David Johnston (WA, Liberal Party, Shadow Minister for Defence) Share this | Link to this | Hansard source

I commence by recording my thanks to the Minister for Resources and Energy, Mr Martin Ferguson, and his staff for the courtesies and engagement they have afforded the opposition on this very important greenhouse gas storage legislation. I also want to compliment and thank the former Minister for Industry, Tourism and Resources, Ian Macfarlane. These bills had their genesis back in 2005. The primary objective of this legislation is the capture and geosequestration of carbon predominantly produced by large emitters. I put it in those terms because the entirety of the cycle is what is required to be considered for the commercial viability of this framework. Carbon capture and geosequestration is acknowledged by Geoscience Australia and all of those interested in the future of coal fired energy generation in Australia as arguably the best option to continue to provide to Australian households and Australian businesses reasonably cost-effective energy.

The legislation is predominantly focused on the Latrobe Valley in Victoria, where approximately 85 to 90 per cent of Victoria’s energy is generated through the mining and firing of brown coal. The Latrobe Valley has quite a magnificent history of providing reliable baseload power to not just Victoria but a very large region, including southern New South Wales and parts of South Australia. The kilowatt hour rate has varied over the years but currently is around 10c to 12c. The foundation stone upon which many people’s standard of living in this part of Australia is built is cheap, reliable baseload power coming from brown coal in the Latrobe Valley. The problem, of course, is that these power stations are very large emitters of carbon dioxide.

What this legislation seeks to do, in anticipation of capture, compression, transportation and then storage of greenhouse gas in subterranean repositories in the Bass Strait, is to provide a framework that commercial interests—namely, the emitters—can use in a practical way to plan their future capital expenses to mitigate their emissions. This is a very, very difficult task because we have to reconcile and balance the competing interests of petroleum titleholders with the titles that this legislation provides to the emitters or their agents who seek to sequester the carbon. Some of the very important issues in providing this user-friendly framework are, of course, surrounding areas of risk, given the very substantial tonnage of carbon that is likely to need to be stored and sequestered—in short, the question confronting legislators is: who shall bear the overall liability, responsibility and risk for this material? The time frames for the resolution of disputation between the petroleum titleholders and the sequestration title applicants are crucial to having a cost-effective framework. The last thing that the emitters, or those who seek to sequester carbon, require is a lawyers’ feast with QCs taking matters to the High Court in disputation with the petroleum licence holders. I will have some more to say about that in a minute.

The principal task of this framework is to reconcile the competing interests of the petroleum titleholders and the coal fired electricity generators predominately in the Latrobe Valley. I should pause to mention that there are another set of interests that also need to be considered. Those are the interests of the North West Shelf gas explorers and producers. Gorgon and Woodside, for example, both have very substantial issues with respect to the sequestration of carbon dioxide emitted by their plants as part of the process of producing liquid natural gas.

Can I also say that I think we do have some distance to go. I do not want to be seen to be critical at all of the department or the minister, but this is a very complex and difficult set of rules and regulations—a difficult balancing act—for different regions of Australia that have different requirements. This legislation is good. It is a tremendously admirable first step, but there are some fuzzy areas in it that I think are going to take a little longer to work through. I will deal with those in a moment.

What we want from the legislation is the starting point, Madam Acting Deputy President Hurley. I pause to acknowledge that, as chair of the committee dealing with this, you have an interest in how this matter pans out. I suppose it is timely that, by coincidence, you are in the chair when we are talking about this matter. What this legislation has to do is provide a commercially workable, viable framework that has as its primary consideration a cost-effective, user-friendly capacity. We anticipate that the science will be there in the next 10 years. We trust that it will, given the amount of money we are spending on it. The aim is to capture the carbon pre-combustion, post-combustion, chemically or through any of the other methods that may well be available. We will then have a product that we require to store—a product that must be taken away from the site of generation and sequestered into a repository at 1,000, 2,000 or 3,000 feet below the surface and, in this instance, because it is Commonwealth legislation, beyond the three-mile limit in the Bass Strait and in an area geophysically that will accommodate this material. By obvious coincidence and logic, that area is also the focus of oil and gas exploration and production.

That brings us to the competing interests aspect. Carbon, once captured, is more than likely—and we are surmising as to how this will take place because I suspect that this legislation will not actually see any real use for some considerable time, probably five to 10 years at the earliest—to be compressed to minus 161 degrees Celsius, forming a liquid sludge that will comprise predominately carbon dioxide but possibly a number of other chemicals including sulfur, maybe a bit of mercury and those sorts of things. This product will then require to be conveyed across the land surface into the sea via a pipeline, out to a site, potentially looking a bit like a drilling rig, and then injected into an area that is suitably explored, tested and evaluated to sequester the material. Thereafter, the challenge for the emitter is to maintain a high level of surveillance upon that site to ensure that there is no leakage.

That all sounds very technical and it is quite a significant undertaking. It is being carried out successfully right around the world and has been carried out in many forms for probably 25 or 30 years with respect to oil and gas production. Enhanced oil recovery has been a recognised science for a very long time in oil and gas technology. That is where the oil and gas producer injects, adjacent to the production well, a drill hole and, under pressure, inserts a product—it could be salt water, carbon dioxide or another form of gas; it could be methane; it could be anything—to increase and enhance the pressure of the geophysical repository such that the production of oil or gas as the case may be is enhanced.

That has been happening for a very long time and has been a very successful methodology. What we are saying is that that methodology has obvious uses with respect to the sequestration of carbon. There are a number of very important examples. I pause to acknowledge the work of both this government and the previous government with respect to the Otway site in south-western Victoria where, as we stand and talk here now, there are 100,000 tonnes being slowly injected into a subterranean repository and being measured and monitored by the CSIRO and a very capable international corporation with experience in this area called Schlumberger. It is a very exciting prospect to see how long it will take for the gas injected approximately 400 metres from the detection site to seep across through the subterranean repository to be recorded. This is a great experiment for Australia and somewhat of a world leading example of the technology.

