OPPOSITION SPEECH: APPEA CONFERENCE 2017

TIM HAMMOND MP
ACTING SHADOW MINISTER FOR RESOURCES

SHADOW MINISTER FOR CONSUMER AFFAIRS
SHADOW MINISTER ASSISTING FOR RESOURCES
FEDERAL MEMBER FOR PERTH

  OPPOSITION SPEECH: APPEA CONFERENCE 2017 

WEDNESDAY, 17 MAY 2017

***CHECK AGAINST DELIVERY***

 

I take this opportunity to acknowledge the traditional owners of the land upon which we meet – the Noongyar people, and pay my respects to their elders past, present and emerging.

It’s terrific to have APPEA Conference in Perth again and I am delighted to have been able to participate in the conference right from the opening session.  Thank you to all of you for making me feel so welcome.

In wandering around through the halls this week I’ve noticed – and would like to take this opportunity to acknowledge – the presence of Martin Ferguson, Ian Macfarlane, and Gary Gray – who are also commonly known the father, the son and the holy ghost when it comes to the oil and gas industry.

You may not recall that Ian Macfarlane was in the Cabinet when the former Prime Minister Tony Abbott bestowed the Australia’s highest civilian honour on Prince Philip. I couldn’t help but notice that not long after that event, APPEA honoured Ian with the highest honour bestowed upon an individual by APPEA – the Reg Sprigg Medal.[1] This is a medal normally given to folks from the oil and gas industry, and I believe that Ian is the first person from outside the sector to be so honoured by you in this way. Not that I’m suggesting there are any similarities between Prince Phillip and Ian MacFarlane…

And whilst last year’s conference was somewhat interrupted by a small matter – namely the 2016 Federal election - in 2015 it was Gary Gray - as the then Shadow Minister for Resources, and prior to that a greatly respected Federal Minister for Resources, who addressed you in this forum on behalf of the Federal Opposition.

I would like to take this opportunity to pay tribute to the work Gary has done throughout his career to support Australia’s resources industry in the national interest, and on a personal note thank him for the counsel and advice he has provided, and continues to provide, both to myself and other members of Bill Shorten’s team.

I would also like to take this opportunity to send warm regards from Jason Clare, Labor’s Shadow Minister for Resources. A longstanding personal commitment prevented him from being here today however he asked me to convey his best wishes to you all and sends his congratulations to APPEA and its members on a successful conference.

One would have to be stranded on a desert island not to observe that the oil and gas industry has taken up a lot of column inches in the mainstream media in recent months. A simple glance at the headlines demonstrates how tortured our national conversation about gas has become in recent times – and I couldn’t help but notice that they probably provide a thumbnail sketch of where the debate has travelled all in the space of a small sample of headlines from 3 days in April 2017:

  • Turnbull steps on gas exports to lift supplyAdelaide Advertiser, 27 April

  • Gas price to halve, Malcolm Turnbull vows to manufacturersThe Australian, 27 April

  • Gas prices halved, problem solved. Is it really that simple? – Ian Verrender, ABC news online, 27 April

  • Gas chiefs reject PM’s claims of cheap fuelSydney Morning Herald, 28 April

  • Gas Crisis? We Were Told It Was Coming Five Years AgoThe Australian, 28 April

  • States lock away 200 years of gas supply: businessThe Australian, 28 April

  • Division over PM’s meddling with gasAustralian Financial Review, 28 April

  • Gas Plan A Blow OutCourier Mail, 28 April

  • Malcolm Turnbull says he cannot guarantee gas prices will halveNews.com.au, 28 April

    And if you indulge me for a moment, my personal favourite:

  • PM is too full of gas – Laurie Oakes, The Daily Telegraph, 29 April.

 

You who work in the sector know fully well – and almost certainly better than I - where the challenges in our gas market are, and what led to them. From where I sit, there appears to be a plethora of differing views about whether there is indeed a crisis, if there is, who is responsible for it, where the pinch points are, and what the ‘solution’ is.

Some have said that there is no crisis; that the market is performing as it should, and that the price of gas in the East Coast’s domestic market is merely reflective of the costs of gas extraction and transportation relative to demand for the product.

