Petroleum and Geothermal Energy (Energy Resources) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 14 November 2023.)

The Hon. R.A. SIMMS (15:29): I welcome the opportunity to speak again on gas week, or energy week, as it has become. It is the theme of the week.

An honourable member interjecting:

The Hon. R.A. SIMMS: There is a lot of hot air in here, as the honourable member accurately observes. There is a lot of gaslighting that has been happening in this chamber this week and a lot of greenwashing as well.

I welcome the opportunity to speak on the Petroleum and Geothermal Energy (Energy Resources) Amendment Bill. The bill makes amendments to the Petroleum and Geothermal Energy Act 2000. The name of the act will be changed to the energy resources act as I understand it will cover resources such as geothermal resources, naturally forming hydrogen, underground coal gasification, carbon dioxide, and carbon capture and storage.

Produced hydrogen and renewable energy are dealt with under the Hydrogen and Renewable Energy Bill, which we discussed at length into the late hours last night. The bill inserts some provisions that require licensee holders to undertake engagement with stakeholders in preparing environmental impact reports and statements of environmental impacts.

The bill also introduces rent for the use of the state's natural reservoirs to store regulated substances, such as carbon. Under the bill, I understand that rent will only be applicable to imported substances but does not require a rent to be paid for locally produced substances. What we are talking about here is carbon capture storage. Carbon capture occurs when a material, such as methane or hydrogen, is extracted from underground leaving a cavity in its place. The idea is then to replace resultant carbon in the space that is left behind.

The Greens are not supportive of carbon capture storage, as we are concerned that this is a delaying tactic for the coal and gas industry to justify fossil fuel projects. It is a form of greenwashing and it gives a social licence to fossil fuel industries. According to the Climate Council, carbon capture storage is a licence to ramp up emissions. Around the world, carbon capture storage projects are being built to allow for continued oil and gas production.

In Australia, the coal and gas industry is pushing for CCS so it has a licence to keep its polluting project going, not because it wants to cut emissions—that is the view of the Climate Council. Greg Bourne, an energy expert at the Climate Council, has also said:

Carbon capture and storage is not a climate solution but rather an expensive attempt to prolong the role of fossil fuels in the energy system… right now the Government needs to be focused on building a resilient, renewable economy, not throwing taxpayer dollars at fossil fuel producers and failed technology.

In our briefing on this bill, we were advised that Japan and Korea are looking for places to store their carbon. This bill proposes to charge those places rent for disposing of polluting by-products, but it exempts local producers who are doing the same thing. Therefore, I will be moving amendments to ensure that local companies have to pay for the storage as well as any imported carbon. It is important that we put a price on the storage of carbon that comes as a result of extractive industries.

It is the Greens' policy to stop using fossil fuels, stop the greenwashing that we see from the coal and gas industry, and stop the continuation of non-renewable energy. It is appropriate to charge a levy for storage of carbon, even though we are not supportive of carbon capture itself as a technology.

Indeed, as I speak today, I know that there are students sitting on the steps of this place calling on the government to take action on climate, and I had the opportunity to meet with them earlier today and earlier in the week. These young people know that we need to do better for our environment. We need to stop using fossil fuels as a way to power South Australia. We need to commit to renewable energy for the future and we do not want to see the prolonged use of technologies that rely on fossil fuels.

Whilst we will be supporting this bill, we will be moving amendments to ensure that any carbon capture has a price tag applied to it at a local level as well as at an international level, and the Greens of course will continue to campaign for action on this important area. I do urge the government to give favourable consideration to this amendment. We know that they are in the pocket of the gas industry. We know that they are the political arm of the gas industry in this place. They are absolutely in their pocket.

I urge them to show some leadership when it comes to addressing the climate crisis, not to simply do as the Minister for Energy, Tom Koutsantonis, has said, 'Roll out the red carpet for gas. Come on down. Whatever you want, we're here to help you.' Show some leadership and let's start cracking down on these dirty polluting industries.