The legislation does have some areas that need clarification. One of the principal problems in providing the commercially usable framework is that the sequestrators will not know much about the site. They will have to employ consultants to take the geophysical data from Geoscience Australia. I think an area that is important is their free and ready access to this. The oil and gas producers will more than likely be unwilling to provide their exploration data and their research data. However, given that these generators and emitters are providing electricity to our communities, there is a national interest involved here and I expect that the legislation would streamline access to data so that the emitters could, in a cost-effective way, receive assistance in identifying sites.

Again, if the emitters were to drill their own sites in greenfields areas that are beyond the oil and gas petroleum titles and were to encounter hydrocarbons, an interesting event arises: an electricity generator may suddenly become an oil and gas producer. But that remains to be seen, and I think we need to be clear as to what the eventualities are, were that to happen. I am sure the department has an answer for that. I am not entirely sure that this permit completely prohibits a proprietary interest in anything discovered whilst undertaking such drilling. Having said that, we then turn to the principal area of concern and that is the reconciliation of the petroleum permit rights with the rights of the applicant to sequester; namely, the rights of the emitter through this sequestration entitlement.

Personally speaking from some experience in mining legislation in Western Australia, the most important thing is that oil and gas permit holders who are investing very large sums of money now and into the future have security of title. That is the first step. Without that we inadvertently undermine the financial valuation of the resources and assets that these companies hold. That is the starting point from the opposition’s perspective—certainly from my perspective. Oil and gas petroleum title holders must be assured and confident, as their financiers and boards must be, that this is not an assailment or an attack upon their titles. They should be able to say and prove, as this legislation seeks to provide for, that if there is adverse effect to their present or future legitimate operations as anticipated through their exploration work they should be able to successfully object to sequestration applications.

I think that is a very important starting point and, of course, there needs to be adjudication of that on a basis whereby we have firstly established the legitimate bona fides of someone requiring to sequester carbon. That is, it must be a strategically financially viable operation that is producing carbon which seeks to acquire the tenement. By establishing that, we eliminate the potential for anybody to want to speculate in these tenements. That would entirely defeat the purpose of what we are about here. So we have to have a legitimate applicant and we have to have a bona fide petroleum title holder who can show that that corporation’s future prospects are adversely affected by this application. Then we have to have a proper adjudication.

Thereafter, we have to have an adjudication that is essentially very fast but fair. There is absolutely no point in having a framework that wraps the parties up in a long bureaucratic process. We are talking several cents, or potentially dollars, per tonne per kilometre in moving this material offshore; dollars per tonne in injecting it into the surface. That is attacking the bottom line of the generators and that flows directly into Australian domestic households and into businesses.

I note that the Senate said that the framework should be successful and it should therefore translate into a smaller increase in household electricity bills. May I say, I think we all hope for that. The chances of that are very minimal. If you consider that the bolt-on capture mechanisms for these emitters are probably not even tax deductible and run at hundreds of millions of dollars, the transportation costs alone—the energy to drive the material 50 to 60 to 70 kilometres offshore—are going to be very expensive. There is absolutely no way that these costs could not be passed on to domestic households and to business.

Having said all of those things, I think the history of this technology is very, very good. It is evolving; it is new. At the Archer Daniels plant in Illinois in the United States they are injecting three million tonnes of carbon dioxide from an ethanol plant. I anticipate that that will be a very successful model as a project carried out in a quite densely populated region of the United States. I think and hope that it will be a great example and reassurance to those who have some doubts.

I pause to say that the states have been dragging the chain on these models. South Australia is leading the way, which is good for them because they have a large oilfield and a gas field in the central part of their state. I give them credit for that. But the point is that other states have failed to grasp the nettle of how a framework for this could work. I come back to my original proposition: if it is going to be viable, it has to be cost-effective. Therefore, the sites have to be adjacent to where the gas is emitted.

In doing any net present value calculations of what type of plant equipment and structures are needed to inject this material into the subterranean repositories that I have talked about, we must have frameworks that are commensurate with and complementary to the Commonwealth framework—and I compliment the minister again—but which have as a priority a cost-effective, user-friendly, nonbureaucratic series of mechanisms so that people can know where they stand very quickly and get on with the job of moving from site to site if things do not go as planned. Having said all of that, I think this is a great first step. I see some shortcomings, but I think they will work themselves out over some time. I think it is a step in the right direction.

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

At the outset, I would like to acknowledge the thoughtful contribution to the discussion just made by Senator Johnston from Western Australia. I note that he has been of assistance to the government in the preparation of these bills. It is only proper to put that on the record. I would also like to acknowledge at the outset the significant work done in this area by the responsible minister in the previous government and the continuation of that work to almost completion by Minister Martin Ferguson in the current government. Also, whilst giving acknowledgements, I think it only appropriate to place on the record the fine work done in respect of the examination of these bills by both the House of Representatives Standing Committee on Primary Industries and Resources, chaired by Dick Adams from Tasmania, and yourself, Acting Deputy President Hurley, in chairing the Senate Standing Committee on Economics which similarly examined this particular piece of legislation, which, as was indicated at the outset, is quite groundbreaking. It will have a significant impact many years into the future. It is quite necessary for the establishment of a long-term, viable, commercially productive industry in this area and it is also quite critical to our government’s plans for carbon storage as we go into future years.

