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Legislative Council - Fifty-Fifth Parliament, First Session (55-1)
2023-03-07 Daily Xml
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National Gas (South Australia) (East Coast Gas System) Amendment Bill

Second Reading

The Hon. C.M. SCRIVEN (Minister for Primary Industries and Regional Development, Minister for Forest Industries) (16:33): I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation and explanation of clauses inserted in Hansard without my reading them.

Leave granted.

The government is delivering an important reform to national energy frameworks agreed by Energy Ministers on 28 October 2022, which involves amendments to the National Gas Law to extend the Australian Energy Market Operator's (AEMO) functions and powers to manage reliability and gas supply adequacy for the east coast gas market over winter 2023 and beyond.

This is in response to events experienced in the National Electricity Market and east coast gas markets in the winter of 2022 and forecasts of future risks to reliability and supply adequacy going forward. These risks are emerging with the forecast decline in southern gas reserves, increasing reliance on gas from Queensland and challenges to the reliability of coal generation as the energy market transitions.

The domestic east coast gas market has become more susceptible to external shocks. In winter 2022, impacts of the Russian invasion of Ukraine increased international demand for Australian gas (in the form of Liquefied Natural Gas). Additionally, coal generator outages and lower renewable energy generation increased domestic demand for gas powered generation. This confluence of events, amongst others, led to record high prices and multiple interventions from AEMO to address supply adequacy risks in the Victorian Declared Wholesale Gas Market (DWGM) and the Short Term Trading Markets (STTM).

The Australian Competition and Consumer Commission (ACCC) and AEMO have raised concerns that domestic gas supply adequacy has declined substantially since early 2022. AEMO's 2022 Gas Supply and Systems Adequacy Risk report and the ACCC's July 2022 Gas Inquiry interim report both highlight increased risk of peak day and seasonal gas supply shortfalls in southern states in winter 2023.

While LNG exporters have committed to offer additional uncontracted supply to the east coast market, risks to supply shortfall remain, such as unexpected maintenance or outages, production and infrastructure constraints and unexpected increases in demand.

In August 2022, Energy Ministers agreed to the accelerated development and implementation of a broad range of actions to address the significant risks of forecast gas supply shortfalls and help AEMO to manage those risks.

Unlike the National Electricity Market which has well established frameworks under which AEMO maintains reliability and supply adequacy, AEMO has limited powers and tools to identify and respond to supply-demand imbalances in the east coast gas market outside of Victoria.

The broad aim of the regulatory amendments outlined in the National Gas (South Australia) (East Coast Gas System) Amendment Bill 2022 is to implement a framework that provides AEMO with the tools to monitor risks to supply adequacy in advance of those risks being realised, to signal those risks to the market and seek a response.

Should the market fail to respond, this Bill will give AEMO the power to manage reliability and supply adequacy threats through seeking further information, engaging the market to identify and implement actions, such as trading in gas—including related services such as procurement of pipeline services or services provided by a compression service provider or a storage provider—as well as directing participants in the market to better manage existing issues.

AEMO's ability to exercise its directions powers and trading function is limited to when AEMO is of the opinion that the giving of the direction or exercise of the trading function is necessary to prevent, reduce or mitigate an actual or potential threat identified by AEMO in the exercise of AEMO's proposed monitoring and signalling functions.

The Bill is intended to complement other initiatives by governments and industry to address forecast shortfalls in the east coast gas market. This includes the Commonwealth Government's actions to amend the Australian Domestic Gas Security Mechanism and the recent renegotiation of the Heads of Agreement. The Bill also builds on recently implemented transparency measures as seen in the- National Gas (South Australia) (Market Transparency) Amendment Act 2022.

More specifically, the Bill outlines AEMO's new east coast gas system reliability and supply adequacy functions, which are broadly proposed to encompass:

Monitoring trends in supply and demand of natural gas across the east coast gas system and factors which affect, or may potentially affect, the reliability or adequacy of the supply of gas within that system;

Identifying, communicating and publishing information about actual or potential risks or threats to reliability and adequacy of gas supply within the east coast gas system;

Reporting to Energy Ministers on these matters;

Giving directions and trading in gas (and associated services) to maintain and improve the reliability or adequacy of gas supply in the east coast gas system where AEMO considers it necessary to prevent, reduce or mitigate an actual or potential threat; and

Other functions conferred on AEMO by the Rules for the purposes of the new east coast gas system reliability and supply adequacy functions.

