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Wednesday, 17 September 2008
Page: 7754

Mr HAASE (5:22 PM) —I thank the House for the opportunity to speak in this cognate debate on the Offshore Petroleum Amendment (Greenhouse Gas Storage) Bill 2008, a vital piece of legislation. Even though the science surrounding sequestration of carbon is well advanced, and even though we have a number of practical operating sites today, there remains a great deal of scepticism in the minds of the public about the long-term veracity of this process. First of all, as a parliament we need to pass this legislation because it is important for Australia. Australia has huge resources of natural gas and coal. If we are to survive in this world, we are told, we have to reduce the emissions of carbon in the generation of electricity. If we are going to do that in a meaningful way, we are going to drastically increase the cost of living or, on the other hand, destroy the standard of living. If we as a public are going to accept that we can increase the price of things by deriving our energy from more expensive sources and not impact on the cost of living, then we are in gaga land. That is not a path that politicians of this country ought to lead the public down.

Professor Garnaut, in his latest statements, has suggested that the price of electricity will increase by 40 per cent. In industries where electricity is a major component, will it be business as usual? Will consumers continue to use that energy and, as a consequence—we are told—pollute the atmosphere with carbon? If their carbon emissions are so great, will they be compensated? If they are going to be compensated then why on earth will their behaviour change? Surely they will then use the same amount because the bottom line net effect will be the same financially. I have just heard the member for Newcastle say that she would like consumers to be compensated for the increased cost of their lifestyle because of the necessity to have a carbon pollution reduction scheme for the good of the world—although it would seem that the Rudd government do not care whether the rest of the world engages in that concern for the world. When we see Australian citizens having an increased cost of living because of a 40 per cent increase in the cost of electricity, for instance, the member for Newcastle would have us believe that the Rudd government will compensate for that increased impact on households. And with that compensation, when we have a 40-degree day in the Pilbara, I am sure that the householders will switch off their air conditioning. No, I do not believe that for a moment. They will leave their air conditioning on, especially if they are going to be compensated for the increased costs of electricity.

I could go on about the illogical nature of this proposed scheme, but it simply strikes me as being so odd that intelligent adults can be hoodwinked in such a way; the hoodwinking is extreme. It makes no sense. If you introduce a Carbon Pollution Reduction Scheme by 2010 in an attempt to contribute to the reduction of carbon globally—without caring whether anyone else in the world does it, or whether by 2010 it will be a good system, or whether we understand it, or whether the public know what the impact is going to be—and then believe that the increased cost of living will somehow be compensated for by a charge on a tonne of carbon, won’t consumers simply keep the cycle going and spend the compensation money on more pollution, if it is to be called pollution? The logic escapes me.

Those who moved into government at the last election have an ability to embrace such an illogical argument. When they were in opposition they were incredibly sceptical about any technology that might involve putting carbon dioxide underground. They could not possibly embrace that idea and that technology, but now they do; so there has been a transition in belief. Wouldn’t it have been a wonderful outcome if those same people could have embraced the absolute logic of nuclear energy? It is not such a magnificent step when you think about it. If you can reconsider the scientific evidence around sequestering carbon dioxide permanently, deep underground in rock formations where carbon dioxide and other gases have remained for millions of years without any surface detection, and if the government can go from a position of not believing in carbon sequestration to embracing carbon sequestration in a period of nine months, wouldn’t it have been a wonderful world had they, from their position of not believing in nuclear energy, had been able to embrace a belief in nuclear energy? But we in opposition today obviously expect too much.

So we have a necessity for the continued use of fossil fuels and, therefore, the necessity to come up with a plan to dispose of the waste product of fossil fuels—which we all know is carbon dioxide, which is a perfectly useful gas that is very common on this earth but has now been demonised and has to be put away out of sight, out of mind where it will never return. Surely trees will form themselves from other substances in the future. I heard someone today talk about a post-carbon world. What a wonderful idea: no more steel, no more trees, no more grass and no more food. Such is the intelligence of the current government.

We have this scheme which is necessary to sequester the nasty carbon dioxide and, because of it, a very complex document that will set up the guidelines for leases to be planned and processes to be undertaken so that those who are today engaged in extracting gases from deep under the earth—natural gas, hydrocarbon gas—will not be interfered with by those who are sequestering carbon dioxide. That is a perfectly logical arrangement. It is a realisation that we have to have this control in place. Of course, the smart way to do that was to modify existing acts, and the Offshore Petroleum Act was the perfect vehicle for these changes.

Of course, as we have heard during this debate, the Standing Committee on Primary Industries and Resources has carried out an analysis of the proposed legislation and received numerous submissions—very solid and intelligent submissions—from various players in the industry. One such submission came from a firm favourite organisation of mine, Woodside Petroleum. I have the pleasure of being the member for the federal seat of Kalgoorlie and, of course, the majority of Woodside’s operations are offshore from my patch. Woodside supports a number of aspects of the bill. It supports the introduction of the legislation generally to accommodate greenhouse gas storage activities. It also supports the regime being included in the Offshore Petroleum Act given the synergies between the title systems and the need to manage the potential for conflict between petroleum activities and greenhouse gas storage activities. It also strongly supports the adoption of the proposed legislative model by states and territories to ensure a nationally consistent framework in both offshore and onshore areas to minimise the regulatory burden.

