Fracking ban supported, but the mechanism remains questionable

Mr MORRIS (Mornington) (15:04): I am pleased to have this rather unexpected opportunity to actually speak on this bill after narrowly missing out on Wednesday afternoon. I am delighted to have the opportunity, and as the member for Warrandyte indicated during that earlier debate, the opposition has indicated that it is supporting the bill.

We are supporting the bill because of the policy, our opposition to fracking, our opposition to the exploitation of unconventional gas.

Whether the legislative approach is appropriate, particularly as the then minister, the Treasurer, noted in his second-reading speech that these types of activities are already banned. Frankly I think the jury is out about the approach the government is taking, because the bill is an energy bill, pure and simple, but we find ourselves debating an amendment to the Constitution Act 1975.

Now, a question I would ask—if the usual rules that apply to legislatures applied in this case, where we actually examined a bill in detail—if I had the opportunity is: what advice had the then minister, the Treasurer, taken to suggest that these policy issues are best determined in this manner, what advice had the Victorian public service given to the government with regard to the implementation of this policy commitment?

It was a policy commitment—that is not in dispute—but whether this is the best way to actually implement it is another matter. We do not know the answer to that question, of course. We will not know the answer to that question.

The bill has been on the notice paper for 12 months. Its passage will make not a jot of difference to the way natural resources are harvested in Victoria, not a jot of difference. It has no practical impact whatsoever. But I do not think it is unreasonable to ask that question: why are the provisions written in this way?

I suggest we all know the answer: it is politics, pure and simple politics. The Labor Party is seeking to give some credibility to the claims that have been made.

I was pleased to hear the member for Buninyong walk back a bit from these claims. We have repeatedly been told that people on this side of the house support fracking. We have repeatedly made it clear—and the member for Warrandyte went through many, many declarations on this matter—both in a policy sense and by our actions in government that we do not. But we are seeing this tactic frequently—just put it out there and see if they can make it stick—and I referred to that in a members statement this morning.

As I noted when the substance of this policy position was debated in 2017—and that is when the decision was made and that is when the ban was actually put in place—every single one of the 73 licences that were issued for exploration for unconventional gas were issued by a Labor government. Every single one of those 73 was issued by a Labor government. Every single one of the 23 permits that exist for fracking were issued by a Labor government.

Now, of course the government is trying to rewrite history, trying to claim, ‘Oh, no, no, we’re really the environmentally responsible party and we’re going to amend the Victorian constitution to make sure that this can’t ever be changed’.

It is not going to make a jot of difference in a policy sense at all. I have always thought what is important is not what you say, it is actually what you do. In government Labor issued, as I said, 73 exploration licences and 23 fracking permits, and they did it with no consultation—none. They were simply issued.

When we came to government in 2010, it was clear that while this form of extraction was being used overseas for many years, it was relatively new to Australia and it was clearly as far as we were concerned a problematic method of exploiting natural gas.

We saw that the risk to agricultural industries was very, very high. We saw the risk to the environment was very, very high. Unlike Labor, we saw the problems and we took action. We made sure that no more permits were issued—none. We placed a moratorium on exploration. We supported and have supported legislation to ban fracking.

So we are not about cheap political stunts. We are about doing what needs to be done to protect the environment, doing what needs to be done to protect our vital agricultural industries. We are about doing what needs to be done to protect Victoria for future generations.

What does this bill actually do? Well, it adds yet another group to the so-called entrenched provisions in the Constitution Act, a new part 8 to be titled ‘Maintaining the prohibitions on hydraulic fracturing and coal seam gas exploration and mining’. That will be included in the provisions that can only be overwritten by a special majority, as a number of members have mentioned.

The constitution of course can be amended like any other act in part. There are a range of provisions that require an absolute majority of members of both houses. We now have a requirement for a special majority: three-fifths of the membership of the Assembly and the Council together—77 members—and there are a range of provisions requiring the question to be referred to the electors of Victoria.