With those introductory remarks, I rise in support of the Offshore Petroleum Amendment (Greenhouse Gas Storage) Bill 2008 and three like bills and note for the record that the bills seek to achieve a number of purposes. Firstly, they establish a system of offshore title for the storage of carbon, and these titles will be similar to the offshore petroleum titles that already exist under the act. The legislation will authorise the transportation, injection and storage of greenhouse gas submersion in deep geological formations under the seabed but also make changes to the existing regime of petroleum titles that are needed to accommodate new types of activities authorised by the legislation.

We all know that 80 per cent of Australia’s electricity is generated by coal. No serious response to climate change can ignore the pressing need to clean up the harmful emissions that come from the use of coal. The establishment of a carbon capture and geological storage, or CCS, framework represents a major step towards making low-emission coal a reality now and into the future. CCS is essential for the long-term sustainability of coal fired electricity generation.

The coal industry is highly significant not only to Australia’s economic prosperity but also to the world’s current and future energy supply. Coal currently provides almost 80 per cent of Australia’s electricity generation capacity. Surprisingly, when I was doing some reading I found coal also supplies 40 per cent of the world’s electricity needs. Clearly, for the foreseeable future, coal will remain critical to Australia’s and the world’s electricity needs. Indeed, the International Energy Agency forecasts that coal will provide around 44 per cent of world electricity needs in 2030. So in just over 20 years electricity generated by coal will further increase by four per cent.

Accordingly, it is critical that domestic policies support the development and deployment of low-emission coal technology. Considering this by way of background, it would be hugely irresponsible for the Australian government to in any way close down the Australian coal industry. To do so would be to forsake the economic opportunity that global demand for coal represents for all Australians. It is Australia’s largest single source of export earnings. It will generate an estimated $43 billion in export income in 2008-09. It is the lifeblood of many rural and regional communities and it employs some 30,000 people around Australia. If Australia were to stop mining and exporting coal, countries like China and India would simply find other suppliers to meet their demand because they have no choice if they are going to maintain their progress in terms of economic transformation. Therefore, any response to climate change pressures must also take into account the need to maintain adequate and reliable energy supplies by making the use of fossil fuel cleaner.

The government recognises that new clean energy technologies, including both fossil fuels and renewable energy sources, are the key to a sustainable climate change solution. The Rudd government is providing leadership and policies that reduce or eliminate greenhouse gas emissions but at the same time ensure that we continue to prosper from our abundant energy resources. In this context, and as a fossil fuel dependent economy, the Australian government has a pivotal role to play—a pivotal role in driving technology outcomes that reduce or eliminate greenhouse gas emissions. A key part of this effort is the need to establish a framework to allow for the capture and geological storage of greenhouse gases emitted from fossil fuel use, both domestically and in countries which purchase and use Australian coal.

The centrepiece of the government’s climate change policy is its commitment to establish a Carbon Pollution Reduction Scheme in 2010, and this scheme will establish a forward price for carbon within the Australian economy. Placing a cost on carbon will encourage industry to develop and deploy low-emission technologies over time. The government’s legislation establishes access and, more importantly, property rights for the safe and secure injection and storage of greenhouse gases into stable, subsurface geological reservoirs in Commonwealth waters more than three nautical miles offshore.

The legislation aims to provide project developers with the certainty required to commit to major low-emission energy projects involving CCS. It also allows for the establishment of an effective regulatory framework to ensure that projects meet health, safety and environmental requirements. The legislation will create an environment in which industry can invest in CCS projects with confidence and will encourage the commercialisation of technologies which will have the potential to play a vital role in reducing global greenhouse gas emissions in the future. The legislation provides for appropriate consultation and multiple use rights with other marine users, including the fishing and petroleum industries, and ensures that pre-existing property and use rights are properly reserved.

So far I have discussed in passing the significance of the coal industry and then given an overview of the government’s legislative framework. I want to now turn to the issue of liability, which is addressed in some detail in both the House report and the Senate report that I discussed at the commencement of my remarks. Put simply, the government proposes to establish a regime for the injection of CO2, carbon dioxide, into underground geological storage. As a matter of sheer logic, this proposal raises issues of leakage for the storage structure and the shifting of CO2 away from the storage structure.

The proposed legislation is silent on the question of long-term liability. Indeed, liability could be anywhere from generations to hundreds or even thousands of years hence. There are, when one reads the relevant chapters in both reports, quite cogent arguments both for and against the acceptance of long-term liability by the government. Those arguments go to issues of risk, incentive, cost and legal responsibility. Risk involves the lack of precedent, which can create investment uncertainty and impede commercial development. Why? Because carbon capture and storage is an up-and-coming industry; it is not yet a mature industry. This lack of maturity is reflected in industry’s inability to mitigate risk from common-law liability. Similarly, risk uncertainty through lack of precedent may prevent long-term insurance for projects because of the lack of actuarial data and the long-term nature of the risk.

The issue around incentive relates to the formal transfer of long-term liability from the operator of the project to the government. Such transfer would ideally be conditional upon strict adherence to prescribed site closure criteria. Arguably, this complexity and ongoing liability will be a disincentive to investment in a particular project or projects. The concerns around cost again relate to the uncertainty over long-term liabilities. By this, as I said, I mean over periods of up to hundreds of years or more and responsibility for actual remediation if damage should occur. Is this a cost to current shareholders or is it an embedded liability which might become real for future owners? This is not an insignificant issue, because structural damage, either through negligence or malfeasance, could be a company breaker in the future.

The final concern relates to legal certainty. This is clearly critical to significant large capital investment, which is going to be required to fund these projects and was referred to by the previous speaker. One only has to look at the raft of consolidations, acquisitions and project transfers that occur in oil and gas related industries to understand the sheer volume of commercial activity in these areas. In the last 10 years alone dozens and dozens of major companies have been taken over, have gone out of business, have been restructured or have simply been absorbed into larger enterprises. One only has to look at the significance of BHP Billiton or Rio in this country to understand how many other separate companies no longer exist in a legal sense in Australia. I raise this because it relates to long-term legal responsibility for liabilities incurred by companies that no longer exist. These are all significant issues.

