Resources Legislation Amendment (Fracking Ban) Bill 2016
Debate resumed from 9 February; motion of Ms TIERNEY (Minister for Training and Skills).
Mr RICH-PHILLIPS (South Eastern Metropolitan) — I am pleased to rise this afternoon on behalf of the coalition to speak to the Resources Legislation Amendment (Fracking Ban) Bill 2016. The purpose of the bill is to cover a number of matters. It is a relatively small bill, the purpose of which is to prohibit onshore unconventional gas activity in Victoria; to legislate a moratorium on onshore conventional gas activity until 2020; to ensure retrospectively that the state is protected from being the subject of litigation in relation to those matters; and to empower the minister to purchase licences and permits affected by the ban.
To run through the structure of the bill, clause 4 inserts a new section into the 1990 act, which prohibits exploration for or mining coal seam gas on any land. Clause 5 inserts a new section that provides that any application for an exploration licence, mining licence or retention licence is ineffective and thus must not be accepted by the minister to the extent that it relates to coal seam gas. Clause 6 inserts a new section that requires any person who discovers coal seam gas on any land to report the discovery to the minister in writing as soon as practicable after the discovery. Clause 7 allows the minister to pay for the surrender within six months of the commencement of this bill, which introduces the ban for any exploration, mining or retention licence that was in force immediately before the bill comes into operation and which entitles the licence-holder to explore for or mine coal seam gas — and subclause 2 of that clause allows the minister to prescribe the amount of payment by order published in the Government Gazette.
Clause 9 of the bill inserts new section 16A into the 1998 act to prohibit any person carrying out hydraulic fracturing when carrying out any petroleum operation, as defined in the principal act. Clause 10 inserts a new section into the act which legislates a moratorium until 30 June 2020, prohibiting any petroleum exploration or petroleum production under an exploration permit, retention lease or production licence from the day the bill comes into operation. This is the clause which gives effect to the moratorium on conventional gas exploration or production. Clause 11 of the bill amends the Petroleum Act 1998 and the Minerals Resources (Sustainable Development) Act 1990 to state that the state of Victoria is not liable in any way for loss, damage or injury whatsoever resulting directly or indirectly from the proposed amendments or from measures under a policy moratorium that commenced on 24 August 2012.
The bill covers a number of key areas. One of the areas in which there is, I think, broad agreement is the mechanism which creates a legislated ban on fracking — hydraulic fracturing — as defined in the bill and which ensures that there cannot be unconventional gas exploration and production in Victoria. This is something which has been the subject of widespread debate in the Victorian community, indeed in the Australian community, in recent years having regard in particular to the activities which have taken place in Queensland and in New South Wales where to varying extents unconventional gas development has taken place with varying degrees of community acceptance.
In Queensland the notion of unconventional gas has received relatively broad community acceptance. In New South Wales that has not been the case. There has been strong resistance, particularly in the Hunter Valley region of New South Wales, to the notion of unconventional gas, particularly where that unconventional gas activity would potentially conflict with the agricultural sector, with concerns expressed by the agricultural sector in New South Wales that the uncertainties related to fracking and unconventional gas more generally were too great a risk for those activities to be allowed in areas where agricultural production was taking place. That is a debate which has existed in New South Wales for an extensive period of time and has led to a debate here in Victoria as to the role of unconventional gas in our state's energy supply and the way in which onshore unconventional gas, be it fracking or other unconventional gas production, could impact on the state's agricultural sector.
It is worth putting on record that agriculture is an important part of the Victorian economy. While having declined in a relative sense through the 20th century from the days when the Australian economy was described as riding on the sheep's back, we are now in a situation where in Victoria agriculture accounts for around 2.5 per cent of the state's total economic output. A large part of that of course is food and fibre production, with the dairy industry, particularly in the south-west of Victoria and Gippsland, being a major contributor to the state's export performance. While agriculture as a share of our economy is much smaller than it was when the Australian economy rode on the sheep's back, it is still an important part of our rural and regional economy and one that is valued by, I think, all Victorians, certainly by members of this house, as an important part of rural and regional life in Victoria and an important part of our export performance as a state.
