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Legislative Council - Fifty-First Parliament, Second Session (51-2)
2008-06-17 Daily Xml
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NATIONAL GAS (SOUTH AUSTRALIA) BILL

Second Reading

Adjourned debate on second reading.

(Continued from 30 April 2008. Page 2574.)

The Hon. D.G.E. HOOD (16:07): I rise to support the second reading of this bill on behalf of Family First. It is interesting that we have come to consider this bill now due to other bills having priority in the past few sitting weeks, which has meant that in the intervening period since this bill was introduced in this place on 30 April there have been some interesting developments.

Indeed, after an explosion earlier this month, Western Australia is facing a two-month shortage in gas supply, with one-third of that state's gas production off line, a situation which the Carpenter government has described as his government's 'biggest test'. The Western Australian Premier has gone to finance companies and they have agreed to go easy on people struggling to meet repayments due to the crisis, for which they are to be commended.

This is reminiscent of the Moomba gas crisis of early 2004 in this state, and I think it serves as a reminder that, whilst we debate bills that seem at times to be somewhat less important than others, if we do not get our infrastructure right it could have major consequences for the state. On that note, I think it is worth noting that we are not as exposed as Western Australia because we are not under the tyranny of isolation that it suffers, since we have a cross-border gas network that enables us to mitigate the damage if we have a gas crisis here. It is the regulation of that network, and not so much how Western Australia fits into that framework, that we are here to debate today.

On a legislative front, we are (as was the case with the electricity market reforms) the lead legislator here, which is indeed a privileged position. We should bear in mind that privilege by ensuring a rigorous but also timely debate so that we do not lose it in future; hence my interest in speaking to this bill today.

I will now provide some background details. The Victorian parliament introduced its bill on 8 May 2008. Also on 8 May the Northern Territory parliament introduced its companion bill, and I believe that the New South Wales parliament has also introduced its bill. I refer to some statistics I came across in the research of this bill. For the SA gas market, according to the 2005-06 annual performance report for the SA energy retail market, some 367,990 small customers as at 30 June 2006, together accounted for 9,250 terajoules (TJs) of consumption, or an average of 25,140 megajoules (MJs) per small customer (per annum). Of course, small customers are our main concern, as these represent largely families and family businesses.

Average residential gas consumption from 1997 to 2006 was fairly stable at around 8,000 TJs, and that averages to approximately 22,000 MJs per residential user. There were 850 large customers (so-called) who, in total, consumed 29,120 TJs, which, one can quickly see, is over three times what the small customers consume altogether. There were a further 2,460 unmetered customers (such as large dwelling complexes where a flat rate is charged to the customer) for whom, obviously, no figures on total or average consumption can be provided.

The minister's second reading explanation stated that the bill was in the interests of all Australians and all South Australians. That statement may seem generally true, but let us look at whether this system is presently working fairly in the interests of all Australians, in particular the primary interest here is in the interest of all South Australians. In doing that, I want to compare prices at some border points in this state to demonstrate, I believe, the national inequity that presently exists in the marketplace.

For example, for a user at the low end of the market, say, 1,500 MJs usage per quarter or 6,000 MJs per annum, the price roughly across the board within South Australia is $98.89 whether you are in the CBD of Adelaide, or one of our regional centres such as Port Augusta, Port Lincoln, or anywhere else where there is a gas line, or the energy retailer will deliver gas bottles to the residence. I would appreciate knowing what areas of the state cannot get natural gas, as I have a question mark over Ceduna and the APY lands, for example, as well as some other areas.

The price equalisation statewide is a fair outcome compared to, say, motor vehicle fuels, which sees country users paying more for the transportation cost. This is one benefit that has resulted from market regulation within South Australia—a good initiative. However, using that $98.89 as a baseline, let us look at the borders. In Renmark in the Riverland near our eastern border, through their reticulated system, you will be charged $98.89. However, just 85 kilometres across the border into Victoria, for the same amount of gas Victoria Electricity will charge just $66.41. This is astonishing when you consider that, just over the border, they are taking gas from the same pipeline that runs via the Riverland to Mildura.