However, Woodside stated quite clearly in its submission that it has strong reservations about the impact of this bill on the company’s ability to develop some of the largest resource projects in Australia—for example, the proposed Browse Basin LNG development, for which key terms agreements to the value of $A70 billion to $A90 billion in sales revenue have been signed. The company will be restricted by this bill in its ability and flexibility to dispose of the carbon dioxide that is produced with the reservoir gas. In Woodside’s view, the object of this bill should be to provide cost-effective carbon dioxide storage solutions without impeding the development of natural hydrocarbon resources. It should not constrain the ability of a project to dispose of carbon dioxide that arises from an integrated multiple field development, as would be the outcome of the current draft legislation, which prohibits disposal within a petroleum production licence area for carbon dioxide derived from outside the licence area.

The bill introduces hurdles for accessing suitable low-cost disposal sites by making them subject to a new regime of greenhouse gas titles. Recognising that geosequestration of carbon dioxide from flue gas is unlikely to be commercially available for the coming 10 years, the ability of large gas developments to dispose of reservoir CO2 should not be compromised. Geosequestration projects, such as that considered by Woodside, should be recognised as fulfilling a crucial role in developing Australia’s LNG potential while at the same time achieving the objective of large-scale carbon dioxide disposal in Australia. Woodside is also concerned about the limited consultation on the bill and the absence of associated regulations and guidelines at this stage. The bill raises significant issues in relation to the sovereignty of existing petroleum operations as against the relative uncertainty posed by the entry of a new activity and supporting industry for greenhouse gas storage into the same areas. Given the significance of these issues, Woodside recommends that the bill be considered as a legislative regime in its entirety.

Woodside mentioned in its submission to the standing committee that it was concerned about the sovereignty of existing petroleum operations. Of course, that leads me straight to my next point, which is that Woodside may well raise the issue of sovereignty and it may well be concerned about this government’s future intentions and any legislation it may introduce. Madam Deputy Speaker, you will recall that in the last budget, like a thief in the night, the Australian Taxation Office attacked Woodside’s bottom line to the tune of $2.5 billion over four years. That is hardly petty cash. I have spoken about that in this place previously.

I am sympathetic to Woodside’s case and their very strongly stated belief that, when they were developing the North West Shelf gas project, one of the enabling factors was the agreement between the then government and the Woodside partnership that would allow condensate to become a cash crop. It would return revenue to the project and the project could proceed on an economic basis. That was, I might add, aided by the bold move of then Premier Charles Court—later Sir Charles Court—in signing a take-or-pay contract with Woodside for domestic gas for the people of south-west Western Australia. Those two components of negotiations allowed the Woodside North West Shelf project to proceed—and, in doing so, invited further exploration and further project development of that incredible wealth that we now know of today, which is earning billions of dollars for this nation and powering up Asia and Japan.

When the budget measure was announced to renege on that agreement, it came as a great shock to Woodside. So it is not surprising that they should be concerned about sovereign issues. They will be concerned about legislation proposed by this government because I am quite sure there is a perception that this government believe that companies that are making a profit today ought not do so—because perhaps ‘profit’ is a dirty word—or they simply do not understand or they do not bother honouring long-term agreements.

It is just as necessary for condensate to remain free of excise today as it was when the contract was first negotiated. To renege on that will mean that the increased costs—$2.5 billion over four years—have to be passed on somewhere. We cannot have this cost disappear into thin air. And who will be in the firing line? It will be the consumers of petroleum products in Western Australia. If nothing else, I think members of this House ought to be incensed by that action because, as I said earlier, it is comparable to the actions of a thief in the night: it came without warning. It is a dastardly act, and Woodside are quite right in being concerned about sovereign risk and deals that have been done in the past and whether they will be honoured in the future.

Even though I have great faith in the science of carbon sequestration, there is no doubt that there are many who still have reservations about the permanence of the science. Unfortunately, because of that lack of belief or confidence—call it what you like—there will be an increased cost in any process of sequestration. And I refer, of course, to the issue of long-term insurance against eventuality into the future. The doomsayers would talk about leakage and incidents that have occurred on the African continent in the past, with carbon dioxide poisoning through natural events. Of course, as a displacer of oxygen, it can be a dangerous gas—as can many gases be. But the problem is that, because of the ‘what if’ nature of this sequestration and the minute doubt that exists in the minds of some people, the question of insurance will be a very large one indeed and has to be resolved. I believe the way to resolve that is for the Commonwealth to consider carrying insurance into the future. Companies may come and go but, if we are talking about hundreds if not thousands of years of storage of CO2 and the minute risk of that gas escaping, there will be necessary monitoring costs and we will have to decide who is going to carry the cost of insurance. The solution will be for the Commonwealth to do so.

We have pleasure in allowing the passage of this legislation through the House, although I note that amendments will be proposed in the Senate. They will cover a number of issues: minister directing an outcome, potential overlapping of the greenhouse gas storage et cetera. (Time expired)