With that in mind, the debate around unconventional gas has taken place in Victoria over the last five or six years. It was the coalition government under former Premier Denis Napthine that indicated that a coalition government would not support unconventional gas exploration and development onshore in this state. In 2012 we had a moratorium put in place which covered unconventional gas production in this state in recognition that there remained broad concerns in the community about the potential impact of fracking and other unconventional gas exploration on our regional communities, particularly agricultural production, and it was not considered appropriate for that activity to proceed while there were those questions in the mind of the community. As I said, that is something which has been extensively ventilated in the state over the last five years and indeed has flowed from similar concerns in New South Wales.
This bill today seeks to put in place a permanent ban on unconventional gas exploration and production. In particular but not exclusively it calls out hydraulic fracturing or fracking as a technology, the use of which will be banned by the passage of this legislation. The bill also seeks to put in place, though, a statutory moratorium on conventional gas production in this state, and this notion that the Parliament should legislate to put in place a statutory moratorium is something that the coalition is deeply concerned about.
We are now seeing a major shift in the energy market in Australia, and have been for several years. It is an energy market which has underpinned for decades the success of the Victorian economy, particularly the industrial economy in Victoria. For decades of the 20th century one of the great competitive advantages for the Victorian economy, and manufacturing in particular, was access to reliable and inexpensive energy. It was on the basis of the development of the Latrobe Valley from the early 1950s that Victoria established a very solid manufacturing industry which has served and continues to serve the state to this day.
Cheap and reliable energy was a competitive advantage for Victoria relative to other states and territories in Australia and it was a competitive advantage in the region in which we were exporting. It has been a very strong competitive advantage for Victoria, and to this day we continue to have estimates that there are around 400 years worth of supply of brown coal in the Latrobe Valley. This has underpinned our state's energy market and economy through the last century and could continue to supply and underpin competitive energy production and supply in Victoria into the future.
But what we are seeing are some significant shifts in the energy market in this state in the sources of the production of energy in Victoria and in Australia and in the use of those energy resources in Australia. We are seeing a shift away from brown coal usage in energy production. Of course the most obvious example of that will come in three or four weeks time with the closure of the Hazelwood power station in the Latrobe Valley, a facility which has for decades supplied cheap and reliable power to industry and to residential consumers in Victoria. It of course has been an important component in supplying the national energy market on the east coast of Australia over the several decades that that integrated market has existed.
We are seeing a shift away from the use of brown coal in electricity generation in this state. What we are not seeing though, particularly with the energy policy framework that this government has put in place, are the alternatives to that brown coal energy source which will provide the same reliability and security of supply that the state has enjoyed for decades along with the competitive price that we have experienced for decades, going back to the last century. Indeed what we have seen with energy policy from this government is quite the opposite.
We have seen this government focus its policy entirely on the shift to renewables, particularly on a shift to wind power, which is incapable of providing the reliability and security of supply that Victorians have come to expect. It is incapable of providing power at the low cost that Victorians have come to expect. We are now largely at a tipping point. With the closure of Hazelwood and with the shift along with other jurisdictions in the national market, such as South Australia, towards renewable energy and in particular wind power, we are seeing the reliable and cheap energy that Australians and Victorians have taken for granted being put at risk.
This is something the consumers, residents, in South Australia have already experienced, with a number of significant outages in that state, particularly in the last 12 months; but we have seen that following a shift by the Weatherill government in South Australia to a policy of renewable energy. Wind power is a central theme of the South Australian government's energy policy. That is now starting to have consequences. It has had significant consequences for South Australian residents that were without power. It has had very significant consequences for South Australian industry.
We risk having the same situation here in Victoria, with a government which has put in place a policy framework which discourages the continued operation of coal-fired power stations in this state but has failed to put in place a policy setting which leads to alternative, reliable sources of energy to take the place of that coal-fired power. The energy policy document released by the Andrews government in 2016, by Lily D'Ambrosio when she was the responsible minister, in fact failed to even mention security of supply as part of the government's energy policy. It is astounding that a government would release an energy policy which was heavy on talking about a shift to renewables — wind power — and disowning coal-fired generation out of the Latrobe Valley but which failed to mention security of supply.
One of the key things we need from an energy policy is security of supply. If we are to have investment in heavy industry and if our existing industry is to continue to successfully operate, we must be able as a government and as a Parliament to guarantee reliability and security of supply. Yet security and reliability did not even get a mention in that policy document released by Minister D'Ambrosio, as she then was responsible for energy, and this government. That really reflects the direction we are seeing this government take with energy policy.