It gets worse. Driving further east to Mildura (a total of 143 kilometres from Renmark), which has the benefit of connecting with the New South Wales market, the ActerAGL company will charge just $45.37 for the same amount of gas again! We have a situation where we are paying over double in South Australia what Victorian users pay for gas out of the same pipeline, which is really a crazy situation. I will give some more detail on that in a moment.

In Bordertown, you will pay $98.89, yet just 43 kilometres over the border at Kaniva you will pay $66.41. That $66.41 price demonstrates that users from the city to the furthest corners of each state pay a flat rate, but in New South Wales (and in Mildura's case, stretching slightly into Victoria) the gas is substantially cheaper—almost 45 per cent of our gas price! To quote the late Professor Julius Sumner Miller on the 1980s Cadbury chocolate ads with his egg and milk bottle, 'Why is it so?' I thought I would just slip that in. I have been waiting to put that in at some stage. I cannot keep a straight face: it was incredibly funny.

I have to put it down to spending on infrastructure. The Victorian government spent—and it sounds like it will soon begin spending again, given recent announcements—significant money expanding on infrastructure in that region. In June 2003, the then Bracks Labor government detailed a $70 million expenditure on gas networks to extend their natural gas network up to 100,000 households in country Victoria.

I have to ask the minister: what was different or special about the Victorian Labor government circumstances that saw its expand its gas network into its regional areas? A cost comparison between states also begs the bigger question: will this bill result in an across the network flat price? In other words, an eastern seaboard standard, which we are presently seeing for all consumers within each state, which I think we can readily infer from the figures I have given, would mean a substantially lower price for gas. Is this what the minister means in his second reading explanation when he states that this bill is good for Australians and, indeed, South Australians?

Let me also put on the record that Port Augusta is not on the network and has to have gas trucked in. The gas pipeline from Moomba branches off under Spencer Gulf across to Whyalla. I can appreciate that there are commercial concerns that make it viable to be that way, and also the flat price I have described across most of the state nullifies this blow for the families Port Augusta; however, for South Australia overall we have to ask whether it is both economical and environmentally sensible to truck gas to Port Augusta when we could spend the money on a pipeline to Port Augusta to deliver gas.

Let me now come back from the country a bit closer to the city and state something that might not be widely known that is very concerning and quite surprising to some, that is, Mount Barker is not on the network at all. Not only is Mount Barker neglected by not being on the metropolitan rail network but it is also neglected by not being on the statewide natural gas distribution network. On a simplistic assessment, this is remarkable when you consider the SEAGas pipeline from the South-East comes in to Adelaide via the Adelaide Hills. Mount Barker is installing reticulated gas that has to be trucked in from elsewhere when, surely, a booming area such as Mount Barker would be a sound infrastructure investment for the government.

ESCOSA states that—and it is regrettable that this is the state of affairs—Renmark, Victor Harbor, Port Lincoln, Wallaroo, with between 50 and 350 customers, and also Roxby Downs, with some 1250 customers, have needed to invest in reticulation delivery because the pipelines do not go to those communities or sufficiently near to make the trucking of gas from the nearest pipeline outlet effective. I think that that state of affairs is significant when you contrast it with the regional infrastructure expenditure of the Bracks government to put an extra 100,000 regional homes on the network.

Looking at the large-scale now—and I say this for the benefit of honourable members—there are in effect four major gas fields in Australia. Our own Cooper Basin, which is, in fact, not just our own but stretches over much of inland Queensland (with the Adavale and Bowen-Surat basins), and less so in New South Wales and the Northern Territory; the Otway, Bass and Gippsland basins in Victoria and Tasmania, with the Otway Basin reaching into our state's South-East; the Perth and Carnarvon basins off the western shores of Western Australia; and, lastly, the Browse and Bonaparte basins in far north Western Australia and slightly into the Northern Territory.

Mike Roarty of the Science, Technology, Environment and Resources section of the Commonwealth Parliamentary Library, in his 1 April 2008 paper entitled Australia's Natural Gas: Resources and Trends, said the following about gas infrastructure in Australia:

Over the period from the early 1990s to 2007, a number of new high-pressure gas pipe lines have been built. A significant element of this expansion has been associated with construction of interstate pipelines—the Eastern gas pipeline (from Longford to Horsley Park in 2000), the NSW-Victoria Interconnect (from Wagga Wagga to Wodonga in 1998), the Tasmanian gas pipeline (from Longford Victoria, to Bell Bay in Tasmania in 2004), and the SEAGas pipeline (from Port Campbell in Victoria to Adelaide in 2004). These developments in particular have greatly expanded gas availability, for example, Gippsland gas now being piped into New South Wales.