Now, there is a school of thought that a Parliament cannot legislate to limit its own power, a well-established school of thought. It will be interesting, if this proposition is ever tested, to see whether those so-called entrenched provisions actually hold, but at this stage it has not been tested. So when we are considering this bill we need to make the assumption that it is constitutional to further limit the powers of the Parliament, as this bill is in fact intended to do.

There are a range of measures that can only be changed by this so-called special majority. They are things like recognition of the Aboriginal peoples; the Crown; the Parliament; the membership of the Council and Assembly; qualification to be an elector and provisions relating to relief from disqualification; the delivery of water services, which is of course a critical natural resource; and some provisions relating to the judiciary—but essentially all matters that properly relate to the constitutional arrangements of the state, and they are, in my view, uncontroversial. But I do make the observation that requiring an overwhelming majority, in this case three-fifths, is not always the most effective way to ensure that the will of the people is respected.

If we go back to 1806, the then Vice-President of the United States, Aaron Burr, advised the Senate that a simple majority should not be sufficient to force a vote, which seemed reasonable advice at the time, but of course the decision of the Senate to accept that advice led to the rise of the filibuster.

Now, the US Senate for nearly a century tried to overturn its own decision. They saw the limitations they had placed on their own capacity to deal with issues. In 1917, over a century later, they managed to shift it so it became two-thirds of senators, and now it has been wound back to three-fifths of the Senate, coincidently the same figure as required for a special majority here.

It is tempting, though, to draw on the contrast between the filibuster in the US Senate and the operation of the guillotine in this chamber, because that has precisely the reverse effect. It prevents this legislature from doing what it was elected to do, and that is to examine properly proposed legislation.

The US Senate of course passes very little legislation at all; we frequently pass bills with very little examination.

The point I am making is we need to be cautious in using a constitutional device to resolve a political issue.

I think we are all agreed that fracking should be banned; I have not heard a dissenting voice in this debate. We are agreed that the exploitation of unconventional gas should also be banned—again, no dispute. But is this the best advice to achieve what is intended?

No-one realised how badly the guillotine would cripple the Legislative Assembly, I am sure, in the same way that no-one foresaw how effectively the filibuster could be used to cripple the US Senate.

While I would say the policy outcomes of this bill are laudable and supported, and I suspect supported by every member of the house, the mechanism by which this is being achieved remains questionable.

Energy Legislation – No protection from Ministerial Overreach

Mr MORRIS (Mornington) (18:29): I am pleased to have the opportunity to make some comments on the Energy Legislation Amendment (Licence Conditions) Bill 2020, because this is a bill that confirms what appears to be a rather dangerous trend, and that is the transfer of operational decision-making to the Minister for Energy, Environment and Climate Change.

Setting conditions on individual licences is not the role of a minister, particularly one who apparently “does not sweat the small stuff”.

The role of a minister is to set policy, determine the strategy and then allow the established delivery mechanisms to get it done, to implement it.

No requirement for accountability is contained in this bill beyond that generally imposed on ministers, and as we know there has been very little accountability from this government.

If I was the Secretary of the Department of Environment, Land, Water and Planning—that is something that is never going to happen, but if I was—I would be looking over my shoulder, because it is clear that the Westminster ministerial accountability tradition does not extend to ministers in the current government.

When things go wrong in the energy sector, as they inevitably will when the minister decides to place conditions on particular licences, they are going to be looking around for a scapegoat. And we have seen in recent weeks that scapegoats generally come from the public service, so the secretary will be thrown overboard or one of the deputy secretaries will be thrown overboard. No accountability is required of the minister and there will be no ministerial responsibility taken.

The bill is intended to allow the minister to vary, add or revoke conditions placed on licensed gas and electricity retailers. That power was previously the sole reserve of the Essential Services Commission.

This bill has a singular purpose, and that is to establish a process so the minister for energy can override the Essential Services Commission. There is no evidence presented in the minister’s speech to suggest that these drastic steps—and they are drastic steps—are in any way necessary.