The Hon. C.M. SCRIVEN (Minister for Primary Industries and Regional Development, Minister for Forest Industries) (15:35): I would like to thank honourable members for their contributions. As we have covered, many of the changes proposed in this bill are administrative in nature and were subject to public consultation on an issues paper in 2021. The improvements were not high enough on the policy agenda of the former Liberal government, allowing it to prorogue after their one term, but thankfully this afforded us to have an opportunity to revise and enhance the bill and to have a further round of public consultation on the draft bill in its current improved format from November 2022.

The main amendments pertain to improvements to efficiency, clarity and transparency of the existing regulatory processes and policies to ensure that this legislation continues to maintain its widely recognised status as leading practice, for its co-regulatory approach to licensing and objective-based approval processes. These amendments also have real benefits for our decarbonisation objectives, allowing us to transmit hydrogen in our gas pipelines and provide a framework to help establish a carbon capture and storage industry here in South Australia, which is widely considered to be a necessary piece of the puzzle to achieve net zero.

I am pleased to take this legislation through this chamber to support our decarbonisation objectives and support our regulators by ensuring this legislation is kept up to date and contemporary. I would like to thank the public servants who worked on this amendment bill for their work to continually review this regulatory framework. This ongoing work ensures these industries are regulated in a manner consistent with best practice.

Bill read a second time.

Committee Stage

In committee.

Clause 1.

The Hon. C. BONAROS: I have some general questions of the minister at clause 1 specifically in relation to the issue that was just raised by the Hon. Mr Simms. We know this bill is largely administrative but introduces the concept of rent for pore space. Is it correct that the original version of this bill did indeed include provisions that would have covered the issues that the Hon. Rob Simms has outlined, namely, that the rent would be payable by those locals as well as interstate companies and, if so, why the change?

The Hon. C.M. SCRIVEN: I am advised that the draft bill as presented by the current government originally did include rent for locally produced carbon dioxide. There was consultation with industry and the change was made so that rental for the storage of carbon dioxide would be limited to carbon dioxide that is imported.

Charging rental for the storage of carbon dioxide produced or sourced within Australia would go against all of the consultation with industry on the bill but, even more importantly, would disincentivise the use of carbon capture and storage to decarbonise existing emissions-intensive industries within Australia. That includes gas, cement, steel and iron industries. The fact is that these industries have difficult to abate process emissions, which have limited options for decarbonisation outside of carbon capture and storage. Furthermore, carbon reduction technologies, such as direct air capture, would also be disincentivised by the charging of rent for storage of carbon dioxide sourced within Australia.

The carbon capture and storage capability being established in South Australia will be available for all South Australian and Australian entities and is a much-needed capability required for South Australia to meet its net zero targets. To charge Australian entities a rent for carbon capture and storage in these early stages would be counter to the development of this capital intensive business in South Australia and will likely see the establishment of any future carbon capture and storage opportunities instead moved to other jurisdictions.

The Hon. C. BONAROS: Just on from that, is it correct that—and I am referring to my notes here—next year Santos will source something like 1.7 million tonnes of CO₂ but has the potential to store up to about 20 million, has that been costed in terms of the other 18.3 million tonnes available as pore space for rent?

The Hon. C.M. SCRIVEN: I am advised that broadly what the honourable member has said is correct, in that there is the capacity for up to 20 million tonnes of storage available in the depleted fields of the Cooper Basin, but the source would need to be outside of Moomba. In terms of the costings, I am advised that the rental level would be determined through regulation and, as such, no figures are currently available.

The Hon. C. BONAROS: Sorry, I just missed that last part of the answer in terms of the rental, if you could repeat that.

The Hon. C.M. SCRIVEN: I am advised that the rental amounts have not yet been determined. That will be determined through regulation and, as such, there are no figures currently available.

The Hon. C. BONAROS: Just to be clear for the record: out of that up to 18.3 million tonnes, Santos—and I am using that as an example—will be able to enter into an arrangement with an overseas producer and then the government will receive effectively a rent from Santos for them being able to store that in their pore space. That is effectively the concept, right?

The Hon. C.M. SCRIVEN: I am advised that, again, broadly that is correct: the government would be able to receive the rent from the example company—in this case Santos—but only if the CO₂ was being imported.

The Hon. C. BONAROS: Is there going to be any regulatory regime around the prices that can be charged by Santos to the overseas producer in terms of importing that CO₂ and how much they can charge to store that in their facilities?