In fact we saw in recent weeks former Labor Premier John Brumby talk about the energy crisis which is now impacting Australia. This is John Brumby, who as Treasurer of this state and as regional development minister in the state had a very strong interest in energy policy in Victoria, as he did in his later role as chairman of the Council of Australian Governments reform council, with a broader perspective on national energy policy. John Brumby has come out and said we have an energy crisis in this state because of policy settings by state governments. Central to that of course is the Victorian government and the direction in which it is taking this state's energy market and source of energy production. We have significant concerns with the direction that this legislation is taking us with respect to conventional onshore gas production. I will come to that in a minute.
The coalition supports the elements with respect to unconventional gas and fracking. It is worth noting that in Victoria 73 licences for unconventional gas exploration have been issued. And who have they been issued by? They were issued by the previous Labor government. We had 23 fracking licences issued. Who were those 23 fracking licences issued by? They were issued by the previous Labor government. So it is Labor that has form in supporting fracking and it is Labor that has form in supporting unconventional gas exploration more generally, with the issue of 23 fracking licences and 73 unconventional gas licences. So for the government to come forward now as the champion of a ban on fracking is to ignore the history of the Labor Party in putting in place 23 fracking licences and 73 exploration licences for unconventional gas. We are happy to support the ban on fracking, but we note the hypocrisy of the Labor Party as being the only party that issued fracking licences in this state.
Now, on the issue of conventional gas, this side of the house is very firmly of the view that the government needs a proper, considered policy framework with respect to the provision of future conventional gas supply in this state. We do not have in this bill anything other than an approach from the government that says, 'We don't want to deal with the issue. We will put in place a statutory moratorium, and we will kick the can down the road'. We are saying that that is not acceptable. We have seen significant shifts in the energy market in this state and country, particularly in the last 12 months, as the consequences of earlier policy decisions take effect, and we cannot afford to simply kick the can down the road further. So it is the coalition's proposition that this bill should be amended, and I would ask that the amendments now be circulated.
Opposition amendments circulated by Mr RICH-PHILLIPS (South Eastern Metropolitan) pursuant to standing orders.
Mr RICH-PHILLIPS — The coalition will propose three substantive amendments when the bill reaches the committee stage. The first one I will talk about would omit the statutory moratorium that this bill seeks to impose, and the reason we are seeking to remove that statutory moratorium is that, as I said, we cannot continue to simply kick the can down the path. Energy security — reliability of security of supply and cost — is something that the Victorian government and the Victorian Parliament need to address.
Creating a statutory moratorium — locking in by statute what currently sits as policy, and which was policy put in place by the coalition, and removing any prospect of flexibility over the next three years — is to ignore the challenges this state faces with its energy supply.
We recognise that as part of the debate around gas in this state, and particularly on the back of concerns about unconventional gas production in the state, that the issue of conventional gas production has been caught up in much of that public debate. Communities are concerned about the impact of gas production in their local areas; they are concerned about the impact of changes in energy pricing here in this state. We saw last year the government claim that the closure of Hazelwood would only have a minor impact on power prices — there would only be a 4 per cent impact on power prices — yet we have already seen residential power prices increase by 10 per cent this year. Consumers are concerned about what this government's suite of policies are going to mean for retail power prices. The minister and the government promised 4 per cent, and we have seen 10 per cent already this year, so consumers are concerned about the impact of this government's policies on energy prices. They are seeing it already in their electricity bills, they have been seeing it in their gas bills, and if the policies of this government remain the same they will continue to see it happen further.
Of course one of the challenges in this regard, particularly with gas production, has been the growth of the export market in Australia. Over the last 10 years we have seen a substantial growth in export of liquefied natural gas (LNG) from Australia. We have seen a substantial growth in LNG exports through the terminals in Queensland to the extent that Australia is now the third largest exporter of gas in the world, after Qatar and Malaysia. That is a major shift in the way the domestic gas market has operated and has led to major price shifts for consumers in Victoria and the other states as an ever-increasing proportion of domestic gas production is exported.