As I said earlier, the legislation has been examined by the two respective committees. On the issue of liability, the House committee recommended that a process for the formal transfer of long-term liability from the operator to the government be established within the proposed legislation. Interestingly, the relevant Senate committee had an opposite recommendation: it recommended that the government reject calls for it to assume explicitly long-term liability for any leakage from carbon storage projects. Presumably the Senate committee was of the view that there was currently adequate legal protection in the common law. The latter situation is the intent of the current set of bills before the chair because this set of bills is silent on the question of long-term liability—that is, once the licensee’s statutory obligations cease when the site-closing certificate is issued, future issues of liability would be in the domain of the common law. It is all well and good to leave things to the common law, arguably evolving from litigation around disused coal mines and the like in the United Kingdom. However, in the longer term the risk, in a sense, does and will pass to the community because project participants may cease to exist or because of some time-related factors such as the unavailability of witnesses.

This is indeed a quite a complex bill. It has within it a lot of balancing, addressing the concerns of different regions around Australia. Major issues do need further discussion, particularly around the issues of risk and liability. One should also observe that this is a groundbreaker in the sense that one of the reports identifies this as the first piece of legislation for CCS anywhere in the world, so not only are the deliberations going to be observed in this country but, because most of the key participants are subsidiaries of international companies, it is going to have a lot of impact into the future in other parts of the world when those countries have to address the issue of carbon storage.

I would like to make a few remarks on an announcement by the Prime Minister and Minister Ferguson—I think on Monday of this week—concerning the government’s global carbon capture and storage initiative, where the Prime Minister announced a $100 million global institute to speed up the development of carbon capture and storage technology. Through this institute, the Rudd government intends to work cooperatively with other countries to help reduce the amount of CO2 released into the atmosphere. The government is offering to host that institute in Australia and will continue to contribute up to $100 million per annum towards its operation. So we have not only groundbreaking legislation before the chair for discussion which is going to impact on this emerging industry around the world into the future but also a clear, firm commitment from our government of a sizeable amount of money to give intellectual support to research and development in a range of projects attached to this issue. That is indeed a most worthy development.

Finally, the minister has asked me to advise the Senate that negotiations are underway with various parties in the Senate. The government will listen to the debate closely and give detailed consideration to any proposals to improve the legislation. The government will come back with any proposals in the committee stage.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I rise today to make some comments on the Offshore Petroleum Amendment (Greenhouse Gas Storage) Bill 2008 and associated bills, which provide for the capture and storage of carbon dioxide in underground cavities offshore. Carbon capture and storage is an integrated process made up of three distinct parts: carbon capture, the transport of the CO2 and the storage, including the measurement, the monitoring and the verification. It aims to produce a concentrated stream of CO2 that can be compressed, transported and stored. The transport of the captured CO2 is likely to be via pipelines. Storage of the CO2 is the final part of the process, and the majority of storage is expected to occur in geological sites on land or below the seabed. Disposing of waste CO2 in the ocean has also been proposed, but this method has been discounted due to the significant impacts that CO2 would have on the ocean ecosystem and to legal constraints around the world that effectively prohibit it under the London sea-dumping convention.

However, the urgency of the climate crisis means that we must have large-scale solutions for reducing carbon dioxide as soon as possible, and the fact of the matter is that carbon capture and storage cannot deliver in time. We have an urgent crisis with climate change. The Intergovernmental Panel on Climate Change says that global emissions must peak and start reducing by 2015. There is no prospect whatsoever of large-scale carbon capture and storage, with its associated coal plants, being on track anywhere until 2030. The first issue we have, then, is the urgency of the climate crisis and the question of the likelihood that carbon capture and storage could meet the deadline, and the answer is ‘failure’; it cannot meet the deadline.

The second issue is: what is the target that we are aiming for? What nobody is acknowledging here is that the coal fired power generation associated with carbon capture and storage is described as ‘low-emission technology’, not ‘zero-emission technology’, because it is still a significant emitter. The fact of the matter is that, because of the loss of efficiency at the coal fired power station in order to capture the carbon dioxide, you have to mine more coal in the first place. So you are actually mining more coal in order to get the same levels of output from your power station, and then you have these ridiculous costs associated with the transport of that CO2 by pipeline and the costs of injection underground. Thirdly, there is the issue of the liability and risk associated with who actually pays in the longer term. So whether or not this technology is ever proven remains to be seen, but the fact is that if you have a stringent target—and the Greens believe we need to get 40 per cent below 1990 levels by 2020 and get net carbon to zero as soon as feasible, and certainly before 2050—then there is no way that this technology plays into the arena of the nature of the cuts required at the price. Everybody talks about ‘at the best price’ and I will get to that in a moment, because carbon capture and storage is extremely expensive.

You have to ask the question: why is Australia—with the best solar radiation in the world, with some of the best wind resources in the world and with fantastic geothermal resources—choosing to pick a winner, in terms of where we put public money, and go with the coal industry as opposed to looking at the whole range of options. We get told all the time that the government does not want to pick winners when it comes to renewable energy, but the government has already picked its winner with so-called clean coal. Why do I say that? It is pretty obvious: we have a $500 million low-emission technology fund—that is code for clean coal. Last week, in an interesting twist, the Prime Minister announced $100 million for his new knowledge hub for so-called clean coal. Usually when good news announcements are made the government announces how much it is going to spend over the quadrennial period so that it maximises the amount of dollars. Last week they announced $100 million for this clean coal facility and then said, coughing behind the hand, that that amount was for every year. So they are actually giving $400 million to this clean coal knowledge hub on top of $500 million for its low emissions technology.