The Northern Territory and Western Australia are largely dependent upon their own reserves and, hence, the present gas crisis in WA is isolated to its own borders in so far as gas supply goes. However, with that state having to buy-in gas or other fuels such as diesel on the national market, there is an indirect effect upon the price of our fuels as a consequence. The lines servicing these basins are significant, and I will highlight a few significant areas:

The Northern Territory, having the Amadeus to Darwin line down its spine from the basin to Darwin through Alice Springs and surrounds;

Western Australia has the major goldfields pipeline from the Carnarvon Basin, making landfall near Broome and running in a south-easterly direction through the inland down to Kalgoorlie and, ultimately, Esperance on the south-east coast;

Queensland has numerous pipelines, of course, but perhaps of most interest is the Carpentaria pipeline from south-west Queensland at Ballera to the Wallumbilla pipeline north to Mount Isa, and it is proposed that it will link up with the Amadeus to Darwin pipeline. Interestingly, Queensland is proposing to make the long journey from Mount Isa to Cape York.

I highlight these particular pipelines to demonstrate, as we were told in our briefing, the very interconnected nature of the gas network in this nation and also the bold plans for the future that will in effect see the Northern Territory link into the eastern seaboard network. However, I also note that our research does not reveal any bold plans for investment in South Australian pipelines.

I have to wonder whether we are to going to need, for the much anticipated mining boom, a major new pipeline from the Moomba line across to the expanding mines in our north. I am aware that companies can make a commercial case for expanding pipelines and can be given competition and regulation exemptions to be able to have economic certainty for getting these pipelines built. Nonetheless, I have to ask the minister what plans are in the pipeline (excuse the pun) for our mines—

Members interjecting:

The Hon. D.G.E. HOOD: I thought you would like that.

The Hon. Sandra Kanck interjecting:

The Hon. D.G.E. HOOD: Well, I have been trying; I keep you entertained.

The Hon. M. Parnell: The bottle and the egg.

The Hon. D.G.E. HOOD: You like that one? Why is it so? What plans are in the pipeline for our mines, especially given the significant plans that Queensland has for the extension of its gas pipelines?

Whilst accepting that this bill is part of a national model, as members of the Legislative Council representing the whole state of South Australia and not those beyond its borders, our comments and questions on this bill essentially come down to two points: first, when and where will the state government be acting in the interests of South Australian families to bring down the cost of gas and expand its network to reduce the ultimate financial and environmental cost of getting gas to regional areas; and, secondly, what provision is the state government making to ensure that we keep up with the bold expansion plans of Queensland for our mining industry in particular, which the Premier stated recently has the potential to be the state's leading industry?

Before concluding, I want to turn to some environmental considerations. In terms of geosequestration, I have heard talk of possibilities for Moomba, especially regarding as a first measure looking at its own emissions. In theory there is potential in the future for this process to occur. There are practical issues such as the lack of gravity feed, one would think, to enable larger scale operations. I raise the idea in the context of this debate, as we think about these issues as relevant to our gas network and infrastructure needs in the future.

I ask the minister: what has been done nationally or in this state about so-called fugitive emissions, that is, gas that seeps out of the pipelines, and, in a federal Labor carbon trading market, will that need to be taken into account?

I want to talk up the environmental benefits of gas as provided by the Australia Gas Association. Its table outlines that, per gigajoule of produced energy—and I have a table here—essentially, for brown coal the average carbon emission intensity of selected fossil fuels is some 93.3 kilograms; black coal, 90.7 kilograms; petroleum, 68.2 kilograms; and gas is just 50.9 kilograms.

With more people turning to split-system airconditioning and the like, it is imperative that we create a competitive price for domestic gas consumption to increase the attractiveness of gas heating in winter. Otherwise, that heating will need to occur using the existing electricity system. Surely then in winter we will be taking the load off the power grid by having a better gas distribution network, lower prices and, therefore, more people heating from gas instead of using electric heating which, of course, has the environmental implications that I have just outlined. In so doing, we reduce our greenhouse gas emissions and give families the capacity to do their bit to reduce greenhouse gas emissions in their own home.