The Hon. C.M. SCRIVEN: I am advised that that would be decided through the regulations.

The Hon. C. BONAROS: So, effectively, until we see those regulations we will not really have any idea about the magnitude of potential profit margins here for both the CO₂ that is imported and stored in rented space and the government, in terms of what slice of the pie it will receive as a result of storing?

The Hon. C.M. SCRIVEN: I am advised that, broadly speaking, that is correct. That information is not as yet available. One of the reasons for that is that in terms of potential importing that could be many years away and so it is clearly difficult to predict on that basis.

The Hon. C. BONAROS: When can we expect to see the regulations around that, given that it is years away, potentially? When can we expect to see the regulations around that so that we know what we are considering here?

The Hon. C.M. SCRIVEN: My advice is that the expectation would be that those regulations would be introduced in the first half of next year and then would be able to be updated as needed.

The Hon. C. BONAROS: So regardless of whether it is something into the future and years away, by the first half of next year we would already have some idea of what—I guess what I am getting at is that regardless of whether it is some years away, if we are going to have the regs introduced by July next year, let's say, surely there must already be some body of work on that which would give you an indication of what sorts of figures you are going to put in the regs, or is that what you are consulting on with industry at the moment?

The Hon. C.M. SCRIVEN: I am advised that, as this is a new area, industry—among others—is still understanding the charges for their business, and the rental payments to be established in regulations will be subject to consultation with industry. Some of that consultation work is underway at the moment which is why the first half of next year is the expected time frame.

The Hon. R.A. SIMMS: I have a quick question about the effect of the bill. It was the Greens' understanding that currently we can already have the importation of carbon capture storage into South Australia and that what this bill was doing was just charging a rent on that. Is that the case or does this bill also enable the importation of carbon capture storage?

The Hon. C.M. SCRIVEN: I am advised that the importation of CO₂ is already permissible under the current act and is currently regulated in the current act, and the major change in this bill is in regard to the rent.

The Hon. R.A. SIMMS: Given the difficult financial circumstances that the government faces at the moment, would it not make sense to charge rent for local carbon capture storage so they could generate more revenue to invest in public projects?

The Hon. C.M. SCRIVEN: I would refer back to the original answer I gave to, I think it was, yes, the Hon. Ms Bonaros, which talks about the reasons why we would not do that. I can read it again, if you wish.

The Hon. R.A. SIMMS: No, that is fine. I heard it the first time. I just was not satisfied with the answer. Can I—

The CHAIR: The Hon. Mr Simms, you just keep asking until you get the answer you want; is that how we are going to operate today?

The Hon. R.A. SIMMS: That is it, Mr Chair. Can I ask, minister: with whom did the government consult? You mentioned industry, but are you able to give a bit more detail on the groups or companies that advised you that they did not wish to pay this rent? Did the government consult with environmental groups, and what were their views?

The Hon. C.M. SCRIVEN: I am advised that there was public consultation and that did include with environmental groups.

The Hon. R.A. SIMMS: With respect, minister, the other part of my question was that you mentioned industry groups; can you provide a bit more information on precisely which companies were involved with that consultation?

The Hon. C.M. SCRIVEN: I am advised that there were seven formal submissions. I do not have information as to whether they were all from industry or from elsewhere. They were provided without a request to make them public and therefore I am not able to provide that information.

The Hon. R.A. SIMMS: But it could be the case that all of those were the impacted companies, for instance?

The Hon. C.M. SCRIVEN: I am advised that was not the case.

Clause passed.

Clauses 2 to 26 passed.

Clause 27.

The Hon. H.M. GIROLAMO: In regard to some scenario situations, would a company pay for carbon storage under this bill if, for example, the head or parent company was international by ownership but the carbon produced was produced inside Australian territory? Would rent apply?

The Hon. C.M. SCRIVEN: I am advised that the exemption from rental payment refers to where the CO₂ is sourced or produced. I am advised that is the specific wording. So regardless of ownership, if it is sourced or produced in Australia it would be exempt from the rent.

The Hon. H.M. GIROLAMO: In regard to carbon that was imported by an Australian headquartered company, would rent apply?