I am still waiting for the announcement, in relation to the promise that was made in the election campaign, of the $100 million for the centre of excellence in solar research. I think the $100 million for solar research just got rebadged into $100 million for this knowledge hub. Why did we have the announcement last week? That was because the Prime Minister is going to New York this week and his address at the United Nations will focus on the leadership role that Australia wants to play in clean coal technology around the world, and the Prime Minister needed to have made an announcement before he left the country, before he got to the UN. This legislation that we have just heard about from Senator Bishop is the first legislation on this in the world. So the Prime Minister can tell the United Nations that Australia is moving to have a legislative framework for the storage of carbon dioxide. The fact that the liability issue has not been addressed is going to result in another cough behind the hand, because that is the one issue that the whole of the coal industry want to know about—because they want certainty in terms of investment.

Why is the UN speech so important? It is leading up to Poznan, and in Poznan no doubt the Australian government will be trying to put together—with the Polish government, the South African government and any other government which will join—a global coal plan that Australia wants to take leadership of. So we will become the coal king of the planet. What an appalling scenario for Australians who thought, when they voted for the Rudd government, that they were actually going to get action on climate change! We had that confirmed yesterday in question time, when Senator Carr, who is quite explicit about that—and I am grateful for his honesty in this—said:

This is an absolutely critical program for coal rich countries like Australia. Coal is vital to regional economies and communities around this country. Last year, it earned some $21 billion in export revenue. We cannot turn our backs on this resource, and we do not have to. Committing to a low-carbon future will stimulate the innovation and technological development needed to reduce the greenhouse gas impact of coal.

Well, the first bit is true. The whole focus is on the $21 billion export market and the desire for Australia to keep on mining and exporting coal. That is fundamental to anything we look at here. It is not about moving to a low-carbon economy; it is about protecting, at all costs, the coal industry. The second claim is that committing to the low-carbon future will stimulate the innovation and technological development needed to reduce the greenhouse gas impacts of coal. Well, it will not unless the government pours money into it. Why? Because the industry itself has no confidence whatsoever that this technology is going to work at a price that is reasonable. In fact, John Boshier, from the National Generators Forum, said on television:

I think we all felt a few years ago that clean coal was doable and was a great option for Australia. We’ve got a lot of coal in Australia. We’re now worried about how long it will take and how much it’s going to cost on the scale that we’re talking about.

Quite right. The coal industry gets it. He went on to say:

Well, it certainly is something of a wing and a prayer at the moment for a banker to put any money into clean coal technology. A banker is wanting to see plants that have got a really good prospect of commercial success and we don’t have that at the moment.

When the coal industry does not even have the confidence that it can capture carbon dioxide pre combustion or post combustion and put that onto an existing power station, why should the community stump up the dollars for the coal industry? The fact is that all of Australia’s coal fired power stations are unsuitable for postcombustion capture. So we are talking about having to build new coal fired power stations in order to go with this technology. There is nowhere where they have been able to bolt it on successfully at a reasonable price, because it reduces the efficiency of the power station by at least 30 per cent and then increase the inputs at the other end in terms of the coal that has to be mined.

Let us talk about what has happened despite all the fabulous discussions that have taken place about how good this technology is. Let us start with the US, where they had such faith in carbon capture and storage that they went with their FutureGen project. It was going to be America’s only commercial-scale experiment in carbon capture and storage. It was announced by President George Bush in 2003 and involved building a 275-megawatt coal gasification plant in Illinois. It would produce fewer emissions and so on and so forth. The site had been chosen, technological reports done and the first stage of construction was to start in early 2009 but, oh dear, it fell over. It fell over, with the US government announcing that it was no longer going to put any more money into the project because of cost over-runs, technical difficulties and so on.

Let us go to Western Australia, where, again, we were told about this fabulous project at Kwinana. This was going to be the bee’s knees in terms of a clean coal project—a $2 billion hydrogen power project in Western Australia. And then, oh dear, it fell over. Rio Tinto and BP pulled out. But who paid the cost? And this was not publicised very much either. We discovered that in fact Western Australian taxpayers are now facing a bill approaching $1 million a year to meet the holding costs associated with the site. Essentially, what happened was that Rio Tinto and BP were negotiating with LandCorp to take a long-term lease over 76 hectares of a former petrochemical plant site to build this 500-megawatt power station using clean coal technology, and it fell over. Western Australian taxpayers have been left with paying $1 million a year, but apparently that does not matter. BP and Rio Tinto have just walked off and left the taxpayers with the problem.

On the very day that the Prime Minister announced his fabulous new investment in Australia being a hub, we found that a landmark clean coal technology project funded by the Commonwealth, backed by the Queensland government, to help steer Australia’s economy away from its reliance on coal power had been scrapped. In fact, $75 million had been promised from the Commonwealth Low Emissions Technology Demonstration Fund to that Fairview power project near Roma in Queensland. But it fell over because, and I quote: ‘There is currently no business case to build an industrial-scale project unless the government tips in more financial support.’ So here we go: at every point along this trajectory you find that the coal industry, which has made megaprofits out of polluting the environment for the last 100 years and has been the largest contributor to the greenhouse gas emission problems we are all suffering from, now has its hand out because it wants the government to tip in more money for the research and more money for the technology.

But is it all we have got? Isn’t there anything else? Of course there is something else. It is no surprise to me that the CSIRO and the Cooperative Research Centre for Coal in Sustainable Development sat on a report for a very long time and did not make it public because it predicted that the cost of electricity from concentrated solar thermal plants would be competitive with coal-fired power generation in five to seven years. The coal industry certainly would not want that made available to the public, and so those bodies sat on that report for a very long time. But that is the fact of the matter: solar technologies, wind technologies, geothermal technologies, wave power and a whole lot of the renewable energy technologies are coming on much faster than any of this so-called promise when it came to ‘clean coal’. The renewables industry are saying that they can produce the power but they need to be given some help in commercialising the technology. So why is it that we have picked entirely the wrong horse to back and then fixed the race for the wrong horse to win?

