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Fracking Banned, But New Gas Exploration Essential

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Much of the legislation we deal with in this place is relatively pedestrian. It is important in its way, but seldom does a bill have significant implications that go well beyond its anticipated life. This is such a bill. It is not just an important bill, it is perhaps a critical bill for the future of the state. It is a bill that builds on the work of the former coalition government and a bill that will ensure our reputation for clean, green, sustainable agriculture is not compromised in any way.

The bill is intended to achieve three major outcomes: a ban on the development of coal seam gas extracted by any means, a ban on the practice of hydraulic fracture to harvest gas, and an extension of the 2012 moratorium on the development of conventional onshore gas facilities, which was put in place by the former coalition government and an extension of which to 2020 was proposed by the coalition in opposition in September 2015.

But there is an elephant in the room, and apparently this elephant is invisible to the government because the debate today is being held against a background of rapidly escalating energy prices, both electricity and gas — an escalation that in the case of gas, it has to be said, is being driven largely by market forces and in the case of electricity is being driven largely by the actions of the Andrews government.

The government sought to make the bill, in the context of this debate, about hydraulic fracturing, and that is without a doubt a significant component, but we cannot simply ignore this apparently invisible elephant — the energy price — because if it is ignored, it will not only cause tremendous social dislocation; it will destroy what is left of Victoria’s manufacturing industries. We cannot just hope for the best. We cannot just hope that energy prices will somehow sort themselves out, because quite simply they will not.

The bill proposes amendments to the Mineral Resources (Sustainable Development) Act 1990, largely to deal with the issues surrounding coal seam or unconventional gas, and also amendments to the Petroleum Act 1998 to deal with the issues surrounding the extraction of onshore conventional gas.

Part 2 of the bill addresses the issues of coal seam gas. Definitions of ‗coal seam gas’ and ‗hydraulic fracturing’ are inserted into the principal act.

Coal seam gas is defined as natural gas when contained in oil shale or coal, while ‗hydraulic fracturing’ is defined as being the injection of a substance or substances into a bore under pressure for the purposes of stimulating a geological formation.

While relatively new in Australia, hydraulic fracturing has been employed in the United States to stimulate wells since the mid-1860s, and over time a variety of materials have been used. Originally it was largely explosive fluids — like nitro-glycerine — while later on, in the 1930s, acid was introduced. A variant of hydraulic fracturing, massive hydraulic fracturing, is currently used on shale formations in the United States, and of course the process itself has been used widely to develop the Queensland coal seam gas fields.

When it comes to coal seam gas and to hydraulic fracturing, the role of the Parliament — the role of the government — is very much about risk management. There is of course in the recovery of coal seam gas, particularly through hydraulic fracturing, a considerable risk, and that was recognised by the former coalition government. As a consequence the moratorium that is still in place was imposed in 2012. It was further expanded in 2013 to include tight and shale gas.

In this regard I contrast the attitudes of the Baillieu and Napthine governments with that of earlier Labor administrations, because not one permit for the exploration or recovery of unconventional gas has been issued under a coalition government.

Every single one of the 73 licences that have been issued for exploration for unconventional gas were issued under a Labor government. Every single one of the 23 fracking permits that have been approved in this state were approved under a Labor government, and there is simply, in all of those approvals, not one example of public consultation — not a single example.

Additionally, as the Auditor-General’s report confirmed, the relevant department did not brief a minister on unconventional gas development in Victoria from 2004 to 2011, so clearly Labor was asleep at the wheel. This new and potentially problematic industry was allowed to develop without proper risk management and without appropriate regulation.

Unlike Labor, upon coming to government the coalition very quickly realised the risk posed by hydraulic fracturing to our agricultural industries, and we took action.

Clause 4 of the bill proposes a total ban on both exploration for, and mining of, coal seam gas and imposes significant penalties. Any coal seam gas that may be incidentally discovered must be reported. Hydraulic fracturing is banned. The issuance of exploration or mining licences, or the retention of a licence issued for coal seam gas, is also prevented. The reporting of any coal seam gas discoveries to the minister is required. A limit is proposed to be imposed on the liability of the government with changes implemented by this bill, and the minister is authorised to undertake buybacks, although in a limited time frame.

Part 3 of the bill relates to the Petroleum Act and implements very similar arrangements. There are also consequential amendments to another act as a result of the banning of hydraulic fracturing and where provisions become redundant.

So that is the bill before the house. In many ways it is straightforward. Insofar as it relates to the prohibition of the exploration or recovery of unconventional gas, it is largely uncontroversial in this house. So too is the extension of the moratorium to 2020. Again the coalition have been leaders in this field. We announced our position on 28 September 2015, and our view remains unchanged. As the Leader of The Nationals noted at the time:

Extending the moratorium until 2020 will allow time for the regulatory work recommended by the Auditor-General to be carried out and for the findings of the parliamentary inquiry to be fully assessed.

Unfortunately there is little evidence to suggest the government is ensuring that the necessary work is undertaken or that the findings of the parliamentary committee have in fact been taken seriously. I suspect they do not actually intend to undertake any work at all to develop any safeguards and simply hope the problem will go away — but it will not.

Victoria is on the brink of an energy price crisis. The most recent report from the Australian Energy Market Commission released in December 2016 states clearly that in the three years from 2016 to 2019 electricity prices are set to skyrocket by 35 per cent. In the short term the impact is even worse, with prices set to rise by up to 40 per cent between 2016–17 and 2017–18 as a result of the closure of Hazelwood.

The National Australia Bank has forecast that Victorian households could be facing gas bill hikes of 50 per cent or more. Of course this hike comes on top of already significant increases. The bank’s 2017 ‗Gas and LNG Market Outlook’ indicates that prices in Victoria could rise to between $8 and $10 a gigajoule, up from $2 to $4 a gigajoule before the export plants were commissioned.

Earlier in this debate the Premier asked rhetorically if we were ―for‖ the Victorian economy.

The fact is that the energy price crisis that is set to engulf this state will not only make life exceptionally difficult for households,it will take the axe to Victoria’s manufacturing industry. Yet the government is doing absolutely nothing to deal with this crisis. It is doing absolutely nothing to ensure that the literally hundreds of thousands of jobs that depend on a reliable, reasonably priced energy source have a future beyond the next year or two. If the government continues to ignore the looming economic firestorm that a 35 per cent increase in electricity costs and a 50 per cent increase in gas costs will ignite, the very future of this state could be at risk.

So should we ban hydraulic fracturing? Absolutely. Should we continue the moratorium on onshore conventional gas until we get the regulatory framework right? Absolutely.

But the government must start that work now. We cannot wait another five years; we cannot wait another ten. The cost to the Victorian economy and the cost to Victorian families in lost jobs and a skyrocketing cost of living is simply not sustainable.