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Wednesday, 17 September 2008
Page: 7659


Mr IAN MACFARLANE (10:14 AM) —The introduction of the Offshore Petroleum Amendment (Greenhouse Gas Storage) Bill 2008 and the three associated bills is where the rubber really hits the road in terms of lowering greenhouse gas emissions. We have heard a lot from those who sit on that side of the House about what they are going to do to lower greenhouse gas emissions. But, in the 10 months that they have occupied the government benches, they have in fact done very little, if anything at all, to lower greenhouse gas emissions. They have done all the symbolic stuff. They have always been good at doing the symbolic stuff. They have done the 24-hour news cycle and they have done the stunts, but this is where it is really going to get hard.

Greenhouse gas emissions is probably one of the most complex areas that the government and opposition are going to have to deal with. I say here and now that the opposition, the coalition, will support the government in its endeavours to put in place a practical and operative suite of legislation that encourages the geosequestration of carbon dioxide in Australia. There are a whole range of reasons why that should happen, but the single biggest reason is that we must lower greenhouse gas emissions while maintaining the viability of the coal industry not only here in Australia but also in the rest of the world. If we do not do that then thousands upon thousands of workers in Australia will simply lose their jobs. They will lose their jobs because the coal industry will not have a future under the government’s flawed carbon trading legislation. They will not have a job under that flawed carbon trading legislation and they will simply be thrown out of work and onto the scrap heap. They will become part of the three million people already identified by Ross Garnaut who will have to change their professions as a result of the government’s policies on lowering greenhouse gas emissions. Rather than a practical, sensible, step-by-step approach to this matter, the government, led by the Prime Minister, is rushing this issue in such a way that is putting in jeopardy the jobs of the mineworkers in Victoria and the thermal coal workers in Central Queensland. And, apart from what we will be discussing in this bill, because it has yet to also clarify the position of those coalminers at mines that emit methane as part of the mining operation, the jobs in those mines are also going to be in jeopardy.

Australia is an incredibly good miner of coal. It does it with some of the strictest, if not the strictest, safety measures in the world. It does it in a way which has the minimum possible impact on the environment. Yet there are those on that side of the House who do not want to see the coal industry grow. Last year we heard the member for Kingsford Smith, the Minister for the Environment, Heritage and the Arts, say that the automatic expansion of the coal industry in Australia is not a foregone conclusion. We know that the Labor Party continues to rely on the Greens vote, not only to secure its vote in House of Representatives elections but also to secure its votes in the passage of legislation through the Senate. We know the Labor Party is aligned with the Greens. We know they are a coalition and we know that the Greens want to stop the coal industry completely. If we do not get this legislation right then that will happen; the coal industry, as a supplier of energy to thermal power stations in Australia, will simply close down. Without this legislation working, the costs that the carbon trading scheme will impose upon them will simply mean they are out of business. Those power stations—like the ones that we see in Queensland and the ones that Australian industry has grown off the back of because of their ability to produce low-cost energy, which has not only provided jobs but given Australia a real advantage in a whole range of industries associated with black-coal power generation—will also be put in jeopardy.

This legislation amends the Offshore Petroleum Act 2006 and attempts to establish a system of offshore titles that will authorise the transportation by pipeline and injection and the storage into deep geological formations under the seabed of greenhouse gas substances. In this instance we are talking about geosequestration in Commonwealth waters—that is, those waters more than three nautical miles offshore. In those waters within Australia’s territorial limits, CO2 hopefully will be sequestered—stored and locked away forever—in the same way that the earth had locked away, until human intervention, the oil and gas reserves that are currently providing us with that enormous and abundant energy.

There are those who are opposed to this legislation per se. It is going to be an interesting time in the Senate for the minister responsible for this legislation, as the Greens oppose this legislation out of hand. They are making wildly erroneous and inflammatory claims that CO2 cannot be stored safely underground. I say to them: before you get into the rhetoric and start talking about all the issues that excite people out of fear, let us have some facts. Let us firstly acknowledge that many of these formations that will be used under this legislation are, in fact, formations that for not centuries, not millenniums, but millions of years have stored gases like the gas that we use in our houses and in industry—‘natural gas’, as it is commonly known, which is often a mix of methane and ethane. They are gases which have been locked away by nature for literally millions of years. Plugging those reservoirs and locking in their carbon dioxide is an incredibly important part of Australia’s and the world’s move towards a lower emissions signature. So we need to make sure not only that this legislation works but also that people, when they argue against this process of geosequestration as distinct from the legislation, do not revert to emotion and scare tactics. We need to make sure that people in both houses, particularly in that other place, actually understand the issue and are prepared to discuss it on a practical basis.