This is an appalling situation in terms of the use of public money. Public money should now be being used to bring on those renewable energy technologies which need assistance with commercialisation and which do not have these mega long-term liability costs associated with them, and then these new technologies could be driven by a gross feed-in tariff, which is what has driven that technology to explode as a solar revolution in Germany—and we are seeing that with renewable energy right round the world.

So there is no business case at all for this so-called carbon capture and storage. We cannot modify existing coal fired plants. What the government is not saying is that this is a recipe for Australia to build new coal fired power plants in the future. As the Minister for Resources and Energy, Martin Ferguson, said at the opening of the Otway Basin project:

… we are a fossil fuel dependent economy and our major export is coal. In my opinion, we’ll see at some point in the future new coal-based power stations in Australia. There is no alternative …

New coal based power generators in Australia—now that is a nonsense. We should not be building new coal fired power stations. And they would be labelled ‘carbon capture and storage ready’ so that they could be retrofitted at some point in the future if the technology is ever proven.

This is exactly what the tobacco industry did. It complained that it was a major industry, that it contributed a great deal to export earnings and that it had to be saved at all costs. In order that that occur, they invented so-called low-tar cigarettes which apparently—according to the tobacco industry—did not have the same problems attached as regular cigarettes. That extended the profit margin of the tobacco industry for a long time by extending its social legitimacy on the basis that, somehow, its new cigarettes were marginally better. Well, that is exactly what carbon capture and storage is: it is trying to give social legitimacy to a technology which is killing the planet and it is trying to do that by suggesting it will go to a low-emissions future—not zero emissions; low emissions.

The costs are huge. As Senator Johnston said earlier, imagine the costs of capturing this carbon in your new power stations, pumping it out there, injecting it underground and then the long-term risk and liability associated with it leaking out. And who is going to pay for that? All that is going to go on people’s power bills. Why would you do that to the Australian community? Why would you lump them with these hideous new costs when you can scale up the renewable energy technologies, where you do not have the liability issues and where the primary source of the energy is free? The sun and the wind are free. Wave power is free. Why wouldn’t you go with those technologies? Why would you want to try and lock Australia into, leg-rope Australia to, the old coal past?

On the matter of liability, there is no way that the Australian taxpayer should bear the liability for leakage from any of these storage sites. While initially you might get some geological formations which hold that carbon dioxide—and that is a maybe—you certainly will not when you are talking about the volumes you would have to capture. The coal industry will be looking for holes in the ground, wherever they can find them, and as soon as they get their closure certificate they will walk away. As they become more and more desperate and the costs of the pipelines become greater, they will go to dodgier and dodgier sites, where the leakage risk is going to be higher and higher. So, if the government wants to pursue this strategy, the coal industry should bear the liability, not the taxpayer. We know there is the potential for liquefied carbon dioxide to leak into surrounding structures or to leak out altogether and gradually make its way into the atmosphere. Somebody will pay; we will pay in making good on the emissions and we will pay in terms of the risks to the environment generally from this technology.

So I am foreshadowing that the Greens will be moving a second reading amendment to say that if the government wants to proceed with this then there should be a bond paid up-front. Just as miners have to pay bonds for what they do for rehabilitation and long-term risk, I am saying that we should make it explicit in this legislation that the total liability rests with the companies that want to dump this stuff in a waste dump strategy. It is an extension of our landfill strategy to the 21st century. They should take liability for it. What is more, before they pump any of it out of their power stations, into these pipelines and into the ground, there should be a bond adequate to the long-term cost and projected price of making right, in the global context of our targets, the carbon that goes to the atmosphere.

Annette Hurley (SA, Australian Labor Party) Share this | Link to this | Hansard source

I was chair of the Senate committee that considered the Offshore Petroleum Amendment (Greenhouse Gas Storage) Bill 2008 and related bills. It followed on from the House of Representatives committee, chaired by the Hon. Dick Adams, which had extensive hearings on these bills and produced a very comprehensive report. These bills are very significant and, as has been pointed out by Senator Bishop, it is groundbreaking legislation in world terms.

The bills allow for the sequestration of carbon dioxide in offshore areas around Australia. Critically, they provide for a uniform national approach, which is something that is vital both for the industries that the bills will apply to and for the governments involved. It means that everyone understands the parameters of carbon capture and storage and that we have nationally uniform legislation to provide for safe and secure storage.

But we must remember in this debate that this is only one element of the government’s comprehensive plan for dealing with carbon. There are also the Carbon Pollution Reduction Scheme, which is being developed, the low-emissions coal scheme and we have also had an announcement by the Prime Minister on 19 September of a global carbon capture and storage initiative. It is very important that we recognise that this is part of a comprehensive strategy by the government, because this is not of course the sole answer to carbon emissions, and the government does not pretend that it is.

During our inquiry we received many submissions that talked about the problems of the amount of carbon being emitted—principally, we are talking in this instance of that from coal-fired power stations—and the comparative shortage of suitable areas for geological carbon sequestration. Indeed, the Victorian government were very concerned that they have access to suitable sites for their carbon sequestration needs. There were tensions between competing proposals to use the Australian sites that are suitable for this purpose.

Several pilot plants are already operational around the world and in Australia, principally Sleipner in Norway, which has been used for over 10 years for sequestering carbon from petroleum operations around Norway. That has been operating very well and without incident for over 10 years. It provides a good example of what is possible. We also have a pilot project here in South Australia in the Otway Basin. CO2CRC is operating that.