The Bill introduces a new term, the east coast gas system. The east coast gas system encompasses the east coast jurisdictions covered by the framework and includes a natural gas industry facility, regulated gas market or gas trading exchange for which AEMO has an established gas trading exchange agreement as well as other matters as specified in the Rules.

The Bill outlines that AEMO must account to the relevant Ministers for performance of east coast gas system reliability and supply adequacy functions.

AEMO will be empowered to exercise a range of directions powers, similar to those which AEMO can utilise in relation to the Victorian DWGM but modified to be more generally applicable to the east coast gas system as a whole. As set out in the Bill, these powers will be exercisable:

to maintain and improve the reliability of the supply of natural gas within the east coast gas system; and

to maintain and improve the adequacy of supply within the east coast gas system.

AEMO directions may relate to the operation, maintenance or use of any equipment or installation, the control of the flow of natural gas, or any other matter that may affect the reliability or adequacy of gas supply within the east coast gas system.

The Bill provides for the requirement for AEMO to prepare, in accordance with the rules, guidelines relating to the exercise or performance of AEMO's directions power and trading function.

The Bill provides a head of power for the Regulations to specify:

the relationship between the operation of AEMO's east coast gas system reliability and supply adequacy functions, or a provision of these functions, and a law of a participating jurisdiction, in the event of an inconsistency;

the extent to which a relevant entity is or is not required to comply with an east coast gas system direction in circumstances where the direction is inconsistent with a law of a participating jurisdiction;

the extent to which an east coast gas system direction is not valid in circumstances where the direction is inconsistent with a law of a participating jurisdiction.

The Bill provides for the Rules to specify matters that AEMO may or must consider in determining there is or is not an actual or potential threat to the reliability or adequacy of the supply of natural gas within the east coast gas system; the kinds of directions that AEMO may or may not give under this function; and the matters that AEMO may or must consider in determining whether to exercise its directions power or trading function.

The Bill provides that the East Coast Gas System Procedures may deal with the matters specified by the Rules and any other matter relevant to AEMO's east coast gas system reliability and supply adequacy functions on which this Law or the Rules contemplate the making of Procedures. Compliance with the East Coast Gas System Procedures is also dealt with in the Bill and outlines who would be applicable and must comply with the Procedures.

AEMO's declared system functions will be expanded to include purchasing pipeline services or services provided by a compression service or storage provider.

AEMO's information gathering powers will be broadened to include its new function for east coast gas system reliability and supply adequacy.

AEMO's powers to make general market information orders, or serve market information notices, will be expanded to include making or serving an order or notice in relation to the exercise of an east coast gas system reliability and adequacy function. The Bill allows for the Rules to specify a person, or class of persons, to whom such an order or notice may be issued. AEMO must determine the type of consultation that should occur before making such an order.

The Bill extends AEMO's ability to disclose protected information to include adequacy of gas supply.

The Bill extends the obligations to make payments under the Rules and Procedures to apply to relevant entities subject to AEMO's directions power.

Consistent with the introduction of most energy legislation, the Bill inserts a head of power for the South Australian Minister to make an initial set of rules. The Bill will allow the Minister to make further rules for a maximum period of six months from commencement of the Bill. This additional six month period is aimed at refining the initial package of Rules with respect to any outstanding issues. Once the time period has expired, the Minister will have no power to make any further amendments.

New subject matters for the making of National Gas Rules will be inserted into Schedule 1 under the heading 'East coast gas system reliability and supply adequacy functions'. This will empower the Australian Energy Market Commission to consider rule change proposals for further development of a range of matters in relation to AEMO's east coast gas system reliability and supply adequacy functions including:

The development of reliability standards;

Arrangements to enable AEMO to contract with other parties to reduce or curtail natural gas demand;

Arrangements to procure, by or on behalf of AEMO, the supply or storage of natural gas, transport capacity and other services for the purposes of AEMO's east coast gas system reliability and supply adequacy functions;

Obligations on retailers, gas powered generators and other large gas users to develop plans to manage peak or other demand scenarios; and

Arrangements to assist AEMO and participating jurisdictions to coordinate with each other in relation to addressing actual or potential threats.

