A matter of judgement

Coming on the eve of ANZAC Day, the Metgasco decision (invalidating government action to suspend a gas exploration licence) by a New South Wales Supreme Court judge has received relatively subdued media attention but it does underline a significant issue about how far one can trust the judgement of modern governments when they are seeking popularity or seeking to avoid unpopularity.

Not surprisingly, the judge’s decision has been welcomed by the upstream petroleum lobbying body as well as Metgasco.

In a statement, the Australian Petroleum Production & Exploration Association argues the outcome of the court case (brought against the NSW administration by Metgasco) reinforces the view that protest action should not be grounds for governments and regulators suspending previously-approved operations.

Still more important, I suggest, is the broad issue of politics being allowed to run over the requirements of law.

For investors on a broad front, the court case highlights yet again the flaky nature of government in Australia in this era of combat politics.

The Baird government licence decision, described by Judge Richard Button as a ”bolt from the blue” for Metgasco, was made in the face of a legislative requirement that any such suspensions must be pursued with procedural fairness. In this case it wasn’t, the judge found.

Paraphrased, Judge Button ruled that the decision withdrawing the company’s right to drill a Northern Rivers well was unlawful and that the Office of Coal Seam Gas confused consultation with persuasion.

APPEA is no doubt right in asserting that suspension of the Metgasco activity last year has served only to encourage the actions of protestors intent on stopping natural gas production.

Certainly, the first reaction from activists to the court decision has been a “back to the barricades” call.

The original move’s value politically can be called in to question because the Coalition still lost two hitherto-safe seats (held by the Nationals) in northern NSW in the March poll, each going, with Labor preferences, to the Greens.

A cynic might observe that, nonetheless, the value to the Liberals in urban areas where there are strong views (however ill-informed) about coal seam gas should not be overlooked.

On the other hand, as APPEA points out, the Coalition has created an atmosphere of “serious concern for any resource project in NSW, undermining certainty for shareholders and employees.”

Labor, notoriously, has only too often in the past 25 years adopted the “whatever it takes” (to win an election) view of this sort of thing. NSW Labor did this again with its commitment to a State-wide moratorium on CSG during the State election.

The Metgasco imbroglio raises a valid question of whether this venal approach now also colors the Coalition’s (and in particular the Liberals’) view on occasions?

This should be of particular concern for Premier Mike Baird because it casts a shadow over the political sunshine in which he has been basking since 28 March for sticking to his principles on power privatization.

For me, an interesting question now is whether the Coalition government will appeal Judge Button’s decision?

(As I understand these things, a decision on making an appeal rests initially with the State Attorney-General rather than the Resources & Energy Minister.)

Being sat on its posterior by a court is never a good political look for a government; having it happen twice on the same issue would smack of stupidity – and what signal would an appeal (taking how long to go through the system?) send to the aforesaid resources investors as well as those owning factories and other businesses dependent on gas supply security?

As for currying favor with the inner-city greenish types and rural NIMBYs, the next election is 47 months away and in 2019 the big issue may well be the loss of NSW’s manufacturing base and thousands of jobs with it, something that would weigh most heavily in Western Sydney and regional centres with factories.

Can you imagine the meal that Luke Foley (or whoever Sussex Street then has in the ALP leadership seat, bearing mind that the last one to survive in this role for any length of time was Bob Carr) would make of such a political opportunity?

As APPEA says in its statement, there are people (lots, I’d suggest) with genuine concerns about CSG development who are open to consultation, science-based evidence and reasonable negotiation.

My personal hobby horse is that a large part of the State population simply does not know the importance of gas to the community beyond its use in their homes and much more needs to be done to bring this home to them.

It needs also to be noted that those who are Greens number no more than the people directly and indirectly employed by NSW factories and small businesses that are big gas users (look at the 28 March poll outcomes).

Seventy-five per cent of the gas consumed in the State goes to 500 heavy industrial businesses. Another 15 per cent is used by 33,000 smaller businesses.

Throw in the partners of these companies’ workers – not to mention the hundreds of thousands of others who stand to lose from a weaker State economy – and the equation is much more negative for the activists, ideologues and their fellow travellers.

James Baulderstone of Santos pointed out at a forum in Sydney on Friday held by the Committee for the Economic Development of Australia that business and industry associations overwhelmingly believe more gas supply is needed for NSW.

Their members have already been hit by an 11.2 per cent rise in gas prices in the past year and they fear much worse.

Baulderstone also said over-reliance on the recent east coast gas “she’ll be right” forecast by the Australian Energy Market Operator, apart from it being heavily oriented to demand destruction in NSW, makes a big assumption that a large volume of the fuel will flow to Greater Sydney from Moomba during winter periods of peak demand post-2016 – and it may not. Depends on the contractual arrangements.

Speaking at the same forum, Martin Ferguson, wearing his hat as chairman of APPEA’s advisory board, argued the March election has given Baird “a clear mandate” to implement his gas plan, of which a critical part is to exert downward pressure on prices in the rest of this decade. APPEA and others assert that this requires bringing the substantial gas resources within NSW borders to market.

In the wake of the Metgasco court decision, the judgement now awaited is that of the State Premier and his cabinet on pursuing this objective with expedition – and this applies to the overall issue of NSW supply not just the Northern Rivers activity.

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