It appears that the technology for carbon sequestration is reasonably well understood. It has been operating at a pilot level and it has been operating as part of other chemical plant operations. For example, Senator Johnston, I think it was, referred to one in the United States, which was an onshore facility. We do know that this technology is possible and practical. The important thing now is to set in place the framework legislation that ensures everyone’s interests as much as possible. This is what the government has attempted to do. As was mentioned earlier, the previous minister, Mr Macfarlane, began this process and Mr Ferguson is now completing it.

The tension between the petroleum licence holders already operating in the offshore areas that are most likely to be prospective suitable geosequestration sites and others, particularly coal fired power station operators who may want to use this sequestration facility, is something that has occupied the attention of both the House committee and the Senate committee. The House committee went into quite a lot of detail about this. Therefore, in many ways, the Senate committee that I chaired did not have to go over that ground. It was clear that it was important that the operator shared information, that the government had expert advice and that there was fair distribution of the available sites. Whereas the legislation had to some extent provided that, I think the recommendation of both the House committee and the Senate committee that the government look to expert advice to deal with these competing interests is undoubtedly the best way to go, and the government was very open to that point of view.

I will not go back over ground that some of the other speakers have covered, but it is important to understand that existing petroleum and gas explorers that already have these offshore sites have their own carbon dioxide emissions and they are being given priority to ensure that they are able to sequester their own carbon dioxide if they have suitable sites on their exploration permits. Clearly, this is a logical step. In the Senate hearings we heard quite clearly from Woodside about the way in which they deal with the carbon dioxide which they need to remove from their gas in order to conduct their operations properly. It needs to be removed in order for them to produce LNG. So it makes sense that those operators can take their own carbon dioxide and sequester it in their own basins. That is clearly the most efficient way in terms of their technical operations and it also makes sense from an economic point of view.

We also had a great deal of evidence from other companies, and, indeed, from the Victorian government, that it was also important that petroleum and gas offshore operators did not unnecessarily withdraw from open source those areas that were potential carbon sequestration sources and that those other power stations and other operators who wanted to use those basins could have a way to get in there and not be shut out by the existing licence holders. We did hear from some licence holders that there may be a problem that if other people are operating in their exploration and operation areas then it may impact on their own operations. It may create safety considerations or it may cause some leakage into the area that they were looking in, whether for gas or petroleum.

So there are a number of competing interests here and it is certainly clear that the minister and the government need expert advice from a technical point of view and from a geological point of view about how to best resolve these competing interests. It seems clear that the best way to achieve this is for a minister to have expert advice through some kind of committee structure, which ensures that there is fair access for everyone.

Also it is important to ensure that when the operation is closed down it is closed down in the best way possible to ensure the safety and security of the basin which is used to store CO2 and perhaps other kinds of gases as well. It is important that, before the government gives that basin a closure certificate, the government has the expert advice that that is done in the best way possible. This basin may be there for a very long period of time and people need to be protected against possible accidents or adverse events or leakage from that basin.

That brings us to the very vexed issue of liability. The Senate committee were happy to accept most of the House committee’s report, but part of our reference pointed specifically to these issues of liability and that is what occupied a lot of our attention. Long-term liability was an issue of great contention and we heard evidence on both sides of the argument about whether the Commonwealth should assume the liability or whether the company should assume liability. Senator Milne made very well, I think, the arguments about why it is a problem. Companies must understand that it is their responsibility when making the application, first of all, to ensure that the carbon dioxide can be sequestered securely and that there are no long-term consequences from it. Once the closure certificate has been issued, it is also up to the company to ensure that that is maintained in the way described. Obviously where the company no longer exists—and we are looking at very long periods of time—and where there are problems then it would clearly fall to the government to address these issues. But the Senate inquiry specifically recommended that the government makes very clear that it will not under normal circumstances accept long-term liability for any problems that arise after the closure certificate.

In doing that, the committee clearly accepted that this may cause difficulties for companies. This is a technology that is clearly not operational other than in a pilot phase at this time—and hopefully it will move as quickly as possible into a fully operational system. But we do not yet know a lot of the difficulties companies will face—the cost of building pipelines, of drilling down, of doing environmental assessments, and of making the sites secure and safe; and that will be a costly process. They then have to look at getting insurance for a liability that will continue for a long time into the future. We did hear from the Otway Basin carbon dioxide CRC that they had some difficulty in getting insurance for their project.

This was not a decision that the committee took lightly, but in the end we did accept that the precedent of the Commonwealth accepting long-term liability for this kind of venture might have unforeseen consequences and we did also accept that the common law in this instance is well accepted, well developed and should cover the kinds of situations that we may be looking at well into the future. It is indeed very difficult, as has been suggested, to set any kind of time limit on when the companies might have liability which would then be taken over by the Commonwealth. Twenty years has been suggested. But we are looking at a very long-term project, and it is difficult to know what kind of situation we may be looking at in 50 to 100 years time. I think the common law is the kind of law which is flexible enough, which includes those kinds of negligence provisions and which would see us able to deal with any incidents into the future.

This is the one strong instance where the Senate committee differed from the House committee, in recommending that the government makes very clear that it will not be accepting this liability, that it is the companies who are involved right from the beginning in applying for these permits that should, right at the end, after the closure certificate has been issued, also be responsible for ensuring that that remains a safe and secure site.

I commend the government for putting forward this legislation. Now that the legislation is going through the federal parliament, I think the states should be able to follow fairly quickly behind. It is certainly my hope that the states do very quickly follow with their own legislation dealing with carbon capture and storage so that we do have a very clear legislative regime applying around Australia, because we understand that many companies are willing to proceed with this technology as soon as possible.