I commend this Bill to members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

3—Amendment provision

These clauses are formal.

Part 2—Amendment of National Gas Law

4—Amendment of section 2—Definitions

Definitions are inserted for the purposes of the measure.

5—Amendment of section 74—Subject matter for National Gas Rules

Additional subject matters are added to the list of subject matters in relation to which the AEMC may make National Gas Rules.

6—Amendment of section 91A—AEMO′s statutory functions

Additional functions are conferred on AEMO, being the east coast gas system reliability and supply adequacy functions.

7—Insertion of Chapter 2 Part 6 Division 1A

New Division 1A is proposed to be inserted into Chapter 2 Part 6:

Division 1A—AEMO′s east coast gas system reliability and supply adequacy functions

91AD—AEMO′s east coast gas system reliability and supply adequacy functions

AEMO′s east coast gas system reliability and supply adequacy functions are set out.

91AE—AEMO to account to relevant Minister for performance of east coast gas system reliability and supply adequacy functions

AEMO is required to provide information about the performance of its east coast gas system reliability and supply adequacy functions at the written request of a Minister of a participating jurisdiction or the MCE.

91AF—AEMO′s power of direction—east coast gas system reliability and supply adequacy

AEMO is authorised in specified circumstances to give a written direction (an east coast gas system direction) to a relevant entity for 1 or more specified purposes. Provision is made in relation to east coast gas system directions.

91AG—East Coast Gas System Procedures

Provision is made in relation to East Coast Gas System Procedures made for the purposes of section 91AD.

91AH—Compliance with East Coast Gas System Procedures

The section provides for compliance with East Coast Gas System Procedures.

8—Amendment of section 91BA—AEMO′s declared system functions

This amendment is consequential.

9—Amendment of section 91F—Information gathering powers

10—Amendment of section 91FA—Making and publication of general market information order

11—Amendment of section 91FB—Service of market information notice

12—Amendment of section 91GG—Disclosure of protected information for safety, proper operation of the market etc

The amendments to the above sections are related to the conferral of the east coast gas system reliability and supply adequacy functions on AEMO.

13—Amendment of section 91H—Obligations under Rules or Procedures to make payments

This amendment is consequential.

14—Insertion of section 294H

Section 294H is proposed to be inserted:

294H—South Australian Minister may make Rules relating to AEMO′s east coast gas system reliability and supply adequacy functions

The South Australian Minister is authorised to make Rules relating to AEMO′s east coast gas system reliability and supply adequacy functions. The provision expires 6 calendar months after it commences.

15—Amendment of Schedule 1—Subject matter for the National Gas Rules

The list of subject matters for the National Gas Rules in Schedule 1 is extended to include subject matters relating to the east coast gas system reliability and supply adequacy functions.

The Hon. H.M. GIROLAMO (16:34): I rise to briefly speak on the National Gas (South Australia) (East Coast Gas System) Amendment Bill and indicate that I am the lead speaker for the opposition on this bill. The bill continues the trend of reforms coming out of the Energy Ministers' Meeting and seeks to deliver transparency and increased powers to market bodies to address historical gas supply issues that have been going on for some 10 years or so.

This bill will support the movement to create a more secure, resilient and flexible east coast gas market. The reasoning provided by the energy ministers for the changes proposed in this bill comes from the fact that unlike the National Electricity Market, which has well-established frameworks under which AEMO maintains reliability and supply adequacy, AEMO has limited powers and tools to identify and respond to supply and demand imbalances in the east coast gas market outside of Victoria.

This bill inserts explicit disclosure measures and enhances AEMO's ability to seek specific information to exercise its powers. This will increase transparency for all industry participants with respect to the forecasting periods. The bill inserts a regulatory framework for AEMO, with flexibility to undertake its monitoring and signalling functions, usually used when there is an emerging risk or system threat. Further from that, when the market does not or cannot respond to AEMO's signalling and the risk or threat does develop, the directions framework allows AEMO to take specific actions to maintain or improve the reliability and supply adequacy of natural gas across the east coast system.

