Bills

Petroleum and Geothermal Energy (Ban on Hydraulic Fracturing) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 4 July 2018.)

The Hon. D.C. VAN HOLST PELLEKAAN (Stuart—Minister for Energy and Mining) (10:31): I rise to speak on this bill from the Independent member for Mount Gambier. This is a topic that has been with this parliament, this state, the people of the South-East and the petroleum industry for many years now—in fact, from prior to the 2014 election. The government—the then opposition, the now government—took to the last election a commitment to introduce a moratorium against unconventional gas projects in the South-East of our state, and we have delivered on that commitment. That moratorium went in place approximately a week after the election. It was part of our 100-day plan. It was a commitment that we took to the election solemnly and a commitment that we delivered on immediately.

The member for Mount Gambier has put a bill to this chamber to seek to have that commitment enshrined in legislation. Let me just say that enshrining it in legislation actually has no practical impact upon what may happen with regard to petroleum exploration or production in the South-East, but it does clearly have an important impact for the people of the South-East. We developed our policy with regard to a moratorium because overwhelmingly that is what the people of the South-East wanted and that is why we delivered it. Overwhelmingly, the people of the South-East want that commitment enshrined in legislation and, while it will not have any direct impact on operations in the South-East, the government will support the member's position on this bill.

Let me say that it is not only the member for Mount Gambier who supported this. Our first term member for MacKillop has also been a very strong supporter of this position, representing the overwhelming majority of the South-East, in addition to the city electorate, if you like, of Mount Gambier. He has been a strong advocate of this. With regard to impacts, let me say that the Liberal opposition, and now the Liberal government, was very clear for a long time that the moratorium position that we took and delivered on would not be extended to conventional gas in the South-East and it would not be extended beyond the South-East, and that is still very clearly our policy.

As I have said before, we have engaged with an enormous number of people on this issue. This includes every industry company and every industry representative body, as well as local communities, local governments and many others. It is clear to me that while this is our government's position—and we will deliver on this, as we did with regard to the moratorium—this position is not without risks. But guess what? Very few positions are without risks. Legislating this moratorium does have some risks attached to it that I will not go into at this point in time. However, let me say very clearly: our government has determined to support this private member's bill.

Mr PEDERICK (Hammond) (10:35): I rise to speak to the Petroleum and Geothermal Energy (Ban on Hydraulic Fracturing) Amendment Bill introduced by the member for Mount Gambier. I note that the state Liberal team went to the election in March with a policy to ban unconventional fracking in the Limestone Coast region of the South-East for 10 years. We did deliver on this commitment immediately after the election and we imposed the 10-year moratorium, which will expire in 2028. No petroleum exploration or production project proposal for the South-East that includes unconventional fracking will be evaluated by our government for 10 years. That is an important position, and we stand by that position, as the minister has indicated.

I have mentioned my history in fracking and mining many times in this place. I worked for Gearhart Australia from March 1983 to March 1984; it was only 12 months, but it is the desert. I had previously worked in earthmoving in the Cooper Basin and Alice Springs region for 12 months. I also operated fracking several wells in East Mereenie. As to vertical fracking and conventional fracking, I have plenty of experience in loading chargers, monitoring the load and making sure I did what I could to assist the engineers.

Minerals and mining are of huge benefit to this state and add billions of dollars to the economy. I note that in the budget delivered yesterday our Regional Roads and Infrastructure Fund provides 30 per cent of mining royalties and at least $76 million per year to go into the regions, yet we see a region that obviously does not want that money.

I also want to talk about mining, drilling and water bores. I think we need to be careful where we go to. There would be thousands of water bores, including many hundreds in the South-East, where the well integrity would be terrible, and there would be leakage between saline aquafers and freshwater aquafers. I just want to make that point. In the speech by the Hon. Mark Parnell in the other place regarding his bill to amend the Petroleum and Geothermal Energy Act 2000, he stated:

…the bill does not affect the activities of geothermal energy, a form of renewable energy, with very different impacts to that of exploring for and extracting hydrocarbons.

Yes, the different impacts are that you have to fracture a lot heavier than oil and gas wells, and it has not been able to be managed, but it is interesting how even the Greens leave that bit out. I do not believe this needs to be legislated, but I do acknowledge the party's position.

I toured the United States with the member for Mount Gambier and several other members from 19 to 29 June 2015, trying to get my head around unconventional fracking. According to FracTracker, and based on data from 2014-15, 34 states in the US saw drilling activity amounting to approximately 1.2 million facilities across the United States, from active production wells to natural gas compressor stations and processing plans. Basically, they had made themselves almost exclusively reliant upon their own supplies.

Farm owner Darlene Barni has a farm in typical farm country—like the country at Mount Barker—in Pennsylvania. She explained the positive aspect that hydraulic fracturing has had on her life and on the community she lives in. Drilling operations have taken place on her property, and she has no issue with this, with six wells operating at the back of her property. She had not been subject to or known of any issues or adverse effects on people's lives as a result of close proximity drilling.