The Hon. C.M. SCRIVEN: Yes, it would, because it is imported.

The Hon. H.M. GIROLAMO: In regard to the actual calculations of the rent, how is that going to be determined, and is it likely to be in arrears or is there a monthly amount that will be paid?

The Hon. C.M. SCRIVEN: I am advised that is still under consideration, whether it would be a yearly charge, whether it would be charged in arrears, or any other permutation.

The Hon. H.M. GIROLAMO: When is this likely to be determined?

The Hon. C.M. SCRIVEN: As I mentioned, the regulations are expected to be drafted for the first half of next year.

The Hon. H.M. GIROLAMO: How will the rent be collected, and will it go to the government's bottom line or be utilised for investment within the net zero space?

The Hon. C.M. SCRIVEN: I am advised that because the space would be a state-owned resource that would be used it would go to general revenue.

The Hon. F. PANGALLO: Will the operator of the storage facility be able to offset the storage fees associated with that with carbon credit schemes?

The Hon. C.M. SCRIVEN: The carbon storage facility can generate offsets—I think that basically answers the honourable member's question. If there is something else we missed in that question, I am happy to hear it again.

The Hon. R.A. SIMMS: I move:

Amendment No 1 [Simms–1]—

Page 15, lines 22 to 31 [clause 27, inserted section 45A(3)]—Delete subsection (3)

This deletes the subsection that enables rent to be payable only by importers, so opens up the potential for it to be paid at a local level as well. The rationale for this is fairly clear. The Hon. Connie Bonaros has highlighted some of the issues as well in her interrogation of the minister.

From the Greens' perspective we think it is appropriate that both the importers and the local manufacturers should be required to pay rent. This could bring more money to the government for its bottom line, which we know is under extreme pressure at the moment. Whilst we do not support carbon capture storage, we do think it is appropriate that these companies should pay their fair share. I am very concerned that the government seems simply to have capitulated to feedback from industry.

The Hon. C. BONAROS: Before I make a contribution, I have a question of the minister. Going back to those regulations, when they come out, hopefully by the middle of next year, will they be the subject of consultation first?

The Hon. C.M. SCRIVEN: I am advised that, yes, they will.

The Hon. C. BONAROS: On that basis, I am going to disappoint the Hon. Robert Simms. I am getting used to disappointing him in recent times, and it is alarming me. The reason I do so is because I cannot contemplate a universe, let alone a parliament, in which the current minister responsible for this portfolio would not charge as much rent as possible amongst as many players as possible, given the potential we have talked about today.

As such, when the minister says that there is a disincentive here, I suspect that must be real and substantial if it is enough to sway the minister responsible to not charge rent to local producers. I say that because at my briefings my first question was, 'Why aren't we charging them?' I asked a lot of questions about that, but, again, if any of us know the minister responsible for this portfolio I do not think he would hesitate to charge as much rent as possible if it was in everyone's best interests.

However, that said, I think this minister has pointed to the fact that the disincentive is such that the storage of carbon capture in SA would effectively be put to competition with other jurisdictions which could well take over this space and not have the desired outcomes that we are seeking to achieve.

Whether or not you agree with the storage—that is part of this bill—I think there is some logic in two things. Firstly, there will be some draft regulations distributed for consultation, which we will all be able to have a look at before they are finalised and which indeed would be the subject of disallowance. Also, regardless of whether these regs come in in six months and do not have effect for two or three or four or five years, it is my understanding that they will be reviewed in 10. The minister might like to confirm that.

If they are reviewed in 10 and we see that there are significant windfall gains here from the government well above what was ever anticipated, and the potential for more without disincentivising the market, then I think that is the more appropriate place to consider this. I guess what I am saying is we do not want to scare people off before the bill is even passed. That is what I am saying. I know that is not the position of the Hon. Robert Simms, but that is the position I am taking. We do not want to scare people off. I think we get this off the ground first—

The Hon. R.A. Simms: Or under the ground.

The Hon. C. BONAROS: —or under the ground, yes—and let it materialise. Once that has actually occurred, then it is more than appropriate to review it to see whether all these things, which to me sound like pie in the sky, actually transpire.