Currently, the gas market is based on bilateral contracts between producers, retailers, infrastructure service providers and larger users. These contracts have proven to be very reliable in ensuring contracted positions are met. Many, if not all, of the market participants mitigate their major supply risks through contracts, so the contracts are very important to a functioning gas market here in Australia.

This bill, proposing government intervention into the gas market, is a major change and may well result in unintended consequences. This could very well have a significant impact on investment into gas production and gas infrastructure. This uncertainty comes at a time when the investment is crucial not only to South Australia's but to Australia's energy security.

More investment in natural gas, and increasingly in renewable gas, is going to be critical to address the fundamental issue in the east coast gas market: the high prices and challenging market for supply of gas that is occurring at the moment. In fact, more gas into the east coast market is critical to keeping gas prices, and ultimately electricity prices, down—a lot of electricity prices are dictated by gas generation—for families, for industry and for business as well.

However, there have been a number of criticisms of this bill, a common one being that stakeholders were given only two weeks to analyse, model and form an opinion on the proposed reforms. The bill seeks to overcome that criticism by providing the Minister for Energy and Mining with the power—also called the 'head of power'—to make an initial set of rules, and also enabling the minister to make further rules for a maximum period of six months from the commencement of the bill subject to a further consultation process conducted by the Energy Ministers' Meeting.

Given that the government could intervene to set the sale price of gas, and even to whom the gas is sold, as and when it sees fit, suppliers and infrastructure service providers are at the moment wary and not willing to commit to a large financial investment decision until the regime and regulations become more apparent.

The changes proposed are required, but the major changes proposed need to be acknowledged, especially as we head into winter. The uncertainty this bill could bring will have an effect on investment into gas production and infrastructure at a time when investment is going to be crucial to South Australia and right across Australia. This is an area that parliaments around Australia need to watch very closely, especially at a time when we have a looming energy crisis and a cost-of-living crisis converging. With the shortened time for consultation, the real fear is that not all options or consequences have been considered.

The Hon. R.A. SIMMS (16:39): I rise to speak on the National Gas (South Australia) (East Coast Gas System) Amendment Bill on behalf of the Greens. This bill seeks to address an issue that emerged during the last winter period where interventions were needed in order to ensure continuity in the supply of gas for both consumers and manufacturers. The Greens understand that the goal with this national gas reform is to give the Australian Energy Market Operator (AEMO) the option to step in where supply is likely to be insufficient. In order to avoid similar problems during this winter, the country's energy ministers have agreed to this reform in order to manage the gas system in a way that ensures continuity.

The Greens recognise that a number of South Australians are still using gas but, of course, it is our view that we should be transitioning away from gas within our energy market. Indeed, members of this place may recall that last year I introduced a private member's bill on behalf of the Greens that would prevent connection to gas on new property builds by 2025. The Greens have also been advocating for a range of measures to assist homeowners in terms of getting them off gas and moving them onto other forms of energy.

There are lots of ways that the government could do this in terms of introducing rebates and assistance to convert appliances to electricity connection, and certainly we would urge the government to investigate those measures as we head into winter to reduce the reliance that South Australians have on gas, given the terrible impact that gas has on our environment and also given the serious consequences gas has for community health.

Whilst we understand the need for this legislation, we hope that the government takes action to break South Australians' reliance on gas and encourages South Australians to move away from gas, recognising that that reduces the cost for consumers and also produces much better outcomes for our environment.

The Hon. R.B. MARTIN (16:42): I rise to speak in support of the National Gas (South Australia) (East Coast Gas System) Amendment Bill. This bill is one of the national energy reforms where the South Australian parliament acts as lead legislator for states and territories. Consistent with the usual practice, this bill requires states and territories and the commonwealth through the energy ministers' forum to agree to its drafting.

It has progressed far more quickly than usual because all jurisdictions want it in place to mitigate against the risk of a repeat of winter 2022, when gas supplies ran extremely tight and prices spiked so high that the Australian Energy Market Operator had to cap prices in Victoria and New South Wales.