Frank Puskarich is a business owner of Hog Fathers. Our discussion with Frank was relevant to the oil and gas industry on the basis of his business's economic growth since the development of an oil and gas industry in the area. Mr Puskarich went from having one restaurant to now having six. It was also noted that the community is very pleased with the implementation of hydraulic fracturing and unconventional gas. Frank is also a farmer and, along with many other farmers in the region, he is satisfied to coexist with fracturing on his property. Mr Puskarich is 100 per cent convinced that there are no problems with the hydraulic fracturing industry.

One of the recommendations of the Natural Resource Committee's report into fracking states:

While the specific process of hydraulic fracturing or 'fracking' in deep shale, properly managed and regulated, is unlikely to pose significant risks to groundwater, other processes associated with unconventional gas extraction, including mid to long-term well integrity and surface spills, present risks that need to be properly considered and managed.

I arranged for Jeff Heller, President of Steuben County Landowners Association, to present to the Natural Resources Committee. Myself and some present met with Jeff while in New York state. Jeff represents over 1,700 farmers, equating to over 225,000 acres of land. At the time we were meeting with Jeff in New York there was a moratorium in place, which turned into a ban.

Jeff, on behalf of the farmers he represents, negotiated a 150 per cent increase for those allowing oil and gas pipelines on their properties. Mr Heller is also concerned for the other farmers he represents as they can cannot access up to 25 per cent royalties, in comparison with their neighbours in Pennsylvania. Jeff advised that many of the farmers coexisting with fracking on their properties would not have the financial capability they now have. It was noted to have saved many people's farms and also that most of those farms are reliant on groundwater underneath their properties.

When reporting to the Natural Resources Committee, Jeff reflected on several terms of reference, and I quote:

The issue in Dimock is really shallow methane migration, if it's valid. That is an issue that has been here in the Northern Tier, Pennsylvania, the Southern Tier, New York. We have shallow methane gas that the water well drillers have had to put up with. It has just always been here; it has been here for hundreds of years, the Indians write about it.

So if that was an issue, between the state and the industry—and here we get into legislation and regulations—they came up with a system for casing the wells. That was the big issue. Originally there were no regulations on that whatsoever, so that standard practice was one annulus: that is, one layer of steel [one casing], one layer of cement. Today, in Pennsylvania, the DEP requires three annuluses, and most of the industry drillers have gone to five or six annuluses.

All have cement in between. He continued:

They have improved the cementing, they have improved the methods of monitoring the cementing, so even shallow methane migration in any form has not been an issue, in Dimock specifically, but in the whole area since about 2008 or 2009 at the latest.

Jeff also highlighted the economic benefits of fracking:

The number of jobs created, according to the Pennsylvania Department of Labor, is over 200,000. That includes the ancillary jobs, not just the guys on the pads or the pipelines. Here in New York we have a tax regulation—it's called Title 5 of the New York tax code—that awards a percentage of the production of the well. It's an advalorem tax on the gas production of a well, and lots of states would kill to have this.

That was his quote. All that revenue stays local. A percentage goes to the county, to the town—which you would call a township, or at least most of our states would call a township—and then to the schools. The schools get the lion's share of it, I am sure. This is his quote:

It is just a guaranteed revenue source for the local people. Pennsylvania has an impact tax, which is a form of severance tax, and the severance tax would be a way for your state and your federal regulators. Again, you could study what some of these other states have done.

They have some states where the landowners do not have the mineral rights. Obviously, landowners do not have mineral rights in this state, but they do like to use fuel, minerals and gas right throughout the state. I certainly do not believe that we need to put the legislation in place. We fully support the moratorium that we instigated. The moratorium is in place and will have that effect without the legislative impost.

The Hon. A. KOUTSANTONIS (West Torrens) (10:45): I understand the passion of the member for Mount Gambier. I also congratulate the leader of the Greens, the Hon. Mark Parnell. These two people have credibility on this issue because they have been of this opinion for a long time. I think it is fair to say that the mining sector is sick and tired of the surprises they are getting out of a conservative government that they believed would be on their side and that they believed would consult with them on changes affecting their industry.

The worst thing a mining minister can do to a resources industry is surprise them. That is exactly what this minister has done, and the reason he has surprised them is because he has almost no say within the cabinet. After taking to the election a policy of legislating a 10-year moratorium on unconventional gas, the first thing he does on becoming sworn in as minister is say it will not be legislated.

He will not introduce legislation to do it; it will simply be a moratorium by administration. I think he put out a press release saying that. The member for Mount Gambier, who got elected on an independent platform to ban fracture stimulation in certain parts of this state, then took it to the parliament, and today we have seen a backflip.

Imagine you are Santos. Imagine you are Beach. Imagine you are OZ Minerals. Imagine you are BHP, and you have just seen the resources minister, without any consultation with APPEA or SACOME, stand up in the parliament, through a leak to The Advertiser, and say, 'By the way, we are going to legislate to ban mining in some parts of South Australia.' There is a term for that: sovereign risk.

