas contracts as part of building a bankable case for the export facilities, but new ventures have not been able to produce sufficient gas to fulfil these obligations. They are buying gas that would otherwise have been used to supply the domestic market. This was not what was anticipated when these projects were first put forward. The environmental impact statement, for example, for the Santos project says:

The project ... is not diverting gas from local markets to export markets ... the project has no direct implications for domestic prices.

That same venture now relies on third party gas from the domestic gas market for 60 per cent of its exports.

The situation has been worsened by the uncompetitive arrangements in some parts of the eastern gas market. The ACCC conducted its review into the east coast gas market and released its report early last year, and the problems it identified are still in place. Transparent contracts remain the exception, not the rule. The Finkel review observed that no-one can really say what the current market price is, because there is no visibility on the contracting arrangements. There are issues with pipelines and networks. The ACCC said:

Pipeline pricing exacerbates the effect of supply tightness on wholesale gas prices. There are currently very few constraints on monopoly pricing by pipeline operators.

These are serious structural problems in the market and none of these factors is particularly new. This crisis should not have taken government by surprise, yet, as with so many things in the energy sector, they seem to have been taken by surprise—caught on the hop. The ACCC reported last year. Labor has been calling for action for years. At our last national conference back in 2015, we adopted a gas export national interest test. That test would commit a future Labor government to ensure that Australian suppliers would not be hurt by the LNG export industry.

So this has all been on the table. It has all been known. These problems have been understood for some time, and yet we have from this government almost no response. We have the complete pretence that, through a casual conversation between the Prime Minister and some of the market participants, it would be able to resolve this. Well, nothing came of that—nothing at all. We now find ourselves with a domestic gas security mechanism proposed by the government that will be delayed in its implementation and that seems to have many features that suggest it will be fairly ineffective in responding to the problems that confront us now. My great concern is that the division within the government on this and the broader energy market will make it unable to respond to the crisis.