This bill gives AEMO more insight into the dynamics of the gas market, requires industry to participate in addressing possible shortfalls and gives AEMO the capability to direct a business—that is, to issue an order—to address shortfalls and, if necessary, to trade in the market. Fortunately, given the urgency of these reforms, the energy ministers' forum now enjoys the leadership of the Albanese Labor government rather than the dysfunctional situation which prevailed while the Liberal-National Coalition held office in Canberra. This has facilitated a collaborative approach by states to the reforms.

It has also allowed for concerns of industry to be heard and ameliorated, even though a major factor in why these reforms are necessary is the failure by private companies to meet the expectations of households and businesses. That community expectation is that in a resource-rich country like Australia, the domestic economy should have reliable energy supplies available at affordable prices. It is a perfectly fair and reasonable expectation and the Malinauskas government will do whatever it can to achieve that.

This bill will stimulate the industry to provide a market response to potential shortfalls in gas supply, with the Australian Energy Market Operator ready to step in and intervene if the market does not respond. It is not surprising some industry players resent the idea of AEMO intervening in the market, but all jurisdictions agree that providing AEMO with intervention powers is essential. Nonetheless, this council should know that concerns of industry have been heard. One of those concerns was that for AEMO to have better visibility of the industry, companies will have an increased reporting and compliance burden.

A number of stakeholders suggested AEMO should make greater use of the existing and new bulletin board reporting obligations to reduce duplication and overlap in the reporting obligations. The Gas Bulletin Board provides publicly accessible information on gas flows in SA, New South Wales, Victoria, Queensland, Tasmania, the ACT and the Northern Territory. It provides data on gas production fields, pipelines and demand centres.

In response to industry concerns, this bill contains changes from the draft version which was released for comment. Overlap and duplication have been removed between the east coast gas system reforms and bulletin board reporting obligations. A requirement has been removed for retailers and large gas users to report medium-term demand forecasts. These forecasts will instead be developed by AEMO.

The focus will be market participants and facilities which can have the greatest impact on reliability and supply adequacy in the east coast gas system by:

employing the same reporting threshold that is used for the bulletin board (so facilities with a nameplate rating greater than or equal to 10 terajoules a day have to report);

providing automatic exemptions to facilities that are exempt from the bulletin board (such as remote facilities and exempt Northern Territory facilities); and

allowing AEMO to exempt a relevant entity from the obligation to provide an item of information in specified circumstances and to use a default or standing value in place of the relevant information.

Other steps to reduce the reporting and compliance costs include:

aligning information standards with those applying to the bulletin board;

defining materiality thresholds for information updates to minimise reporting costs;

allowing for the use of standing or default values, which should alleviate reporting for users with relatively stable demand; and

allowing for the appointment of a reporting agent or a reporting entity for those cases where there are multiple owners, operators or controllers of a relevant entity, which will reduce the reporting costs.

Given that the gas market is commercially competitive, stakeholders were concerned about the treatment of confidential information. Amending rules make it clear that all information obtained under the new disclosure obligations will be considered confidential and is protected from unauthorised use or disclosure. This means that AEMO must follow the necessary aggregation and anonymisation requirements set out in the National Gas Law if it is considering publishing the information on the bulletin board or in its regular industry overview, the 'Gas statement of opportunities'.

One of the most common concerns was about AEMO having powers to direct market participants to supply, pipe or store gas. To address the concerns raised by stakeholders, a number of changes have been made to both this final bill and the amending rules. These include:

AEMO may only exercise its direction function if it is of the opinion that the direction is necessary to prevent, reduce or mitigate an actual or potential threat; and

AEMO must have regard to the following principles when deciding whether to exercise its directions function to the extent AEMO considers appropriate, given the nature, timing or circumstances of the identified risk or threat.

Those principles are:

industry must be given a reasonable period of time to take action to mitigate the identified risk or threat;

AEMO must coordinate with affected jurisdictions in a timely manner;

safety must not be compromised; and

distortionary impacts must be minimised.

That final point warrants expansion because AEMO will have the power to affect existing contractual obligations of a business. Forcing the break of a private company's contract is not an action that AEMO will be able to undertake lightly. The amending rules establish a number of caveats on AEMO, including consulting on directions prior to issuing them. This should enable AEMO to elicit information, including on contractual impacts, that it can then use to make a more informed decision about minimising distortionary impacts.

