We all made a fracking mistake, says former premier Bob Carr – try googling the headline if you get paywalled. Ex Premier Bob Carr forgets to mention the Eddie Obeid coal licence scandals that gave so much oxygen to the anti-miners and Green protesters. But why the NSW Govt went so far in changing the law around resources exploration is a mystery. We have got to this point after decades of Green-anti-development lies and exaggerations not being rebutted by industry and scientific/engineering experts. This has strengthened the ever present anti-resources industry groups who seized on the slick ready-made anti-fracking campaign imported from the US to increase their supporter base and level of activity. Now we have Green lawfare on an amazing scale, I read where there are 23,000 objections to the Santos Narrabri gas project EIS approval process.
The most neutral comment I can make about Carr:
He once opined (plagiarising Ralph Emerson) that “consistency was the hobgoblin of small minds” – thus excusing his hypocrisy.
Well, expediency is the heroin of power addicts – eh, Bob the Builder ? Wherefore NSW now ?
Yes Bob; when the power goes out there will be “bitter/strange fruit” on the streets .
Google this headline and see if it gets through the paywall at The Australian.
States in firing line after Turnbull tames the gas companies
Here is the full text.
Gas politics is now engulfing the nation. This week Malcolm Turnbull won with an agreement obtained under threat from the gas companies to avert an east coast supply crisis, but the long-term political war will pit the Prime Minister against Victoria, NSW and the Northern Territory to win a boost in sustained supply.
Two entities have been in the firing line — the gas companies and state governments. Both are critical agents in the price rip-offs that have threatened industry and households. The companies cut their losses this week and sought a peace treaty with Turnbull to be policed by the Australian Competition & Consumer Commission.
This leaves the states naked in the firing line. They have played self-interested politics with energy policy too long and too recklessly. Don’t fall for their absurd propaganda that the problem can be fixed by diversion from gas exports. It cannot. Our situation where the states own energy assets but the federal government has over-arching political carriage and responsibility is set to detonate.
The politics of energy and climate change is inexorably changing. The nation is being taught the most elementary lesson — decisions have consequences, and if you decide to lock up gas reserves, the price to pay will be measured in higher costs, lost industry and lost jobs.
Victoria has opted for unscientific green ideology. NSW has pandered to the
anti-gas coalition and its approval process has become a large-scale rort. NSW now imports 95 per cent of its gas. The Northern Territory sits on 200 years’ worth of gas resources. Victoria has banned onshore conventional and unconventional gas extraction.
These southern states, home to our manufacturing, engage in energy policy betrayal. The Turnbull government has now been given the opportunity for a set-piece political artillery barrage against the Andrews Labor government in Victoria.
This government is jeopardising industry and the position of households. It imposes a cost penalty across the state’s population. As Turnbull remarked this week, “it’s a hell of a way to run a state”.
The longer the Andrews government’s stubbornness prevails, the more damage it will suffer. No wonder its cabinet is divided.
The Prime Minister has a critical ally in this process: the ACCC, with its three-year brief in this area. Under its chief Rod Sims, the ACCC is the ideal third-party enforcer. It will be pivotal to coming events in a power sector where there is excessive concentration in both generation and retail.
The ACCC’s report this week is stark: it means industry and consumers have been exploited by a dysfunctional market and charged prices far above competitive benchmarks.
Turnbull has a second potential ally in the Commonwealth Grants Commission. Its position paper this month raises the prospect that those states that decide to develop and raise royalties from coal-seam gas should not be penalised in GST redistribution (which means states that refuse to exploit this opportunity would be losers).
Meanwhile, the PM was rebuffed by an aggressive AGL at its annual meeting, with its corporate leaders defying the government over keeping the coal-fired Liddell power station open to buttress baseload needs.
If the company has forgotten its chief, Andy Vesey, told senior ministers he was prepared to sell “to a responsible party”, the government certainly hasn’t forgotten this statement.
The government sees AGL as a bad corporate citizen with little concept of the national interest. Ministers certainly will take more than a passing interest in the ACCC’s findings about the company from the new access it has to transactions within the gas sector.
Sims is the cop-on-the-beat to ensure the heads of agreement between the federal government and the three liquefied natural gas exporters, to guarantee there is no gas shortfall next year in the east coast market, is upheld. The deal this week with the big three, Origin, Santos and Shell, was a breakthrough for Turnbull.
Having threatened to divert LNG exports — a move he called “almost without precedent” — Turnbull saw the companies buckle and offer a guarantee instead to avert more drastic intervention. This followed two reports released last Monday showing the market situation was not just tight — it was a shortfall three times the size earlier estimated. On the way through, Turnbull called Bill Shorten “Blackout Bill” and explained that because gas set the wholesale electricity price, higher gas prices were also the biggest single factor in escalating electricity prices.