A key to this legislation will be making changes to the existing regime of petroleum titles in order to accommodate the new kinds of activities being authorised under the act. Put simply, that means that, if a company has been granted an exploration lease and has converted that into a production lease on the hydrocarbons that lie below its lease on the seabed, we then need to ensure we have legislation that enables either that company or other companies to gain access to some of those aquifers—those cavities in the earth, so to speak—to store CO2. Perhaps it would be from that gas operation—as would be the case with Chevron’s proposal on Barrow Island—but it also may be the case in the Gippsland region and Bass Strait, where Exxon Mobil own extensive leases for oil and gas production. Companies that are operating brown coal power stations in the Latrobe Valley will seek the opportunity to store gas in that area.

The bill provides that there will be access and property rights for greenhouse gas injection and storage. It will describe the appropriate management systems for ensuring safe and secure storage and attempt to balance the rights of what will be a new industry with those of existing resource industries—those industries that are already operating on that lease—in a way that will encourage future investment. In those last three words, ‘encourage future investment’, lies the key to this bill. If this bill is framed in such a way that it impinges on the ability to extract, particularly, natural gas, and hydrocarbons in the form of oil and condensate, then we will not have the opportunity to use those fuels. Gas, in particular, is going to be an incredibly important transitional fuel as we move to the next clean energy technology. If we do not have that right then companies will simply not come here to explore and spend the tens of millions of dollars finding oil and gas and then the billions of dollars—and it is billions of dollars—to actually exploit that reserve, take it ashore as natural gas into industry and domestic use or turn it into liquefied natural gas and fire the power stations and homes of countries all around the world in the place of coal.

If we do not get this right, those companies are not going to come to Australia. In Australia, we always need to understand that, while we are a country of great natural wealth and enormous good fortune in terms of those resources, we are not the only country so blessed. Quite rightly, Australia has a reputation for imposing the strictest criteria when it exploits those resources to ensure that it is done not only for human safety and workplace health and safety compliance but also for compliance in terms of environmental impact. That is seen by companies as a cost—a cost they are prepared to bear. But if we then move into a situation where this legislation makes it too complicated or does not allow them to have the certainty of the lease that they need to regain their capital expenditure and make a profit—making a profit, in the end, is what this is all about—then they will simply go to the myriad other countries that are offering the opportunity to explore and exploit hydrocarbons. That is the first concern.

The second concern is a far greater one: if this process to give the producers of carbon dioxide or greenhouse gases the opportunity to geosequester is not done in such a way that they can do it with relative certainty then geosequestration of greenhouse gas emissions will not occur. We need, for a moment, to just step back from the hyperbole and the 24-hour spin and actually look at how complicated this process is going to be. We need to understand that currently coal-fired electricity is produced, depending on how old the contract is, at between $35 and $40 a megawatt hour. Gas electricity is produced at somewhere between $45 and $55, again depending on the length of the contract of the company that is producing the electricity.

To produce an electron of electricity for zero emission—and I will come back to zero emission in a moment—from a coal-fired plant requires that coal be first processed through a series of retorts and converters so that the hydrogen is split off from the coal, and the carbon dioxide and other gases are put into another stream. I will continue with the carbon dioxide stream process in a moment. The hydrogen stream is then fed into a gas turbine similar to those which you see on the wings of airplanes when you fly about. That gas turbine drives a generator, and the heat produced out of the exhaust of that turbine is used to boil water. The boiling water is then used to generate steam to drive another turbine—what is called a combined cycle gas turbine. What comes out the back of that, out of the chimney, so to speak, is steam—water. The combustion of hydrogen in oxygen produces water. This is the cleanest possible way to produce electricity, if you can do it.