Similar concerns were raised by industry about giving AEMO the capability to trade in the market. On this, AEMO will have similar obligations as it will to issue directions. Trading will only be undertaken if AEMO is unable to elicit sufficient reaction from using less interventionist measures. It should also be noted that the pool of funds to be established for AEMO to trade will only be $35 million. This is a modest pool in a market where hundreds of millions of dollars change hands. It indicates that any trading by AEMO is likely to be a rare event.

The Malinauskas government recognises that gas is an essential part of the energy mix, even as the state stands proudly on the frontline of the world's transition to a decarbonised economy. Gas is needed by households and industry, with many manufacturing processes having no viable current alternative. Our gas system must be cleaner, affordable and reliable. This bill creates a necessary set of powers for AEMO to ensure that objective is met. I commend the bill to the council.

The Hon. R.P. WORTLEY (16:49): I rise to speak in support of the National Gas (South Australia) (East Coast Gas System) Amendment Bill 2020. This bill is only one of a suite of measures that are taking place to ensure continuing supply of gas to South Australia. This bill is predicated on risks of a shortage, which are forecast by the nation's energy organisations.

The most recent analysis on gas availability was published by the Australian Competition and Consumer Commission on 27 January. The ACCC's report is part of an ongoing inquiry into gas, which began in 2017 under a tasking from the commonwealth government. The ACCC's January report warns that Australia's east coast gas market faces a shortfall of 30 petajoules this year if the liquified natural gas producers were to export all their uncontracted gas.

In context, the commonwealth Department of Energy says one petajoule is the energy required to power 19,000 homes for a year. On the supply side, the ACCC estimates that this year alone 1,983 petajoules will be produced, mostly from developed reserves but also with some undeveloped reserves coming online, some net input from storage and some gas coming into the east coast market from the Northern Territory. On the demand side, the ACCC estimates that about two-thirds of demand, or 1,296 petajoules, has already been contracted by the LNG companies for export. Some 22 per cent of demand, or 445 petajoules, will be needed by Australian consumers, that is, residential, commercial and industrial.

Just over 6 per cent, or 126 petajoules, will be used in gas-powered generation of electricity. This is particularly important in South Australia where gas-fired power is second only to wind generation in annual contribution to electricity power supply. Finally, the ACCC lists 146 petajoules of demand from uncontracted gas that LNG producers expect to have in excess of their contractual commitments. This uncontracted gas could be exported, placed in storage or used to supply the domestic market, the ACCC has said.

If it was all exported, the ACCC warns there would be a 30 petajoule shortage in supply. Most worryingly, the ACCC says that the LNG exporters have become net extractors from the domestic market, that is, they purchase more from third parties to add to their exports than the quantity they supply themselves into the domestic market from their own operations. This imbalance began last year in 2022 and is expected to take place again this year, with a net withdrawal of 17 petajoules from the domestic market.

A further issue of concern raised by the ACCC is that demand in the southern part of the east coast gas system, that is, South Australia, Victoria, New South Wales and the ACT, will significantly exceed production in the southern section. Therefore, gas will need to be piped from Queensland to the tune of 52 petajoules. The ACCC report does not break down the supply contributions from individual states. However, industry analysts calculate that South Australian producers put more gas into the system than the state consumes.

The net shortfall can really be traced to New South Wales and Victoria. In New South Wales, there have been long delays on impending gas development, most particularly the Santos Narrabri project. In Victoria, the moratorium on onshore gas development, which was instigated in 2012, stymied projects until new legislation and regulations were passed and prepared, keeping the industry frozen until November 2021.

The stagnation in New South Wales and Victoria is also identified by the Australian Petroleum Production and Exploration Association. In a submission to the consultation of this bill, the APPEA says it should be up to the market to respond to potential shortfalls. Their submission states:

An alternative to setting up a way for AEMO to intervene in the market, is to increase the supply of gas in the East Coast market, particularly in Victoria and NSW. This would alleviate the need to direct gas from Queensland to the south at times when there is a perceived shortage.