There are three elements to the agreement. First, the companies guarantee to prevent any domestic shortfall by diverting to the domestic gas market the 54 petajoules required, plus up to a total of 107 petajoules, depending on the weather, demand and other variables. In short, if the gas is needed, it will be provided in 2018 and 2019.
Second, any uncontracted gas will henceforth first be offered to the domestic market. This follows the ACCC analysis that the companies were in a “strong position” to mitigate the supply shortfall but were selling a significant volume of gas on the international LNG spot markets.
Third, the ACCC will have a transparent line of sight into the sector, being able to monitor every gas sale, every offer made and every offer rejected, and decide if customers are getting a fair price or being exploited by retailers.
During the meeting with the companies Turnbull wrote down on his iPad the terms of their agreement: it means creating an effective market based on several suppliers, contracts running over a period of years, and prices that reflect the global price. The aim is to bring these gas deals from the shadows into sunlight.
Will the gas companies honour the deal? They would be foolish in the extreme if they did not. Turnbull’s humiliation would be intense. The ACCC would have the evidence in the public arena. The consequence down the track would be the certain application of export controls. Obviously the Prime Minister did not want to resort to this ultimate option. If left with no choice, he will.
Labor is baying for such controls now and attacks Turnbull for not “pulling the trigger”. It distrusts the energy companies almost as much as it distrusts the banks. Replying to Labor, Turnbull says the entire purpose is not to “pull the trigger” but solve the supply shortfall and get a functioning market. The ACCC says export restrictions in their own right cannot be the answer.
Of course, if Turnbull had pulled the trigger earlier, guess what — he would have missed. Monday’s reports transformed the scale of potential shortfall and, as Turnbull said, if he had acted earlier it would have been on the basis of inaccurate data.
This agreement is tied to an essential result — the need for an easing in gas prices. That is a more difficult process. The ACCC report this week documented a dysfunctional market: commercial and industrial users often have only one supplier willing to provide them gas at prices “well in excess of competitive prices”, ranging from $10 to $16 a gigajoule.
In short, they are being exploited. One senior government figure says: “The prices being offered by AGL bore no relationship to the international price.”
Many buyers have been holding back, desperately hoping for an easing of the price. The ACCC sees this situation overall as an “increased risk to businesses’ commercial viability”. It warns current price offers would approach a “tipping point” where commercial and industrial users faced forced exit decisions.
Environment and Energy Minister Josh Frydenberg says: “Companies are being quoted ridiculously high prices; indeed, some companies are not able to secure contracts or only going out to tender and receiving one offer on unfavourable conditions.” Imagine what this means if you are a manufacturer whose plant is built around gas power.
This is the emergency Turnbull confronted. The imperative was to prevent a supply shortfall and restore a functioning market. In simplified terms the essential problem lies in inadequate gas supply to meet domestic demand. In meeting its brief the ACCC report says gas production from offshore in Victoria (the Gippsland Basin Joint Venture) was insufficient to meet southern state demand, and gas from Queensland or elsewhere was needed to balance the market.
Turnbull explained what that meant: the price was an extra $2 a gigajoule, the cost of shipping gas from Queensland to Victoria, or about 11 per cent on the gas bill of a typical household in Victoria. As the ACCC report makes clear, Victorians will pay more for gas than the international benchmark price because they don’t have their own gas reserves and have to import from elsewhere at extra cost.
In its report last Monday the ACCC estimates the appropriate benchmark prices in the southern states to be between $6.29 and $7.77 a gigajoule for 2018, depending on location. But Australian Petroleum Production and Exploration Association chief Malcolm Roberts made clear to David Speers of Sky News the industry believes the price should be higher than the ACCC estimates.
It is hardly a surprise there are differences. But the ACCC is confident of its numbers. The world market is awash with gas. And the ACCC is perfectly certain this debate is about $6 or $7, rather than about $10 a gigajoule.
An industry publication, Energy Quest, earlier this year quoted a US executive saying: “Australia is not a very data transparent country. Australia is treated like a black box, similar to Qatar, Russia, Saudi Arabia and Malaysia. It’s not as bad as Malaysia but light years away from Norway, which has excellent transparency.”
Sims argues the ultimate solution lies on the supply side. He says moratoriums and other restrictions are inhibiting further downwards price pressures.
Turnbull has said the agreement between the gas companies and the government this week was about fixing the near-term crisis only. It is an emergency response, not an expansion in gas supply as such. The long-run solution goes to state government policy.