Moving on from those important environmental concerns, I will return to a legislative issue that I think demonstrates the need to get on with this bill. South Australia enjoys the privilege of being lead legislator, which apparently is thanks to a stance that Trevor Griffin took in the past that we would not be usurped by other jurisdictions. As a result, we tend to be lead state with this form of legislation. It is a privileged position and one that we bear in mind when debating bills like this and the solar feed-in scheme bill that we looked at previously. We would not want to lose the privilege of having a national impact in this way.

Secondly, our place as lead legislator is also a credit to this parliament and, indeed, a nod to the bicameral system—as one would expect that if, for instance, speed was of concern, such issues would go to the unicameral Queensland parliament—and in particular the stamp of scrutiny and accountability that the South Australian bicameral parliament provides. Having recorded some questions for the minister, I look forward to his response. Family First supports the second reading.

The Hon. M. PARNELL (16:24): Because South Australia is the lead state in developing this national legislation, I think it is very important that we do whatever we can to make sure that we get it exactly right. The issues that are raised by this bill are in many ways identical to the issues that we discussed in this place in October last year in relation to the national electricity laws, and I have to say that I find it very frustrating that, in this day and age, we still have critical energy legislation like this bill setting up rules that govern an essential energy market presented to us in a way that fails to acknowledge the complexity of the issues and instead seeks to blinkeredly restrict consideration to just economic considerations. Just to reinforce that point, I refer to a couple of sentences in the second reading explanation which state:

The national gas objective is to promote efficient investment in, and efficient use of, natural gas services for the long term interests of consumers of natural gas with respect to price, quality, reliability and security of supply of natural gas. The national gas objective is an economic concept and should be interpreted as such. The long term interest of consumers of gas requires the economic welfare of consumers, over the long term, to be maximised. If gas markets and access to pipeline services are efficient in an economic sense, the long term economic interests of consumers in respect of price, quality, reliability, safety and security of natural gas services will be maximised. By the promotion of an economic efficiency objective in access to pipeline services, competition will be promoted in upstream and downstream markets.

With all respect, that is an absolute load of rubbish. Inherent in those statements is an assumption that markets have at their heart the best interests of society, whether it is the best interests of society in a social context or in an environmental context. It would seem to me that we are not doing the best we can if we have an efficient and competitive economic system which in fact pays no heed to the environmental consequences of what is, essentially, a fossil fuel and which pays no real regard to the social consequences of regulating an essential community fuel, because gas is not just about economics.

We rely on it for cooking and for heating, so there is a social dimension to gas. Gas also has both a positive and negative impact in relation to tackling climate change. The reason it can have both a positive and negative impact is that gas is a better fuel than oil or coal when it comes to its greenhouse gas emissions, but it is not as good a fuel as true renewable energy, whether it be solar or wind.

That means that it is very important that we take environmental considerations into account in relation to gas to ensure that it fulfils its role as an essential community service on the one hand and a transitional fuel on the other hand in relation to reducing our greenhouse gas emissions but that we not stop there and say, 'Well, let's move to gas instead of coal and the greenhouse problem will be solved,' because it will not.

The current experience in Western Australia that members would be aware of with gas shortages has highlighted a number of considerations that we should be taking into account in relation to this bill. In particular, when we get to a situation of having to ration gas supplies, the important questions are who makes those rationing decisions and also whose needs are most important. Is it a large factory with lots of jobs at stake? Is that more important than a hospital's need to sterilise their equipment or a pensioner's need to cook their evening meal?

The debate we had last year in relation to electricity and the national uniform legislation was quite extensive, and I am not proposing to go through all of the issues that we went through last time, other than to say that they all still apply. I have picked three issues to form the subject of a single amendment to this legislation, which I would urge all honourable members to consider.

My amendment is in relation to the national gas objective which is clause 23 of the bill and covers three main issues: first, the incorporation of ecologically sustainable development (ESD) as an objective; secondly, some consideration of the greenhouse implications of gas; and, thirdly, an acknowledgement of the community's right to have access to an essential fuel.