The ACCC says its forecast of the southern states being net importers from the north continues a trend that has been developing in the past few years. The ACCC goes on to say:

Given that some gas from the southern states flows north of Queensland, especially during summer, the actual amount shipped will very likely be higher than 52PJ. This places a great deal of reliance on certain key pieces of infrastructure: the South West Queensland Pipeline (SWQP), the Moomba to Sydney Pipeline (MSP), and Wallumbilla.

While there is likely to be a sufficient pipeline capacity to bring gas south, AEMO has found that pipeline and storage capacity in the southern states are likely to be insufficient on peak winter days in 2023.

Specifically, AEMO has found that under one-in-20 year demand conditions, small, infrequent supply shortfalls could occur in 2023. To mitigate these shortfalls, AEMO noted that on-schedule completion of committed pipeline upgrades, greater operational management of LNG storage, and demand-side solutions are likely to be required.

It is clear from these warnings that the community cannot rely on the market alone to safeguard against the risks of shortfall. Greater oversight, and, if necessary, intervention to ease pressure points is required from the Australian Energy Market Operator. That is what this bill aims to achieve. Looking further ahead, the ACCC is concerned about the pace of new supply coming online. This concern adds to the need for this legislation. Again, I quote the ACCC January report:

While the need for more supply and associated infrastructure is clear, the development of most of the proposed supply and infrastructure projects has been delayed.

For example, a number of domestic supply projects that have already been approved for development have been delayed by a year. The potential timing of supply from LNG import terminals and a large number of other domestic supply projects that have not yet been approved for development have also been delayed by 1-2 years, with supply from most of these projects not expected to commence until 2025-2026. Pipeline and storage projects have also experienced a number of delays over the last 12 months and some major pipeline projects have been abandoned.

These delays, which are occurring against a backdrop of significantly higher domestic gas prices, have contributed to the deterioration in the short and longer-term supply…

While delays are somewhat inevitable given the geological, land access and regulatory challenges that these projects can face, there are a number of new challenges that these projects are likely to face. The two most significant challenges are environmental policies and access to finance, with the latter reportedly becoming increasingly difficult for fossil fuel projects.

The ACCC notes that some of Australia's potential new sources of gas supply are in regions not connected to the east coast gas system infrastructure, those being the McArthur, North Bowen, Gunnedah and Galilee basins. The ACCC says only five significant gas projects have been identified which have been approved for development and which could be brought online within the next five years. The largest of these is Beach Energy's project in the Otway Basin, the Enterprise field.

This project is forecast to produce an average of 11.7 petajoules a year. First gas is expected in 2024, but Beach says this could be brought forward to later this year if all regulatory approvals are obtained. The other four projects are all in Queensland and each is only expected to produce two petajoules or fewer per year. Therefore, they are unlikely to have a material impact on supply, the ACCC advises. With gas supply tight right now in 2023, and risks to supply likely to remain in the next few years ahead, the reforms proposed in this bill fulfil a vital need. I commend the bill to the council.

The Hon. F. PANGALLO (16:59): Today, I would like to speak to you about the benefits of using natural gas as an energy source for consumers and industry in Australia. Natural gas has become increasingly important as an energy source around the world, and Australia is no exception. In fact, Australia has vast natural gas reserves making it an attractive option for domestic and international consumption. Let me explain why natural gas is so valuable and what the economic risks would be if its production was banned.

Firstly, natural gas is a cleaner burning fuel than other traditional energy sources like coal and oil. It produces significantly lower levels of harmful emissions like sulphur dioxide, nitrogen oxides and particulate matter. This means that using natural gas as a fuel source can help to improve air quality and reduce greenhouse gas emissions, which is critical in the fight against climate change.

Secondly, natural gas is incredibly versatile and can be used for a wide range of applications from heating homes and businesses to generating electricity. In fact, natural gas is the largest source of electricity generation in Australia, accounting for around 20 per cent of the country's total electricity production. This makes it a crucial component of Australia's energy mix and an important contributor to the country's economic growth.

Thirdly, natural gas is relatively affordable compared with other energy sources, particularly when it comes to electricity generation. This is because natural gas is abundant in Australia and is therefore cheaper to produce and transport than other forms of energy like coal or oil. This affordability makes natural gas an attractive option for consumers and industry as it can help reduce costs and improve energy efficiency.