A further argument is that the escalation in cost of gas to manufacturers and consumers is not because of the price of extracting the gas; rather the costs imposed by those whom seek to transport the hydrocarbons through a complex system of pipelines, leading to a domestic market price in the range of up to $20 a gigajoule as compared to an average market price 12 months ago of somewhere between $8 - $10 per gigajoule, and 12 months before that, even lower still.

Others have said that while there’s plenty of gas, too much is being exported and restrictions must be placed upon the export of LNG to protect domestic supply.

Another argument is that there is plenty of gas, but it is mostly underground in coal seams and state government restrictions on extraction are responsible for creating the current crisis.

In any other circumstance, producers of a product would be thrilled to be able to sell into a heated market at an inflated price. So where is the problem, I hear you ask?

The problem is that regardless of the rationale, gas prices in the East Coast domestic gas market are simply too high for what the community – both manufacturers as well as mums and dads – are expecting to pay, especially in a circumstance where the resource – just like our iron ore - belongs to all of us, a point being made on talk-back radio all around the country, every single day.

Combine community expectation in relation to gas pricing with the fact that whether we like it or not, those who seek to portray the industry as one in which the major players do not pay their fair share of tax are winning the public relations war.

This means that there is a steep mountain to climb if the gas industry is to reach its full potential, which is certainly something that I am keen to see occur.

In order to the industry to flourish, I think we will probably need to be prepared to reach the true point of compromise – which is what I commonly describe as the point of mutual unhappiness. You know a negotiation has run its proper course where all parties settle on a position where everyone is truly unhappy.

And arriving at that point of mutual unhappiness is tricky in the current environment.

The wholesale price of gas for energy retailers impacts the cost of gas to household consumers. This is evidently more important in some markets – those where everyone has gas fired central heating – than warmer climes. But it ties into a broader political tumult over the Australian Energy Market which has been engulfing public discourse in recent times.

And this tumult is an historical artefact of the Abbott-Turnbull tiff, which has left Australia without a meaningful policy about the future of our energy security. We all know that investment in new coal projects is very hard, if not impossible to find, and at the same time energy investors are loathe to put money into schemes with regulatory uncertainty.

So what is to be done? First and foremost, we should be looking closely at what the Government has proposed to deal with the gas price crisis in the East Coast domestic gas market.

The Government’s plan to reduce gas prices is for gas export control regulation. It should be noted that this regulation will be made via a legislative instrument made by the Minister, rather than primary legislation.

The regulation will commission the Australian Energy Market Operator (AEMO) to make an analysis of the domestic gas market, with the view to enabling the Minister, once a particular threshold has been reached, to pull a ‘trigger’ to limit gas exports.

The details of the regulation, including the data used by AEMO to analyse the market, and the threshold for the ‘trigger’, are still being worked through by Government.

We are all in the middle of a very tight window in which the industry can still put its case to government in terms of the robustness of AEMO’s analysis and the trigger threshold.

And APPEA itself has not been absent in the political debates around the gas crisis. And I’d like to take this opportunity to acknowledge Malcolm Roberts and the team at APPEA for being so willing to talk to us about the Industry’s take on the issues at hand.

And certainly other bodies have also been robust in expressing their opinions of the causes of – and solutions to – the gas crisis.

I note that Cath Tanna has advocated ‘ending the blame game’ by strengthening the powers of independent agencies like the Australian Energy Market Commission (AEMC), the Australian Energy Market Operation (AEMO) and the Australian Energy Regulator (AER), which is a division of the Australian Competition and Consumer Commission (ACCC).[2]

Santos Chairman Peter Coates said: "There's no shortage of gas but there is an absolute shortage of uniform government recognition, commitment and support for ongoing, auditing development of adequate supply to the east coast market," he said. "We haven't got a gas crisis. We've got a policy crisis."[3]

The Government has set itself a high bar to jump and we want to make sure that a moderation of prices is achieved in a measured and sensible way. The devil, as you all know, will be in the detail of how the Government intends the regulation to operate and we will wait to see the details of the proposal.