I say ‘if you can do it’, because the other half of that equation is to take the CO2 exhaust from the converters, compress and liquefy it and then pipe it to where you are going to bury it. In most cases, that will not be in the same place. It will be, perhaps, 100 kilometres away or even 1,000 kilometres away. It may be that as a result of this legislation, which covers offshore, we can get a situation where there is legislation relating to onshore, to allow the geosequestration of greenhouse gas emissions in saline aquifers in depleted natural gas fields across Australia, including the Cooper Basin.

That process is incredibly expensive—converting that coal into a hydrogen gas and then firing it into a turbine. The first problem is that there is no turbine currently built that will run on pure hydrogen. They simply do not exist. Hydrogen burns at such a high temperature it would literally melt the turbine. The second thing is, as you can imagine, to compress, pipe, bury and store the CO2 is going to be very expensive. So, while those over there have committed Australia to a position where they are going to charge for carbon, they still do not have the technology that can actually save that emission. Companies are facing the very real proposition that, if they produce electricity from coal, they are simply going to have to buy credits, because there is no technology in commercial operation that allows them to bury greenhouse gas emissions, under this legislation. Companies are facing the cost of electricity consumption doubling for brown coal and probably doubling for black coal at the power station in terms of carbon price. That over time will increase. The impact that that is going to have on normal households is a 40 per cent increase in electricity at their door.

Let us see where we are up to in actually being able to use this legislation to save greenhouse gas emissions as a result of the power industry in Australia. There is one proposal in the world currently still alive, and that is the ZeroGen proposal in Central Queensland. It is a proposal for an 80-megawatt power station—a 10th of the size of most of the power stations you and I would know, Mr Deputy Speaker—that will cost, they expect, at least $2 billion. That is 10 times what it costs to build a power station under conventional coal. You then have the expense I have just outlined. The cost of this electricity will not be $45 a megawatt hour, $90 a megawatt hour or $120 a megawatt hour; it will be somewhere north of $140 a megawatt hour—almost four times what it costs now.

Those who sit opposite who think these solutions are simple need to understand the practical reality: the technology does not exist. The commercial development of this technology is still in its precommercialisation phase. There is no such project in the world at the moment. In the words of the Minister for Resources and Energy, who is putting forward this legislation, the sort of capacity to generate electricity and store the CO2 under this legislation is 15 to 20 years away—15 to 20 years of the electricity industry having to pay a carbon tax, because that is what they are confronted with, by having to buy carbon credits.

There is only one group of people who are going to pay for that: the workers and the families of Australia. Being too impatient to lower greenhouse gas emissions, trying to show the rest of the world that we can do it when no-one else can, is going to cost Australians jobs. Families in Australia are going to face a cost-of-living increase that will see their electricity price rise by at least 40 per cent, if the companies pay their carbon taxes, or, if we rely on this sort of technology, double. So, if you are a household in Queensland and you are paying somewhere between $1,200 and $2,000 a year, double that—take that out of your weekly budget on top of all the other things you have to take out of your weekly budget now as a result of the inability of this government to deliver anything they promised in the last election campaign. They said they could do something about petrol prices. They gave that up at Christmas. We knew straightaway, when we saw the Prime Minister go out and say, ‘We’ve done as much as we can.’ He has given up the battle on grocery prices, which are hurting families. He has given up the battle on water.

What this government does is it comes up with these great ideas and then does not know how to put them in place. Despite what some of my colleagues might say about them, those who sit opposite are not stupid. They understand this issue. They understand what it is going to cost. They understand that what they are doing for working families in Australia is actually preparing them for a major hit on their energy costs. It will not just be the working families in Queensland, New South Wales, Victoria, South Australia, the Northern Territory, Tasmania, Western Australia and the ACT that will pay the higher costs of this—it will be the next generation as well.

This legislation still has a number of areas which need to be addressed. I commend the House of Representatives Standing Committee on Primary Industries and Resources for their report. It is a detailed report that extends to around 120 pages and makes 19 recommendations. In the spirit of bipartisanship, I commend the Minister for Resources and Energy on his approach to this legislation. I know this is not easy legislation. I began the work on this when I was the Minister for Industry, Tourism and Resources and I commend the minister for his efforts on this. It is extraordinarily complicated. But this legislation has to work if the carbon trading scheme of those who sit opposite is not going to cripple Australia—not just for this generation but for the next generation.