Now let's talk about the economic risks of banning natural gas production in Australia. Firstly, it is important to understand that natural gas is a major industry in Australia and contributes significantly to the country's economy. According to the Australian Petroleum Production and Exploration Association (APPEA), the natural gas industry contributes around $50 billion to the Australian economy each year and supports around 80,000 jobs. Banning natural gas production would therefore have significant economic consequences, including job losses and reduced economic growth.

Secondly, banning natural gas production would have a knock-on effect on other industries that rely on natural gas as an input; for example, the manufacturing industry which uses natural gas as a fuel source and raw material would be particularly affected. This could lead to reduced productivity and competitiveness and could even result in some companies moving their operations overseas to countries where natural gas is readily available.

Finally, banning natural gas production could have an impact on Australia's energy security. As I mentioned earlier, natural gas is a critical component of Australia's energy mix and is used to generate around 20 per cent of the country's electricity. Banning natural gas production could therefore lead to energy shortages and price spikes as Australia would have to rely more heavily on other energy sources like coal and renewable energy.

In conclusion, natural gas is an important energy source for consumers and industry in Australia, offering a range of benefits including lower emissions, affordability and versatility. Banning natural gas production would have significant economic consequences, including job losses, reduced economic growth, and an impact on other industries that rely on natural gas. It is therefore important that we continue to support the natural gas industry in Australia while also investing in renewable energy sources to reduce our reliance on fossil fuels and help combat climate change.

Thank you for listening, but before I sit I have a confession to make. This is the first oratory piece where I have not written a single word of my own. I decided to run a test of artificial intelligence and the words were generated by artificial intelligence site ChatGPT only a short time ago, based on a handful of words that I put into its search module and, presto, in the course of a few seconds up came exactly 600 words. Yet it is not really far off the mark reflecting my own sentiments. I must say, it might lack the rhetorical flourish—as the Hon. Rob Lucas would often say about me—that I tend to use in colouring my speeches, questions and even countless words I have written as a journalist over five decades.

This is probably the first speech written by AI to go into our Hansard; however, I will resort to my own style in future, and I hope it does not stifle critical thinking and expression in this place and eventually replace the need for MPs and their speech writers. SA-Best supports the bill.

The PRESIDENT: The Hon. Mr Pangallo, the Clerk has rightly pointed out to me that regardless of where it comes from, you are still going to be held accountable for what you have said in the chamber. Most of the members thought it was probably one of your better contributions.

The Hon. C.M. SCRIVEN (Minister for Primary Industries and Regional Development, Minister for Forest Industries) (17:05): I would like to thank the members who made a contribution on this bill: the Hon. Ms Girolamo, the Hon. Mr Simms, the Hon. Mr Martin, the Hon. Mr Wortley, the Hon. Mr Pangallo and the AI assistant as well.

Just in response to some of the matters that have been raised in others' contributions: in reference to some comments by Mr Simms, the South Australian government strongly supports the gas industry as a key part of a transition to a net zero carbon economy, and it is essential that this transition takes place as smoothly as possible. That means that consumers and businesses must not be left in the cold, either literally or figuratively, nor should they be subjected to extreme price spikes because of pressures on gas supply.

The Hon. Ms Girolamo made some comments which I just respond to, that given the limited time available to consult on the changes that are required to be implemented before winter this year, energy ministers across the country agreed to a post-implementation regulatory impact assessment being completed by the Department of Climate Change, Energy, the Environment and Water within 12 months. Also, the Australian Energy Market Commission will be conducting a review of the entire framework within three years.

I do urge council members to see the bill in the context of a range of matters that need to be addressed in the gas sector, including ensuring a fair balance between domestic gas demand and the lucrative export of liquefied natural gas, notwithstanding that this bill is separate from those other matters. Again, I thank members for considering this bill and, in anticipation of a vote, I encourage them to recall the practice of the South Australian parliament in terms of voting in favour of agreed national reforms in the energy system, which is represented in this bill. I commend the bill to the council.

Bill read a second time.

Committee Stage

Bill taken through committee without amendment.

Third Reading

The Hon. C.M. SCRIVEN (Minister for Primary Industries and Regional Development, Minister for Forest Industries) (17:09): I move:

That this bill be now read a third time.

Bill read a third time and passed.

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