Sunday, 8 December 2013

Gas Report link

The Gas Report

Thursday, 5 December 2013

Speech to CEDA on Victorian Gas Task Force

Notes for a Speech to CEDA

The Gas Task Force was an initiative of then Premier Ted Baillieu at the end of 2012. The trigger for the establishment of the Gas Task Force was a meeting, with the Premier, of business leaders who raised their concerns of the expected impact on Victoria of gas exports from Gladstone and more general issues about the eastern gas market arrangements and possible reforms.
Clearly the impact on the manufacturing sector and the importance of continuing supply and price were key issues.
The Task Force recommended;
1. The Government support the industry – the one thing they will not do – even though Queensland SA and WA are strong supporters of the gas industry
2. Lift the bans on fracking and exploration for coal seam gas
3. Adopt best practice – National Harmonisation Regulatory Framework, ban Btex
4. Gas Commissioner; engage with the public on all issues
5. Gas Commissioner; provide information and liaise with local communities; chair the independent water committee; advice on fracking, green etc; put fracking info on the web;
6. Establish royalty rates, holiday period; $ for local communities via royalties for the regions; double existing compensation
7. Nominate the ‘go to’ person in state bureaucracy
8. No reservation
9. Joint marketing to go to ACCC
10. Standing Committee on Energy and Resources; set out our agenda, resource information, transmission capacity, and recommend that market issues should go to the Productivity Commission including capacity trading and use it or lose it provisions

There is nothing complicated about the recommendations but if adopted they would ensure that Victoria had a well-managed industry that could respect the interests of the agricultural sector as well as maintain the environmental assets of our State. The political reaction to the report is that there is no rush. And more science is needed. Labor echoes the government’s position. Both sides of politics are on a unity ticket. Both sides of politics want the issue deferred to after the election. Labor says it will have a 12 month parliamentary committee to consider how to manage an onshore industry. Labor actually wants to string the issue out until 2015 and the Napthine government has a similar timetable.  There are systems for managing the coexistence and they were recently described by John Lenders, State ALP Shadow minister who said
‘I am confident you could follow what they’ve done in Queensland and get a satisfactory outcome. It’s a model you would use to build from in Victoria, no question of that… Queensland has found a way that engages their farming communities more effectively than anywhere else in Australia.’
Both sides talk about consultation. Both sides could have been consulting a year ago or more but neither have done anything. Labor proposed consultation through a parliamentary committee in 2011 and has done nothing since. The Government will have consultation but they can’t start until April. In the meantime the State government has had, for nearly two years, $10 million of Commonwealth funds to do water studies and yet has done nothing. And of course exploration is the best way to gather information on water and yet the government has confirmed its ban on drilling for coal seam gas.
In my opinion, to secure existing jobs and to provide the prospect of more jobs, both Victoria and New South Wales cannot afford to delay.
We should follow the lead of the US where gas production has revitalised the manufacturing sector.
The barriers to onshore production are political.
The lesson to learn from policy failures in NSW is that governments who abandon public debate soon find that scare campaigns and green activists fill the vacuum. And then the public debate is soon mired in false claims, partly because government has not ensured the public is fairly informed and because some activists have other political agendas. Sadly, instead of promoting increased supply of gas by constructively responding to genuine issues, decisions taken in Victoria with its moratoriums and NSW with various policies have encouraged and helped legitimise the green activists. Victorians should be under no illusions. Gas prices are already rising and will have a negative impact on Victoria’s manufacturing base. As prices spike in the lead up to the next state election, I hope neither political parties then say they want to do something about it or that they are sympathetic to those who lose their jobs. That moment has passed.
There are many reasons why manufacturing in Victoria is under pressure. Victoria is not a rust bucket, not yet, but unless governments are prepared to fight for real reform to reduce costs then the prospects for Victoria are fading. Many of the cost burdens on business are imposed by governments, State and Federal.  Victoria could regain its manufacturing base but it will take a lot more commitment by both sides of politics to give Victoria the chance I believe it should have but which seems most unlikely.
The political campaigns against the gas industry are principally all about scare mongering. The fracking debate is full of overblown nonsense. The greens have an ulterior motive. Green activists strongly oppose any fossil fuels even though gas has much lower emissions than brown coal. Gas is not only important to lower emissions, it is also essential to the use of wind power.
I have seen many scare campaigns in my time in politics but this particular campaign has been allowed to run for far too long and will have adverse repercussions for living standards and jobs.  Fracking; Gaslands; Peter Hartley; “There is no proven case of fracturing fluid or hydrocarbons produced by fracturing diffusing from the fractured zone into an aquifer” (address at Deakin University Melbourne 8 October 2013). See also GeoScience Page 18.
Not only are concerns about fracking exaggerated, the reality in Victoria is that the geology in places like Gippsland are different and fracking is not likely to be needed on the scale currently underway in Queensland. Onshore gas has been underway in Queensland for at least 15 years.

There are very few countries in the world that ban fracking because there is no reason to do so. Fracking was invented in the late 1940s; it is a new technology and more and more firms are turning to green fracking which is another innovation from the gas industry.

Victorians with an open mind should visit Roma and nearby and hear how the gas industry has been a boon for regional Queensland including for farmers (see also the Australian Sat 26 October 2013) and despite thousands of fracking operations.

Queensland has worked through the same issues as Victoria and New South Wales. Rather than turning a blind eye to the possibilities of natural gas, the southern States would do well to learn from Queensland’s mistakes and look carefully at the success they are now enjoying.