The Hon. C.M. SCRIVEN: First of all, I can advise that, yes, a review is built into the act on the 10^th anniversary, so in 10 years' time. I did go into this in some detail in the contributions and questions at clause 1, in that charging rental for storage of carbon dioxide produced or sourced within Australia would not only go against the consultation with industry but would also disincentive the use of carbon capture and storage to decarbonise existing emission-intensive industries, including the gas, cement, steel and iron industries.

A further piece of information that was not included in that original answer is that this amendment, which seeks to delete subsection (3), would also remove exemptions for storage of a regulated substance where associated with the production of a regulated substance, such as natural gas storage, as has been undertaken at Moomba in the state's Far North over the last 40 years. So the government will not be supporting this amendment.

The Hon. C. BONAROS: In terms of that review—and I think this is an important point as well, because I did ask this question—it is my understanding that this is about the fourth review of this piece of legislation since 2000. There have been four reviews over 23 years. Notwithstanding the fact that there is a new prescribed review in 10 years, that does not discount the potential for another review in line with the reviews that have already been taking place over that period; is that right?

The Hon. C.M. SCRIVEN: I am certainly advised that reviews can happen sooner than that 10-year period.

The Hon. H.M. GIROLAMO: The opposition will not be supporting Mr Simms. He will be very shocked to hear that we do not believe that it is in the best interests of industry, or of the mining sector either.

Suggested amendment negatived.

The Hon. R.A. SIMMS: I move:

Amendment No 2 [Simms–1]—

Page 15, after line 36 [clause 27, inserted section 45A]—After subsection (4) insert:

(4a) The Minister must cause any amount paid to the Minister under subsection (2) to be paid into the Environment Protection Fund established under the Environment Protection Act 1993.

I do have a sinking feeling that perhaps this is not going to be supported. It has not been my week; however, hope springs eternal and I keep trying. Even members who did not support the original proposition I think could consider this amendment favourably because what it does is ensure that any rent that is paid would, rather than just going into general revenue, go towards environmental protection and the Environment Protection Fund that is established under the Environment Protection Act.

This is because we know that extracting gas and storing carbon under the ground does come at an environmental cost, and it is appropriate that that money therefore goes towards environmental protection initiatives. Even though members could not bring themselves to support my other amendment, I am optimistic that they may consider this one favourably. We will see.

The Hon. F. PANGALLO: I will be supporting this amendment, simply because it is actually a commonsense approach and because that is what we are talking about: protecting the environment. Any funds that are derived from that should certainly go towards that, so I will be supporting the amendment.

The Hon. C.M. SCRIVEN: The government does not support this amendment. Any rent earned for the use of the state's natural reservoirs to store a regulated substance—for example, carbon dioxide—needs to be available to the owners of the subsurface, being the Crown and the people of South Australia. The rental money should be applied to the benefit of all South Australians and not restricted to one specific purpose.

The Hon. H.M. GIROLAMO: The opposition will also be opposing this amendment, for similar reasons as those mentioned by the minister.

The Hon. C. BONAROS: I apologise, but I am trying to calculate, if there is a huge windfall gain, how many doctors, nurses and frontline service people we could potentially also employ to help. Schools could benefit, the health system could benefit, the justice system could benefit, we could have more rehab programs, we could have voluntary drug rehab programs across the state, mental health, psychosocial—the list is endless. I will say also that offshore wind farms also create a lot of environmental impacts as well.

Hope springs eternal: the profits might be huge and we might be able to share that amongst all our agencies and departments and resources equally and fairly, including the environment. On that basis, I will not be supporting the amendment.

Suggested amendment negatived.

The ACTING CHAIR (The Hon. R.B. Martin): We now have another amendment: No. 3 [Simms-1].

The Hon. R.A. SIMMS: I will not be proceeding with amendment No. 3 [Simms-1] or amendment No. 4 [Simms-1]. They are both consequential amendments so they are no longer necessary.

Clause passed.

Remaining clauses (28 to 71), schedule and title passed.

Bill reported without amendment.

Third Reading

The Hon. C.M. SCRIVEN (Minister for Primary Industries and Regional Development, Minister for Forest Industries) (16:10): I move:

That this bill be now read a third time.

Bill read a third time and passed.