In other matters, onshore unconventional gas exploration has been the subject of much debate and I’ve been pleased to see industry recognition of the need to work with communities to re-establish their social licence to operate in particular areas.

It’s clear that business as usual simply won’t cut it.

Industry and Governments need to work together to think beyond the norm.

Communities have made it clear they won’t accept the way unconventional gas exploration and extraction has been undertaken in the past.

So, if we want to get the gas out of the ground, we need to find new ways of doing business.

I am encouraged by efforts of Governments in Queensland and South Australia who have been working closely with industry on measures to address concerns of the community regarding unconventional exploration and extraction.

I think continued examination of measures such as those introduced in SA and Queensland is a worthy exercise.

For Federal Labor’s part, our position remains clear.

While onshore unconventional gas exploration is squarely in the jurisdiction of our state colleagues, Labor’s national platform sets out clearly that we are committed to ensure decisions we make around unconventional gas extraction are based on science, particularly when it comes to impact on water reserves and coexistence with other agricultural activities.

To continue our proud tradition of bipartisan support for the resources sector, Labor welcomes the measures introduced by the Government in the budget in relation to investigating ways in which to improve gas market efficiency and transparency, as well as to encourage and accelerate responsible development of onshore gas to the domestic market.

If we are to truly lead with ideas in this sector, we need to be open to big ideas and novel conversations as to how best to secure energy security in Australia in a way that actively reduces our emissions, provides certainty and stability for industry, and helps to create Australian jobs by encouraging companies to explore and extract gas, both onshore and offshore, both conventional and unconventional.

That means not being afraid of criticism that may come from some corners in relation to re-visiting a discussion about a west to east, or a north to south pipeline.

It also means encouraging and applauding the decision of Peter Coleman and Woodside to double down on their Browse Basin investment and see a pipeline built to connect this world-renowned resource to the North West Shelf, as well as their move to convert plant and machinery that traditionally run on diesel over to gas.

I don’t subscribe to the view that Opposition is about biding one’s time, or simply running a negative line. The reality is that as an alternative to the current Government we have a platform from which we can seek to influence public debate and call the Government out when it pursues policies against the national interest.

On the topic of what is in the national interest, we took to last year’s election a clearly enunciated policy for a national interest test for new gas exports. And while gas prices weren’t then being described as being at ‘crisis’ levels, it was clear to us that there was a need – and a community expectation – to prove an answer to rising prices on the east coast.

Let me be clear: our policy was not a domestic gas reservation policy. Rather, Labor proposed regulatory reform to make sure that Australia is a net beneficiary from the resources that lie under our seabed and in our earth.

And let’s be frank - at the time APPEA baulked at the idea of a national interest test for new gas export projects.[4] And I understand the arguments against a heavy hand controlling the market. But compared to where we find ourselves now, and having regard to our discussion this morning, I can’t help but wonder if such a test is not worth further consideration.

I thank Malcolm and the APPEA team for allowing me the opportunity to speak today and conclude by echoing Peter Coleman’s remarks at the opening of your conference – whether we like it or not, the gas industry is currently behind the 8-ball when it comes to its relationship of trust and confidence with the community.

But it is not just up to the industry to bridge the gap and restore the trust and confidence of the community. It is also up to us, as elected leaders, not to play up the concern, but play a meaningful and long lasting role in bridging the gap. I hope that today I have demonstrated to you that Bill Shorten, Jason Clare, myself, and all of the Federal Labor team are not only up for the challenge, but intend to continue as we began – with close and meaningful relationship with industry, and to every extent possible, to demonstrate bipartisanship - in keeping with the traditions established by the father, the son and the holy ghost.

 

[1] https://www.appea.com.au/media_release/macfarlane-krzywosinski/

[2] https://www.energyaustralia.com.au/about-us/media/news/independent-approach-key-ending-energy-blame-game

[3] http://www.abc.net.au/news/2017-05-04/santos-shareholders-question-export-restrictions-at-agm/8496278

[4] https://www.appea.com.au/media_release/labors-national-interest-test-fails-gas-consumers/