The Prime Minister has branded the fact that a gas import facility is planned for Victoria as “an absolutely shocking indictment” of the state government. He says Premier Daniel Andrews seems to be an “enthusiast” for policies that would see his state pay more for gas — whether from the Middle East or northern Australia.
Both the Finkel review and the ACCC repudiate the anti-scientific basis of the Andrews government’s policy. They say gas should be developed on a case-by-case assessment, not blanket moratoriums. That’s rational — it means some will pass the environmental test and some will fail.
The politics of energy is being incrementally recast. The resistance remains strong yet the forces driving realignment should score some successes. The consequences arising from affordability and reliability are too great.
This week virtually every industry lobby stood behind Turnbull’s agreement with the LNG companies.
The gas saga in Australia has been extraordinary and testifies to the success of green power. It was apparent a decade ago that gas was the logical answer to the market gap left by retreating investment in coal. Yet the green movement, having demonised coal, was highly successful in campaigning against gas development. It benefited from the monumental stupidity and arrogance of the gas companies. They deserve no sympathy from anyone.
At the heart of the politics is the broad alliance between green power and farmers, extending into the heartland of the Nationals and penetrating the Labor and Liberal parties. The campaign against gas development has been manic but also devoid of any assessment of the costs.
Shorten has challenged Andrews, saying conventional gas exploration should be encouraged while insisting concerns about fracking are legitimate. Energy spokesman Mark Butler says federal Labor supports “responsible development of gas resources across the country”.
NSW’s Liberal Premier Gladys Berejiklian has repudiated Turnbull, saying NSW policy will not change. Industry hopes for development of the Narrabri Gas Project — with potential to supply up to 50 per cent of the state’s needs — remain frustrated. The farce of its environmental process is on display, with 23,000 submissions in response to the proposed venture. Narrabri is the latest test case for environmental activism.
Turnbull has a long and uncertain journey ahead on many fronts to devise an effective energy policy. Yet he is making steady progress, revealing his identity as a problem-solver and fixer. His political task is to cultivate the notion of shared responsibility: the states must decide whether they are part of the solution or part of the problem in the nation’s energy crisis.
Meanwhile the chronic vulnerability of power systems is revealed by the ongoing effort to prevent another failure in South Australia. In recent days the Australian Energy Market Operator has intervened in South Australia, instructing gas generators to come on line to guarantee system reliability.
The concern arises in South Australia through a combination of low demand on the system with too much wind power — the upshot being a risk of failure. The moral is that the system requires not just a supply of energy but the right mix of energy — one of the enduring lessons from the South Australian energy experiment.
Good stuff from The Oz
I have been googling again. First from 2014 the Northern Rivers newspaper a report showing how Queensland farmers were doing well out of gas exploration compared to their mates in NSW.
How Queensland farmers reached harmony with gas companies 8 May 2014 Hamish Broome
www.northernstar.com.au/news/farmers-find-peace-of-mine/2251902/#comments
Then from earlier this year we should remember those stories, this one from Newsweek; that Russia has been egging on the US opposition to fracking.
Putin Is Funding the Anti-Fracking Campaign 29 Jan 2017
www.newsweek.com/intelligence-putin-funding-anti-fracking-campaign-547873
then the Northern Star again in last few days reporting Norther Rivers protesters active at Narrabri.
Narrabri gas project has zero book value: analyst 26 Sep 2017 Hamish Broome
www.northernstar.com.au/news/turnbull-looks-like-a-puppet-of-gas-companies-acti/3228085/
It does make you wonder if Santos will keep persevering. Does anybody know how much of the gas potential is actually under the Pilliga Forest and not under private land?
Beachgirl, In Australia, with a few minor exceptions, land owners don’t own mineral rights under their land. Although, much of the obstruction land owners put up to gas, etc drilling is an attempt to gain such rights.
@Beachgirl
> “Does anybody know how much of the gas potential is actually under the Pilliga Forest and not under private land?”
Just google “Gunnedah Basin Geology”, for example:
www.google.com.au/search?q=gunnedah+basin+stratigraphy&ie=utf-8&oe=utf-8&gws_rd=cr&dcr=0&ei=i1TRWfmLMsfP0AS-yzQ
@Philip Bradley
> ” … much of the obstruction land owners put up to gas, etc drilling is an attempt to gain such rights”
Many attempts over many decades for some “share” of the State-owned Royalties. Another such push is currently under way.
Never mentioned is that, if successful, schools, hospitals and other perennial funding simply gets less. If “locking the gate” is completely successful (and it may well be), nobody “shares” anything.
Ianl8888,
The leader of the “Lock the Gate”Campaign, Drew Hutton had a brother who was a driller in the 80-90s era.