There is no evidence to suggest the Essential Services Commission has been insufficiently diligent in oversighting the energy market. There is no evidence even of perceived shortcomings in the current arrangements, let alone actual shortcomings that would perhaps justify concentrating power like this in the hands of the minister.

In fact, when you look at the minister’s commentary in the second-reading speech, it suggests that the process is actually working pretty well, because the minister says:

Energy licensees are subject to a stringent compliance and enforcement regime overseen by the ESC …

The Victorian government has committed to … strengthening the ESC’s enforcement powers so it is able to more effectively regulate the energy sector … In May 2019, the ESC was given a $27.3 million funding boost over four years to enable it to take strong action against wrongdoing by energy companies.

Now, I certainly would not use the sort of language that the minister is using in what appears to be a premeditated slur directed at the energy industry, but her comments do suggest that the Essential Services Commission is more than capable of doing the job.

So again I say: how can ministerial intervention, particularly on the scale proposed by this bill, be justified? How can the government justify allowing a minister to intervene directly to determine the conditions of an individual licence? Because these are sweeping powers.

When you look at pages 6 and 8 of the bill, the minister can specify as a condition to a licence anything the minister thinks fit, and similarly vary and revoke. But the key point there is anything the minister thinks fit. The minister can as a licence condition:

apply, adopt or incorporate wholly or partially or as amended by a Ministerial licence condition, the provisions of any document, standard, rule, specification or method formulated, issued, prescribed or published by any authority or body …

Basically any piece of paper that comes out of a public agency. A little bit further down the page:

confer powers and functions on, and leave any matter to be decided by, the Commission.

Which is currently identified in the Essential Services Commission Act 2001 and the energy act.

What we are doing is effectively delegating the power of the Parliament within that clause. I would say to members on all sides: just think about what those words mean. Just think about it: the power to specify conditions as the minister thinks fit and to vary conditions similarly as the minister thinks fit.

Those conditions can be applied in the words of the legislation to ‘a particular licence’—not just a class of licences, but particular licences. The bill gives the minister absolute discretion to place any condition on a licence—absolute discretion. There is no requirement even for consistency in the way the rules are applied, and in fact there is no opportunity to contest the imposition of that condition.

The bill actually gives the minister power to place a condition on a licence that could potentially place that licensee at a competitive disadvantage. It could force a licence-holder, for example, to operate in a manner that is contrary to prudent financial practice.

In other words, the bill gives the minister power to place conditions on a licence which could essentially force the licensee out of business, and—this is the real sin as far as I am concerned—without placing similar conditions on a competitor.

Effectively this bill gives the minister the power to decide who succeeds and who fails in the industry, and there is no avenue of appeal.

Now, I am sure the government will say that is an extreme interpretation. They will say the power would never be exercised in this manner. But I would say if that is the case, why have it there in the first place? It does not need to be there.

The other point I want to cover is that the bill gives the minister the capacity to second-guess the Essential Services Commission. The fact is, as we know and as we have heard from the member for Tarneit amongst others, the energy market is a complex environment.

These are complex matters, and the complexity is the very reason the Essential Services Commission was created in the first place.

So where is the minister going to turn to for advice? Who will be tasked with effectively second-guessing the Essential Services Commission? Will it be the department? Will it be the minister’s office?

Will it be outside political advice or someone in the Premier’s private office? Or will it be a ministerial advisory group of Labor cronies?

Independent quality advice is essential, and there is nothing in this bill to ensure that the advice the minister will receive will be independent and will be quality advice.

The other comment I want to make is around consultation.

The bill provides that the minister has to consult the Premier, the Treasurer, the minister administering the Essential Services Commission Act 2001 and affected licensees. But in no case is there an obligation to respond to any submissions that the minister might receive.

