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Wednesday, 9 September 2009
Page: 9164


Mr CHESTER (11:14 AM) —I rise to speak in relation to the Offshore Petroleum and Greenhouse Gas Storage Legislation Amendment Bill 2009, which seeks to correct omissions in the act that came into effect last year and make a number of technical corrections.

The bill has been in development since 2005, under the previous coalition government, and has enjoyed bipartisan support. The act authorises the transportation by pipeline and injection and storage of greenhouse gas substances in deep geological formations under the seabed. I have spoken previously to offer my general support for this legislation and the process it seeks to facilitate, which is the sequestration of greenhouse gases, primarily carbon dioxide. In doing so, I made the point that the Gippsland Basin—and the member for Corangamite touched on this as well—is likely to play a critical role in the development of these new technologies.

For those who are unfamiliar with the Gippsland Basin, it is a major contributor to our nation, and the legislation has particular relevance to my region. The Longford gas plant, which is located about 10 kilometres from the city of Sale, is responsible for supplying most of Victoria’s gas requirements and about 20 per cent of Australia’s oil and gas supplies. I grew up in the city of Sale and I well remember the impact of the oil and gas industry when it came to my home town.

This year marks the 40th anniversary of the joint venture partners Esso-BHP and their work in Bass Strait. There was a function quite recently—on 29 April this year, as I recall—which was attended by the Minister for Resources and Energy and the shadow minister, to commemorate this occasion. It really was an auspicious occasion for the Gippsland region—the former member for Gippsland, the Hon. Peter Nixon, was in attendance, and I wish him well—because it marked a critical date in our community’s development.

It is hard to imagine the Gippsland region today without the discovery of oil and gas in the early sixties, such has been the profound contribution of the industry to the economy of the region and to the cultural and social life of the Gippsland community. Esso has been a longstanding benefactor of the community, with a range of donations to community and sporting activities, perhaps most notably the Wellington Entertainment Centre in Sale, which has been completed in the last few years.

I do not seek to give the House a comprehensive history lesson on the Bass Strait oil and gas fields, but it is important in the context of this debate. The offshore drilling began in 1960, when BHP was granted petroleum exploration permits. In 1967 Kingfish 1 was drilled and encountered Australia’s largest oilfield, with 1.2 billion barrels recoverable. By the end of 1969, 11 fields had been discovered and the first five were in production. After this initial phase of very high success rates, the new Esso-BHP discoveries were limited throughout the early 1970s to Cobia, Sunfish and Hapuku.

There have been many more wells drilled. Notably, though, West Tuna in 1984 was the last of the giant oil discoveries by the Esso-BHP joint venture partners. There have been several smaller discoveries since, and there are now 24 offshore platforms and installations in Bass Strait, which feed a network of about 600 kilometres of underwater pipelines and keep the oil and gas flowing 24 hours a day. While production will continue for many years to come, the depleted sections of the basin are of particular interest for carbon storage, the subject of the legislation before the House today.

I make these points to highlight my view that, when it comes to dealing with the complex issues and claimed impacts of climate change and when it comes to the government’s Carbon Pollution Reduction Scheme, Gippslanders have a very keen interest in the outcome. We are very much at the pointy end of this debate. They are our jobs that will be directly affected in the oil and gas industry, in agriculture and, most significantly, in the power industry in the Latrobe Valley.

As I indicated in my maiden speech, if we are prepared to give the planet the benefit of the doubt and we accept that climate change is real then we are going to need a strong and sustainable economy to deal with the challenges it presents. In my region there are forecasts of storm surges and sea level rises. While I may personally doubt the extent and veracity of some of those claims, if those scenarios are accurate it will cost billions of dollars to relocate public infrastructure and mitigate the damage in low-lying coastal towns.

I liken the issue to household insurance: I do not expect my house to burn down but I will take out insurance every year just in case. In relation to the climate change forecasts, I have some serious doubts about some of the claims but I am not prepared to rule them out completely and I am prepared to take action that is proportionate to the threat. My insurance in this regard is to support practical and sustainable action which is good for the environment, but I am not prepared to sacrifice our economic future in the process. We need to tackle these challenges from a position of economic strength, which draws into sharp perspective the reckless spending spree of the Rudd government. I fear the government’s debt and deficit binge has left the cupboard bare.

In relation to the legislation before the House, Gippsland will need to be at the forefront of research and development to successfully capture and store carbon in the future. As the technology is developed on an industrial scale, it is likely that Gippsland and the Latrobe Valley will be key players. Studies have shown that the Gippsland Basin has the capacity to store very large volumes of carbon dioxide. In the context of the brown coal industry, there are obviously enormous gains to be made in the future, but it will take time; it is not going to happen overnight.

What concerns me is the enormous rush with which the government is trying to ram through its flawed CPRS legislation. I do not believe there has been enough time to explain the potential impacts on regional communities. As I have said before in this place, carbon capture and storage may be the big ticket item which provides the answer to the issues facing the brown coal power generators but we are several years away from achieving the desired result. I agree with the previous speaker, the member for Corangamite, when he said it is not a silver bullet. I believe there will be a suite of solutions. I am very confident in the capacity of engineers and scientists at work on finding technology-based solutions for many of the challenges we are facing from climate change.