The amendment that I propose adds these principles to the objective. In relation to ESD, my amendment provides that decisions under this law should take into account principles of ecologically sustainable development. That is not a radical concept. Most pieces of natural resource management legislation or environmental or conservation legislation include the concept of ESD (ecologically sustainable development). Within that concept are issues such as an acknowledgement that many resources are finite—certainly, gas is. It also obliges us to take into account the needs of future generations, the concept of so-called intergenerational equity. It also requires us to take a precautionary approach to decisions affecting the environment. These are in just about every other piece of environmental legislation in this state. I say we should continue that precedent and incorporate ESD into this bill.

Secondly, my amendment seeks to incorporate into the objective the following: recognition should be given to the long-term environmental and economic impacts associated with greenhouse gas emissions arising from the use of natural gas. I have used the words 'environmental and economic impacts' rather than 'costs and benefits' because, as I said before, there are both costs and benefits. One of the things that we need to be very careful about is that we do not allow gas to become the endpoint in terms of energy policy. We do need to allow some technology to leapfrog from the dirtiest straight to the cleanest, without going through the transitional fuels such as gas. We do need people to be able to go straight from dirty, coal-burning power stations to clean, renewable energy.

The third amendment to the objective states that reasonable and reliable access to natural gas should be viewed as an essential service within the community. That is to make it very clear that gas is not just about economics but is also about the social fabric of society and the basic right all of us have to access sufficient energy for our daily lives. I would urge all honourable members to support my amendment when we get to the committee stage.

As I said, the debate over this bill should really be very similar to the one we had on the electricity bill. The issues are very much the same. It has been conservation groups and peak welfare bodies in other states that have urged us to get it right here in South Australia. We have not had as much correspondence on this—they may have lost heart, having written to us all last year and found that most of the amendments fell into a black hole and were not supported. Nevertheless, those who have contacted me this time assure me that this bill is just as important as the national electricity laws and that amendments such as these are equally important to support. With that, I support the second reading.

The Hon. SANDRA KANCK (16:33): This is a very utilitarian bill. It concerns arrangements for the governance and operation of gas markets in Australia. It is designed to ensure that the gas markets operate more efficiently, and it includes incentives for exploration. We have to recognise that it is also occurring in the context where we, as a nation, are eagerly selling our gas to China and touting the benefits of gas as a clean fuel.

There are problems with this idea of gas being a clean fuel and also the fact that we are selling it to China: first, gas is not clean and, secondly, it is not an unlimited resource. This eagerness to exploit natural gas displays the same short-sighted greed and complacency that has characterised our reckless consumption of petroleum. Gas is not a clean, green source of energy; it is cleaner than some such as coal and oil, but it is not clean. It produces 50.9 kilograms of CO2 per gigajoule of produced energy. It is better than brown coal, which has a figure of 93.3, and black coal which is 90, but it is not much better than petroleum, which sits at 68.2.

It also does not take into account the energy losses from the processing, compressing and/or liquefying and transporting of natural gas. Transporting natural gas costs six to 10 times the equivalent of transporting oil. Natural gas is purified before it is liquefied into LNG, a process that consumes around 15 per cent of the original gas volume and, of course, the energy. Natural gas can be used as an alternative fuel for transportation in the form of either compressed natural gas or liquefied natural gas, especially in heavy transport such as public buses or road freight carriers that can use centralised refuelling points.

Gas to liquids processes have been developed to produce liquid fuels, such as jet fuels, petrol and diesel from natural gas, but up to 50 per cent of the original gas is lost in this process. In other words, even in the best-case scenario (that is, substituting brown coal for gas) gas is only 65 to 70 per cent more efficient. If we phase out coal but double the consumption of gas, we will be back where we started in terms of greenhouse gases.

Using gas as a substitute for petroleum delivers only very minor gains, so gas is not in any sense a long-term substitute for petroleum, or even coal, in a pollution sense. It is a short-term transitional fuel and might buy us a decade or two at best. We are grasping at straws if we pin either our energy future or our prosperity on gas.