In that respect, I also commend the government on the carbon capture and storage initiative announced by the Prime Minister. As I said previously, I think the carbon storage technology is really fairly well understood. It is in the area of the most effective and efficient means of carbon capture and transport that we need quite a lot work to be done. To join in the knowledge and technology from around the world in this global initiative is, I think, very definitely the way to proceed. Everyone in the world has these problems with carbon emissions. We certainly have excellent people involved in the research and technology in Australia, but it is an excellent measure to get involved with other people around the world in a group effort to try to ensure that we can put in place these very important technologies as soon as possible.

Senator Milne was expressing concern that this technology could not be implemented fast enough. I think the money that the Australian government is putting into this global initiative, which will be headquartered in Australia, of coordinating national centres around the world is indeed money well worth being spent. We do have a number of coal fired power stations around Australia and we do need to deal as urgently as possible with the carbon emissions from those coal fired power stations, and the quickest and most efficient way to do that is for Australia to use world technology to deal with technology gaps that we have and to develop collaborative research on this project and collaborative technology so that we can implement this technology as soon as possible. Whether or not we lead the world is not important as long as Australia is doing as much as it possibly can to deal with carbon emissions from coal fired power stations.

Don Farrell (SA, Australian Labor Party) Share this | Link to this | Hansard source

I am pleased to have the opportunity to speak on this most important piece of government legislation. The Offshore Petroleum Amendment (Greenhouse Gas Storage) Bill 2008 and related bills deal with some of the more innovative aspects of what the current government is planning to do on the issue of energy. My own state, of course, has been a pioneer in lots of these areas. As Senator Bernardi would know, we lead the country in wind power. You may be smiling, Mr Acting Deputy President Parry, but what I am saying is true. We are innovators and leaders in South Australia in energy and, in particular, new forms of technology in the energy sector. One of those areas that you might be interested in is, of course, wind power. We have now developed about 45 per cent of Australia’s wind power resources, yet we have only nine per cent of Australia’s population.

Cory Bernardi (SA, Liberal Party, Shadow Parliamentary Secretary for Disabilities, Carers and the Voluntary Sector) Share this | Link to this | Hansard source

The smartest nine per cent!

Don Farrell (SA, Australian Labor Party) Share this | Link to this | Hansard source

Yes. I do not often agree with things that Senator Bernardi says, but on this occasion I would have to concede that it is the smartest nine per cent in the country. Because we are smart in South Australia and because we have often had to do more with less, we have managed to develop new technologies that the other coal rich states have been able to ignore.

It is a great pleasure for me to be able to talk about the fact that this is one of those areas where the Rudd Labor government is moving to deal with issues that confront not just the state, not just the country but the world. We know that greenhouse gases continue to pose a very significant threat to the planet through climate change. I am privileged to be on the Senate Standing Committee on Rural and Regional Affairs and Transport, which is currently looking at the issue of the Coorong. We can see daily the effects of climate change on our community, the way it is affecting irrigators, the way it is affecting farmers and the way is affecting the lives of the people who live in my state. Because of the problems of greenhouse gases we have to develop realistic, practical responses to deal with the issues of climate change and carbon.

This bill seeks to develop the sorts of technologies that enable the government and industry to work together to capture and store carbon, because it is the capture and storage of the carbon that is going to be critical to this country making its contribution towards addressing the pressing issue of climate change. Some people may criticise the government for investing in research and development to make coal emit less carbon into the atmosphere. But those critics would be wrong, because this is something that we must now do. We have no choice. Climate change is here. It is upon us and we are seeing the effects daily, as anybody who lives along the Murray will tell you, and so we have to invest our resources. We have to put our money where our mouth is and we have to find real, practical solutions in the research and development so that we make coal emit less carbon.

Carbon storage is just one of the aspects of the Australian government’s response to the climate change issue. I am very privileged that the person responsible for the climate change portfolio is a fellow South Australian, Senator Wong. She has a whole range of programs to try and deal with this issue, and this is one. Some of the other ways in which we are proposing to deal with the issue of climate change is in the areas of solar power and wind energy. I have already spoken about wind energy and how we produce about 45 per cent of the wind energy that goes into the national grid.

Solar power is also one of the areas in which South Australia has been leading the country and, because South Australia has lots of fresh air and lots of light, we are in a position to take maximum advantage of the new technologies that we are developing in solar power. Already households receive significant government rebates to install solar panels, and the government has ensured that this money is spent in the best way in which to promote, create and develop the solar industry. I mentioned before that we are leaders in wind power. If you go to the Fleurieu Peninsula, on any day you will see the turbines wheeling away there, producing that power and pumping it into the grid.

Unfortunately, though, the reality of our present circumstances is that there is no immediate suitable substitute for coal, so while solar is good and wind power is good, some of the new technologies like geothermal have great promise. I was fortunate enough to meet with Beach Petroleum the other day. They have got perhaps one of the most innovative programs in geothermal energy, and I suppose it is fair to say that there are a couple of competing technologies in that area to harness the geothermal activity and turn that that into grid power. Unfortunately, at the moment when you combine all those other alternative forms of energy there is still no way of replacing the amount of energy that we get from coal and coal fired electricity.

I think geothermal does have the long-term prospect of providing that solution but some of the technology still has a little way to go. I am not sure how familiar people with the concept of geothermal: you pump water underground and you run it over what they call ‘hot rocks’. This is nature’s clean, green nuclear energy, because the heat that is provided by these rocks is nuclear related. It heats up the granite underground and you run the water through the rocks and you then run the water back to the surface. That water then runs turbines that produce electricity. One of the difficulties that some of the new technologies have in this area is that they cannot get the output to match the input: either too much water or too little water is coming through. I think that is going to be one of the areas where more research and more innovation is required. (Time expired)

Debate interrupted.