We know they will not use nuclear power. We know they think that it is all right to sell uranium to our friends, to our mates, to people who are important to us and for them to use nuclear power—that is fine. But when we try and have a debate on nuclear power in Australia, we get rubbish from those opposite. We get scare campaigns, and fear and terror about nuclear power stations when most of them, if they were prepared to consider it, would realise that nuclear power stations are in fact one of the solutions as we move towards a low-emission future. But if they do not consider nuclear power then they will need to make sure that they get this legislation right in the sense that, as I said, the companies holding existing leases not only continue to explore for and exploit hydrocarbons and oil and gas in Australia but also want to use this legislation to bury CO2  These companies need to have confidence that they can access the aquifers and, more importantly, that, providing they do everything right based on the knowledge of the time, they are given financial security for having done the right thing and for having helped Australia to show the way on lowering greenhouse gas emissions.

I should mention that there will be a further report from a Senate committee, which I think will be released tomorrow and tabled in the Senate in October. These two reports highlight two issues. My understanding from the little detail that I have of the submissions to the Senate inquiry is that the issues are fairly common, but I have not had the opportunity to see that report—and quite rightly not—nor have I had the opportunity to see the minister table the amendments to this legislation in this House. He has given me an outline of the legislation, and I thank him again for that. However, until we see the amendments and are able to comment on them, the coalition reserves its right to move amendments—not in this place but in the Senate.

In the last five minutes of my time, I wish to highlight two areas. The first area refers to a recommendation by the committee, which, while it has good intent, is not going to be supported by the government. The coalition will not be supporting it either, but I think we will be working very closely with the minister to amend it so that it clarifies for companies that are exploiting hydrocarbons on a petroleum lease their ownership rights as well as their right of access to bury carbon dioxide in the strata.

I should just explain—very poorly, my grandfather would think if he were watching; he was the chief government geologist in Queensland and a far better authority on this issue than I—that, if you have a tenement which extends from the seabed, there will be a number of strata, perhaps 20 strata, underneath that, and only three or four of them will contain commercial hydrocarbon. If they are sandstone or something like, they might be able to store carbon dioxide or greenhouse gases. Those strata may also contain oil and the gas, and when that is taken out there will be more storage areas. Bass Strait is a good example of our need to give certainty to companies that are exploiting oil and gas from perhaps three or five strata. They need to be certain that they will always have access to those strata and that they will have the right not only to remove gas from them but also to reinject carbon dioxide into them after the natural gas has been taken out of that field or turned into liquefied natural gas. At the same time, we need to give coal-fired power stations in the La Trobe Valley the ability to use the vacant strata. They need to do it in such a way that they do not disturb the oil or gas production if there is a need to access the strata simultaneously for storage and extraction. They do not want to be in a situation where the company that holds the lease is able to hold them to ransom. There needs to be equity in this process.

The minister and I have talked about a process where the minister has discretion and where there is an expert board—and, dare I say in this place, where there are as few lawyers as possible. We need to have a process that is based on science and on commercial realities. We do not want a process like native title where it can go on for years and years and perhaps even for decades. We want a process that can begin and then be judged and concluded within 12 months. That is highlighted in this report and is dealt with, perhaps not in the best way but certainly in a reasonable way, in recommendation 11. This issue has not been resolved in the report and it has not been resolved in this legislation. As I said earlier, we will, through consultation, commit our support to the minister to ensure that that part of the legislation works.

The coalition also has concerns in relation to liability. In this situation, Australia needs to be a little broadminded. We are going to have a situation where gas will be taken with the best scientific advice, with the best geological advice and with the best geophysics advice. The gas will be put into an aquifer and stored. The company will be liable for that gas during the operation of that storage process and for any damage caused by that gas should it escape. How long that liability exists after the well is capped will determine how many companies will be prepared to involve themselves in geosequestration. If they hold that liability for hundreds of years, their boards of directors simply will not allow them to take that risk and there will be no gas sequestered and there will be no situation whereby we lower our greenhouse gas emissions. We need to get this right, and we pledge our support to a consultative process.