PC idea worth some thought

An interesting proposition from the Productivity Commission that goes to the heart of the east coast “energy crisis” is, rather surprisingly I think, getting no attention at all.

Last week the commission released its five-yearly review of the nation’s productivity (“Shifting the Dial,” available on its website, something all thinking Australians should read) and a number of the topics on which it has made critical comments, including energy, have received a lot of media attention (and rightly so).

A particular commission perspective on better managing the gas problem has met with less interest.

This is part of what the review says about the issue: “Removing the moratoria on gas exploration and development in New South Wales, Victoria, Tasmania and the Northern Territory, which have slowed the growth in supply, are one place to start (to ensure adequate domestic supply).

“There are more effective models of community engagement which exploration firms can, and should, seek to apply if given the opportunity.

“Local employment and investment should be upfront considerations, not left to others to guess at. Royalty regimes may need review.

“Bans are unlikely to be lifted simply because of pricing concerns. The decision (by the federal government – which the commission labels ‘undesirable’) to intervene in exports may actually relieve a pressure on States with bans.

“A voluntary industry-wide code of practice might help the gas industry improve their relationship with the community, but must be accompanied by moves of substance.

“None of this is intended to question the science and the efforts of chief scientists to establish safer practice. But, as is often the case, the science is not enough to carry the policy debate.

“To build community confidence in gas exploration and production a code must go beyond other desirable aspects of gas exploration — safety regulation, sound scientific evidence, and monitoring and enforcement of compliance — and include clear guidelines and arrangements to manage community impacts and support landholders in negotiating land access agreements.”

So far as I can see, this advice has been allowed through to the keeper since the report appeared.

There has been no reaction from the federal Environment & Energy Minister, Josh Frydenberg. In fact, the Sydney Morning Herald reports that his office “declined to comment on the report” – but this, I don’t doubt, was wholly about the PC embracing the carbon pricing at exactly the time the Turnbull government announced a policy (the “national energy guarantee”) in effect eschewing it, something the media pack have seized on eagerly (and who can blame them?)

There’s no reaction to the PC proposition on a code from the moratorium ringleader, the Victorian government.

No comment from the New South Wales government, which has been meandering for many months on a path to who knows where when it comes to addressing the State’s pressing gas needs issue. (The Australian Petroleum Production & Exploration Association CEO, Malcolm Roberts, slammed it earlier this month: “The NSW government has a Yes-No approach.  It claims to be open to business, but boasts of closing nearly all the State to exploration. And it seems to be in no hurry to release new acreage or to approve the only live project in the State.”)

But even the upstream petroleum industry has not reacted so far to the commission’s suggestion about a positive new approach to gasfield access. And neither have any farmers’ organizations.

Perhaps few have read to page 161 of a 255-page report, perhaps there is so much else in the document to attract attention – but I think this commission view deserves some reflection where it matters.

The core reasons why this is so have been canvassed widely many times, not least the fact that the gas imbroglio is a fundamental part of the electricity market mess now labelled a national crisis.

As the commission points out in its new report: “The difficulty for generators in accessing long‑term supply contracts at acceptable prices, coupled with uncertainty in carbon pricing, (has) reduced the viability of investment in gas-fired generation — the natural complement to renewables. The significant increases in the domestic price of gas have been a key factor in the rising wholesale electricity prices.”

Does the PC perspective also not fit with the gas industry view that the States could (I’d say should) take up the Queensland approach to having development facilitated independently?

As the Australian Pipeline & Gas Association president at the time, Shaun Reardon, put it at the organization’s annual conference in Cairns this month: “The Queensland experience – which empowers the State gas commissioner to consider developments on a case-by-case basis while also taking in to account community and other issues – presents an enviable model. State and Territory governments could do well to look to it for inspiration. This model strikes the right balance and will enable additional gas to be made available for market, bring jobs, investment and other opportunities to local communities, support local industry and avoid demand destruction through high prices or uncertain supply, enable gas to act as an important partner to renewable technologies and, importantly help to solve the east-coast gas crisis.”

If not elsewhere earlier, I think you can expect to hear more about the PC’s proposal when the Quest Events’ Australian Domestic Gas Outlook conference is held in Sydney at the end of February. (Preliminary details of the conference are on the Quest website.) It’s not an idea that should be just left to fizzle.

Comments are closed.