One of the amendments that the coalition will put forward today recognises that there is community concern about rising gas prices, particularly as a consequence of those exports. Accordingly we will seek to amend this bill, and consequently amend the Petroleum Act 1998, to provide that where the minister grants a new production licence for the production of gas, or petroleum, as defined in the act on land in Victoria, in the first instance production of gas can only be used in the domestic market — the Victorian market — until the minister can provide assurance and is satisfied that there is sufficient gas to meet the needs of the Victorian market.
We believe that this is a sensible step to provide reassurance to the Victorian community that if we go down the path of opening up further gas resources in this state they are for the primary benefit of the Victorian community — for citizens of Victoria who are concerned about rising gas prices and for businesses in Victoria that are increasingly concerned about not only rising gas prices but their inability to secure gas supply at any price. The number of large industry users of gas who are now saying they cannot get gas contracts at any price is of great concern.
We believe a mechanism which ensures that if we do open up future onshore conventional gas that gas is made available in the first instance to Victorians is a positive step. It goes to providing reassurance to the Victorian community that where onshore gas activities are opened up the benefit will be to Victorian businesses and Victorian consumers and not to the international export market.
In a similar vein we recognise there has been concern in the Victorian community about the impact of onshore gas activities on local communities and local landholders. That is why we are very clear that we support the ban on fracking and unconventional gas. But in the area of conventional gas, which is proven technology — onshore production of gas has been used successfully worldwide — we believe, as I indicated before, that not imposing that statutory moratorium to allow for flexibility with onshore gas and to allow for preparatory work and geotechnical work to be undertaken is a sensible step.
Also sensible is recognising the concerns and impacts that conventional onshore gas can have on landowners and local communities. So the other substantive amendment that the coalition proposes to put in place, which is also an amendment to the Petroleum Act 1998, is to provide that where the minister grants a new petroleum production licence after 1 July 2017, which is the intended date for the operation of these amendments, the minister can only grant that petroleum production licence if the minister is satisfied that the applicant for that licence has obtained the consent of the owners and occupiers of the land on which the wellheads are to be located. This is to recognise that local landowners will be legitimately affected by the production of gas on their land. It is appropriate that that be recognised.
Providing those occupiers and landholders with a mechanism by which their consent is required means that they have some bargaining power in the decision around production on their land. It gives them the opportunity to negotiate with intending producers on their land, just as we see now with landowners — farmers — who face the possibility of having wind turbines on their land. Companies building wind turbines negotiate with landowners the placement of wind turbines on their land. Landowners get a financial benefit from allowing those wind turbines on their land.
The coalition proposes a similar mechanism where a landowner who is going to have a wellhead on their land will, by this mechanism, which requires the minister to be assured of a landowner's or occupier's consent, be able to negotiate with the intending producer to get an economic benefit from having that infrastructure located on their land. The intention is not to use it to block production but rather so that the landowner and the producer are able to ensure there are local benefits for local landowners flowing from local production in regional areas, just as we are seeing with wind turbines and the like now.We believe it is not acceptable to kick the can down the road, as the government is proposing through its statutory moratorium, which does not allow any flexibility or the opportunity to meet the rapidly changing needs and circumstances in the gas market in Victoria.
We believe that there is a role for future onshore conventional gas production in this state and for the preparation for future onshore conventional gas production in this state, but any production of that nature needs to have regard to local concerns. It needs to have regard to the fact that this resource should be available in the first instance for the benefit of Victorians, not for the export market. Our proposed amendment would give the minister the power to ensure that the Victorian market was satisfied before other markets were satisfied.We believe it is appropriate that the local community be recognised through a mechanism that allows them a say in onshore conventional gas production. That is why the insertion of a mechanism where the minister needs to be assured of their consent will provide local landholders with input on decisions on gas production in their area.
We believe that removing the statutory moratorium or not imposing the statutory moratorium will allow the flexibility to address the rapidly changing circumstances in the energy market, and in the gas market more particularly, in Victoria before that proposed moratorium would expire in about three and a half years time.
The coalition does not oppose the fracking ban or the ban on unconventional gas more broadly. We do believe that these amendments are a sensible step towards getting the gas market and energy production in this state moving again in a way which addresses the concerns of the community while ensuring that we can have a return to reliable and inexpensive energy supply in the state. I would urge the house to support these amendments; they are a sensible step. The government has abrogated its responsibility on energy policy in this state. It is a government that does not even mention security of supply in its energy policy. We need an alternative approach to energy in this state, and the coalition through these amendments are offering such an approach.