Now, clearly it would be foolish to ignore the advice of the Premier, the Treasurer and even a colleague administering the Essential Services Commission Act, but there is no obligation to consider in any way beyond the necessary full form process submissions that might be put in by the licensees.

There is no safeguard, no protection from ministerial overreach and no appeal mechanism. Licensees can like it or lump it.

I do not argue that we should have an unregulated market. I certainly do not argue for a second that this market is perfect.

You have only got to look at the way power prices have gone up since 2014 particularly. I think we also need to accept that we are in the midst of tumultuous change in the way our energy is sourced and distributed.

Whatever some may wish to think, coal is on the way out, fossil fuels are on the way out, and the rate of change in that regard accelerates every single day. I think there is great opportunity in that change but there are great risks as well.

Is the market perfect? No, it is not. Do we need to make sure the consumers are protected? Of course we do. Do we need to make sure the strategic interests of the country are protected? Of course we do.

But we need to know who is best placed to consider the complexities of the market. What are the strategic risks? How can they be managed? Clearly the minister’s office is not the place to do that.

The Essential Services Commission has the expertise. They have the experience. They can deal with this issue appropriately. This is incredible power that needs to be exercised in a responsible way and it is not appropriate to hand this sort of power to a minister.

Question – Solar Homes Program

Mr MORRIS (Mornington) (16:10): (495) My question is also to the Minister for Solar Homes.

The question relates to the Solar Homes program and in particular the instructions provided to the providers of new systems.

A constituent has been advised by his provider that in order for the rebate to be paid he would simply need to pay for the system. He promptly paid the bill but was subsequently advised the request for payment is contrary to the instructions to providers.

In this instance it was not made clear that an eligibility number may be required prior to installing the system.

There is confusion about which guidelines apply, and I have been advised that many providers have indicated an eligibility number is not required prior to installation. Some have told clients the number simply facilitates faster processing when the time comes to apply for the rebate.

So my question is: when the scheme was first announced in August 2018 was it in fact mandatory to get a pre-approval number prior to installing a solar panel system?

If not, when did the rule change, and were installers notified that it was mandatory prior to installing a system?

Peninsula Faces Energy Crisis

This week the Hazelwood Power Station will shutdown in the Latrobe Valley due to policy decisions by the Andrews Labor Government. Hazelwood represents 22 per cent of Victoria’s power generation and 1000 jobs, providing affordable and reliable power to homes and businesses.

The Andrews Government has tripled the tax on coal and introduced a state-based
Renewable Energy Target of 40% by 2025, forcing the closure of Hazelwood. As a
result of this decision, St Vincent De Paul Society estimates Victorians are facing
$300 extra on the average annual household energy bill.

Under Daniel Andrews, Victoria is copying South Australia’s energy policies which
have resulted in blackouts and the highest power prices in the country. Victorians
now face 72 days of power shortfall in the next two years according to the Australian
Energy Market Operator, putting the State’s power security in jeopardy and more
pressure on prices.

The Victorian Coalition has called for the Andrews Government to intervene and fight
for a staged closure over years as it is the most responsible outcome for the Latrobe
Valley and Victoria. This would allow time for the Latrobe Valley workforce to
transition and Victoria’s energy network to adjust while maintaining reliability,
security and affordability. However, Daniel Andrews seems more concerned about
meeting costly green targets than he is with people’s livelihoods.

The Leader of Opposition, Matthew Guy has announced that a Liberal Nationals
Government will scrap the Victorian Renewable Energy Target so Victorians don’t
have repeated blackouts and higher electricity prices.

“Under Daniel Andrews Hazelwood is powering down and electricity bills are
powering up.”

“Unless we act, Victoria is bound to have regular South Australian-style blackouts
and higher power prices because of Daniel Andrews’ reckless policies.”

“Victoria needs a Premier to fight for the best interests of Victorians, not allow crime
to soar, youth justice centres to be overrun, CFA volunteers to be shafted and power
prices to surge because of reckless ideology.”

Fracking Banned, But New Gas Exploration Essential

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.