SOUTH Australian Resources and Energy Minister Tom Koutsantonis has slammed Victoria's decision to extend its ban on the use of hydraulic fracturing (fracking) in the hunt for unconventional sources of oil and gas.
Mr Koutsantonis said the move by the Napthine government to extend the ban until July 2015 -- and restrictions on the coal-seam gas industry in NSW -- was against the national interest.
He said the decisions would "condemn Australians both here and on the east coast to rising energy costs".
The Australian 29 November 2013
Premier  Napthine (7 Nov 2013) says
"There is no hurry, there is certainly no hurry. We will consider these matters carefully," he said.
"As I say the gas has been in the ground onshore for tens of thousands of years. It'll be there for some time yet."
Many of the landmark buildings in Melbourne were built on the success of new Australians who walked to the gold fields of Ballarat and elsewhere. We were once a resource state. But not now; now, we don’t even want to drill 60 or 100 wells and we are not prepared to use the latest technology for drilling. It’s a sad day when Victorians are denied the opportunity to develop their own State.
For people in Gippsland, the gas industry is the best and probably the only real opportunity for new jobs and investment in your region. Unfortunately, you have very few friends to support you and you and have a minority of people in your midst who would deny you the higher living standards you could enjoy. I think the farmer organisations find the issue too hot to touch. They can’t see or don’t want to see the benefits of integrating the gas industry and the agricultural sector. Instead they want to deny all Victorians the assets that are currently the property of the Victorian community. No government will ever agree to the demands of “lock the gate”. The one advice I would offer to the people of Gippsland is to start running your own campaign.  It can be inside the political parties or from outside. I am sure there is a silent majority that can be harnessed in the interests of your region but you will have to take the initiative.

Tuesday, 3 December 2013

Grain Corp

The Abbott government is now the first Australian government to knock back an application to the Foreign Investment Review Board from the business community of our close ally the United States, writes Peter Reith.

I was shocked when I heard the news last Friday that the Abbott government had blocked the sale of GrainCorp to an American company, Archer Daniels Midland. Although the decision is technically made by the Treasurer, Joe Hockey, the reality is that this decision had Tony Abbott's finger prints all over it. And Tony was not alone; he was being supported by Nationals Barnaby Joyce and Warren Truss.

The Nationals were always going to be unhappy with ADM but I never thought that the Abbot government would be the first Australian government to knock back an application to Foreign Investment Review Board from the business community of our close ally the United States. I certainly hope that the Government properly consulted the US as required by our free trade agreement with them - and in a timely manner.

Of course, the Coalition government does not want to start its term with dissension from their National Party colleagues. But dealing with the Nats is nothing new; for example, in the early days of the Howard government, John Howard had to quell a very unhappy National Party on the question of gun reforms. And although it has not been the subject of much public comment, the new Treasurer Peter Costello had to take a very firm stance in dealing with Howard on the exchange of letters that led to a formal agreement on the independence of the Reserve Bank. In both cases, they were difficult issues but no one would question that the right decision was made.

Unfortunately there were numerous signs that the GrainCorp decision was always about politics; in fact Hockey went close to making that point when he talked about disquiet in the agricultural community over the prospect of the sale.

Needless to say, Joyce did his best to whip up the opposition. It seems that the decision had little to do with the national interest and everything to do with agrarian politics, Queensland style.

It is understood in some quarters that FIRB first intended to agree to the application and that Labor was going to approve the sale. However, the decision was not announced when the election was called and Chris Bowen, Labor’s Treasurer, either ran out of time or, more likely, decided to squib it. If it is true that FIRB was intending to say yes, then it has some explaining to do.

I also opposed the one decision made in the Howard years by Peter Costello to block the sale of Woodside. However on that occasion there were genuine issues to be resolved.

But the big difference this time is that the Costello decision was made by a government that had already established its credentials as an economically rational economic manager that had already introduced big reforms on workplace relations, with the budget back on track to paying down debt. Howard also had a good record of standing up to the Nationals when, in Opposition, he championed the end of the single desk for grain sales.

This is not the case for the Abbott Government. Abbott's government is brand new and many are watching its every move to see what sort of government it will become.

The Abbott supporters want a sign not that the Abbott Government gets every decision right but that they make more good decisions than Labor. I know that is not ambitious but it would still be an improvement on the last 6 years.

Unfortunately, Abbott, even before getting into government, had already made a number of decisions that should never have been made.

He has burdened business with his paid parental leave; he should never have agreed in the first place to Gonski funding; and he has deferred much needed labour market reform. And now comes the ADM decision.

ADM was not such a hard decision. The really hard decisions will be in the budget. I don't have much doubt that Joe Hockey knows what has to be done but all these big decisions have to be endorsed by the PM.

As well as ADM, Hockey also touched upon another decision that the government may have to consider. The government has a policy to reduce red tape. Normally these issues are determined by market forces but Qantas is handicapped by legislation put in place to preserve its national carrier status.

The idea of a national carrier became obsolete with privatisation and greater competition in the aviation industry. But the legislation remains on the books and is hard to repeal thanks to the socialist tendencies of the ALP and the Greens. Remarkably, Labor has even suggested that they could inject taxpayer money into Qantas to keep it afloat. Having spent billions of dollars on establishing a government owned monopolistic broadband utility, Labor now wants government to get back into the business of owning an aeroplane company. Whichever way you look at their propositions, Labor wants the government to subsidise a business with taxpayer funds.

Given the huge amount of taxpayer money already wasted by Labor in the last six years it is hard to understand how they could now propose even more waste.

Hockey says it should be the subject of a national debate. Australia does not need a debate; we need a government that makes it clear it will not be wasting any more taxpayer money with subsidies for business and that its priority, as promised, is to return the budget to surplus ASAP.

Peter Reith was a senior cabinet minister in the Howard government from 1996 to 2001 and then a director of the European Bank for Reconstruction and Development from 2003 to 2009. View his full profile here.