I said that there were two problems, and the second problem is that gas is not really a reliable substitute from an energy security perspective. According to BP's Statistical Review 2005, Australia has reserves of 2,460 billion cubic metres (BCMs) of natural gas from which it produces 35.2 BCMs annually. It consumes 24.5 BCMs and exports 30 per cent of the production. If all the gas in our reserves could be extracted at the current rate, it would last 70 years but, as the gas reserves of other countries decline, the demand for LNG will escalate.

Natural gas consumption in Australia has continually increased since the mid 1960s. Australian gas consumption was 1,184.6 petajoules in 2005-06. Growth in domestic use of natural gas is projected to remain strong, growing at 4 per cent per annum in the medium term to 2010-11 and thereafter at 2.5 per cent per annum to reach 1,740 petajoules in 2019-20. Exports of LNG are projected to increase nearly fourfold to almost 50 million tonnes—or 2,700 petajoules—in 2019-20, to account for around 60 per cent of Australia's total gas production in that year.

In 2004-05 the share of natural gas in Australia's primary energy consumption was 19.7 per cent, but it is forecast to increase to 24.1 per cent by 2019-20 and to 25.2 per cent by 2029-30. This trend of increasing demand is also occurring in the US and, according to the US Energy Information Administration, world market energy consumption is projected to increase by 57 per cent from 2004 to 2030, while gas consumption will increase by 38 per cent by 2025 in the US alone. Currently, coal accounts for 72 per cent of China's energy consumption while natural gas accounts for only 2.5 per cent—far lower than the world average of 25 per cent and the average level of 8.8 per cent in Asia—but it is extremely likely that Chinese demand for gas will put the same pressure on gas prices that has occurred with petroleum.

One prominent peak oil theorist predicts that the world will experience the peak gas phenomenon by 2020. The demand for gas will be accelerated by its use as a substitute for oil for the production of jet and motor fuels and petrochemicals, and today's peak oil debate could well be a debate about peak gas in another decade. Natural gas production has begun its decline in Europe (starting with the UK) and in North America. Decline may begin in Russia next decade. Britain used to be an exporter of natural gas but now imports. In short, the whole world will want our gas, so we will have to give some thought about whether it will all be for sale or whether we want to hold on to a strategic reserve.

Some countries are thinking clearly about the limited future of fossil fuel. Most of Norway's revenue from North Sea oil goes straight into its petroleum fund, established in 1995. The figures I have (which are in UK currency) indicate that the fund is now worth a total of £82 billion, or £16,500 for every man, woman and child in Norway. The Norwegian government uses its oil revenues to cover its moderate budget deficits and transfers the balance to its petroleum fund. The fund amounts to a national portfolio that is invested in a mix of financial instruments in the form of bonds, equities and money. In addition (and Australia might like to consider this perspective), Norway recognises its good fortune in having this natural resource in its own territory, and uses some of that revenue to take a socially proactive position on issues involving developing countries and human rights. Sweden has set itself the target of being fossil fuel free by 2020. Australia and South Australia are lagging behind on such initiatives.

It is unfortunate that these issues are not the direct concern of this bill; however, they are of vital concern to this state and this country, and it appears that they are not being addressed anywhere else. The bill highlights the need for a state energy plan that actually takes a holistic look at our future energy needs from both an environmental and energy security point of view. The Western Australian Chamber of Commerce and Industry supports the development of a government energy strategy that embraces all energy sources. We in South Australia are failing in this regard. Such a strategy would make it clear that the role of remaining fossil fuels should be to facilitate the transition to a less fossil fuel dependent civilisation with reduced greenhouse gas emissions.

Gas is not a solution: it is just a slightly slower road to climate change and, at worst, civilisation collapse. We needed to be reminded of this, and this bill has been helpful in concentrating our thinking. My party, the Democrats, has been warning about climate change since the 1980s and, more recently, it has been warning about peak oil. However, the more we turn to gas as a transitional fuel the closer we come to reaching peak gas. This bill is about markets, the very short term future and profitability, and it is therefore very short-sighted.

We need to keep control of our gas markets, and for that reason I support the bill in the way it will regulate the markets. However, ultimately the bill is about orderly exploitation of a natural resource, and no-one appears to be thinking about the consequences of that exploitation. I look forward to the day when this government has an energy plan and is looking after our non-renewable natural resources—but I will not hold my breath.

Debate adjourned on motion of Hon. J.M. Gazzola.

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