Members opposite, who claim to be pro-business and who claim to be pro-resources, are just going to ban an industry altogether without any consultation. You have just changed your platform completely within five minutes. I have just heard that the member for Mount Gambier had an hour's notice. How much notice did the resources industry get on this? None.

Let's forget the reckless way that the government are treating the resources sector by increasing their taxes without consultation, by cutting the agency without consultation, by removing royalty discounts without consultation and now banning an entire operation without consultation. Let's talk about the merits of the bill.

The merits of the bill are this: despite independent regulation, despite scientific evidence, despite all the evidence on the basis of a regulatory approach to mining—that is, only an independent regulator on the basis of scientific evidence can say yea or nay to mining activity on the basis of doing no harm—we are going to come in over the top and say no anyway. Based on what? Based on science or based on votes? Congratulations to the community who fought so hard for this. Congratulations to them, but it is not based on science and it is not based on facts.

What other industry in South Australia is next to be unpopular? What other industry is going to be arbitrarily banned by a Liberal government because they want votes? What does that say for investment in South Australia? What does that say for growing the economy? What does that say for growing jobs? I will tell you what it says: South Australia is not open for business. It says that this government will not stand up for anything. It will stand up to anything but pressure.

It is ridiculous that the mining minister has not even called Beach Energy, has not even called Santos. These companies are headquartered here. We are the largest producer of onshore oil in Australia, and the Liberal Party is banning their activities. The Otway Basin is the place we went to first for oil and gas, yet the Liberal Party is banning it. I feel very sorry for the independent regulators, the scientists, the geologists, the people who devote their life to the growing of our state safely, who use their expertise and the knowledge they have gained through years of education, through years of practice, to regulate our industries fairly and independently.

Yesterday, the government announced that the days of picking winners were over, that they do not pick winners anymore. Well, what is this? This is picking winners, this is saying that this industry cannot go ahead—not on the basis of science, as I said earlier, not on the basis of proving up a resource, but because they want to win a seat, they want to win a seat in parliament. That is all it is.

What is the intellectual argument for banning fracture stimulation in the South-East but not in the rest of South Australia? If it is not safe in Mount Gambier why is it safe in the Cooper Basin? What is the difference? If it is not safe there, what about anywhere else? Is that the message the Liberal Party want to send out to the people of this state, that Beach and Santos do things unsafely? What does that say to their investment portfolio? What does that say to the investors in South Australia? What does it say to the thousands of people employed in the Cooper Basin about what the Liberal Party think of them? They do not have a minister who stands up for them anymore: they have a minister who is a rubber stamp for the people in the Liberal Party who are just populist, who stand for nothing and have no core convictions and no core beliefs.

I completely understand local members of parliament having these views because they are representing their communities, but leadership is not about being liked. Leadership is not about doing what is popular: it is about doing what is right, and you do what is right on the basis of independent expert advice, what the scientists say. If the scientists tell us it is not safe, you do not do it. If they tell us it is safe, you do it. That is the difference between evidence-based regulation and emotion-based regulation, which is what the government is giving us today. The investment signals here are absolutely appalling. So much for no surprises.

Importantly, gas is a transition fuel, a transition fuel to a carbon-free future. I believe passionately in renewable energy; I know members opposite do not, but I do. I think it is the transition, and one of the reasons that electricity prices are high is that gas is that transition. The transition is fuelled by gas. However, the Liberal Party tell us, despite not having an energy policy anymore, despite the NEG being dead, that they are going to lower power prices and ban gas. So they will ban gas, have less gas in the system, but somehow, miraculously, by the power of their personalities they are going to lower power prices.

What do the members say to the workers at Kimberly-Clark who rely on gas to operate that factory? What do they say to the people in those jobs? Are those jobs not as important as the votes the Liberal Party want to receive in the South-East? Is that what it is?

I have to say that if the Liberal Party really believed that fracture stimulation was dangerous and could not be done safely, then they would ban it in the entire state. This is just about politics, which is what makes it so appalling. At least the Hon. Mark Parnell has intellectual honesty behind his argument: he believes in an abrupt transition to renewable energy. He does not want any more fossil fuels. He thinks fracture stimulation is unsafe—and he believes it. I disagree, but he has always held the same position. It is intellectually honest.

Members opposite cannot claim to be intellectually honest about this because the same members who are going to vote for this ban are the same ones who are going to say privately in their fundraisers and privately to the mining industry, 'Of course we support the gas industry. Of course we support the mining industry, of course we do.'

I have heard you do it. I think it is appalling for the minister not to have the honesty and the integrity to stand up and fight for an industry and to cave in. Why not just simply have implemented your election pledge at the very beginning? Why be shamed into it by an Independent? Had Troy Bell not won this seat in Mount Gambier, this would not be occurring today. He has shamed you into it, and the damage it does to industry is irreparable because 24 hours ago you had a different policy of an administrative ban. Now it is a legislative one, and it has sent shockwaves through the mining industry in South Australia and the investment community. Everyone expected this from the member for Mount Gambier; they did not expect it from the government, and it is appalling.