I do not believe it is in anyone’s interest to jeopardise the economic viability of the power generators in Latrobe Valley by moving too fast or by placing too heavy a burden on their operations. I note the presence of the Minister for Resources and Energy in the room. It was great to see the minister in Longford for the commemoration of the 40th anniversary of the Esso-BHP joint venture partners’ activities. I have met with the power generators in Latrobe Valley and I understand the government has too, but was anyone actually listening on the government’s side of the table? Was anyone actually listening to the concerns that were being raised by the generators?

Let me set the scene for House about the importance of the power industry in Latrobe Valley. It is the most important industry in the region, bar none. Latrobe City commissioned an independent report into the economic importance of the Latrobe Valley coal and electricity industry. It reported back in August last year and it makes quite compelling reading. As a local member, I fully understand the significance of the following figures. It is estimated that the value added in Latrobe City from the coal and electricity industry sectors is $802 million per year, or 21.2 per cent of the gross regional product. There are 125 people employed in the coal mining sector and 1,705 people employed in the electricity supply sector. The flow-on impacts of such a major industry is obviously very significant to the entire region in terms of the training opportunities it provides to young people and the contracting opportunities for the private sector. It is just a critically important industry for the future of our region.

We have a vast reserve of brown coal in Latrobe Valley and it has underpinned the economic growth of Victoria. We are proud of the contribution the Latrobe Valley has made to the wealth of this nation and it is vital that it is allowed to continue in the future. One of the frustrating aspects of the debate on climate change is that the pride in our achievements in providing a base load power supply to the community over many decades has now been eroded to some extent. The media coverage of Latrobe Valley smokestacks on a nightly basis is actually quite disappointing for the people who live in the community. They are very proud of the contribution they have made to making Australia the great nation it is today through the supply of a cheap and reliable form of energy. I continue to encourage my community to be proud of their achievements in the past and to also look forward with confidence in the future. It is a cautionary note for the government, I believe, in how it handles the issue of climate change in the communities which I believe are being portrayed unfairly as the villains in the whole debate.

The shadow minister touched on the many of the issues that have been raised by the Energy Supply Association of Australia in its negotiations with the government regarding the issue of the CPRS and the legislation before the House. The association says there are four critical issues which are not adequately addressed in the current CPRS design. I will not go through them all in complete detail but the essence of their arguments relates to that need for certainty in the ongoing financial viability of the existing assets. In an environment where there is global economic uncertainty and the generators are seeking to refinance billions of dollars to continue their operation, there needs to be sufficient information for investors to commit to long-lived capital assets.

The industry is trying to engage with the government and so is the opposition. We do have time to get this right and the government must take the time to fully inform the community about the impact of this legislation. For example, the CEO of Loy Yang Power, Ian Nethercote, has cautioned that previous reports could be seriously underestimating the real impact on electricity prices. There is a lot riding on these very complex issues around the CPRS and the legislation before the House today. We must not get ahead of ourselves and place Australian jobs at risk.

Just last month we had the release of one of the most alarming reports yet about the impact on jobs. The report, Securing SMEs in Australia’s low carbon future, should be ringing alarm bells across the nation, particularly in regional areas. I am concerned that we have not had a single word of caution from those opposite, particularly from the regional MPs. The member for Charlton, and now the Minister Assisting the Minister for Climate Change, Mr Greg Combet, seems to have undergone a complete transformation. Once the great champion of working families, now he stands in this place and very rarely mentions the impact of the CPRS on jobs, particularly in his own community.

I am concerned that regional Labor MPs in the coalmining seats are silent on this issue. There is not a peep out of them. It is the silence of the lambs. It is as if some of them are told: ‘Come here, turn up, sit down, shut up and vote when we tell you to.’ I am very disappointed that some of them are not prepared to at least raise the concerns that their regional constituents are putting to them. I have a completely different view about my role as a representative of a community which has a strong dependence on the coal industry and brown coal fired power generators. You cannot come here and be the Marcel Marceau of government. You need to get up and speak out on behalf of your constituents.

If we rush down the path of the Rudd government’s model, we run the risk of sending our jobs overseas to countries which do not have an emissions trading scheme, and our economic circumstances will deteriorate. We must stand up for jobs in our regions. We need to be in a position of financial strength to mitigate any impacts of a changing climate. I fear that under this government’s current approach we will be sending jobs overseas and there will be an increase in total global emissions at the same time. We will be poorly placed to undertake mitigation measures if they are ever required.

I will go back to the report on the CPRS and its impact on small and medium sized businesses. This report is independent. It was released by the Australian Chamber of Commerce and Industry. As I said, the findings are alarming. I will quote a couple of the key results. The report states:

Our findings show that the CPRS will generate additional costs that would erode firm profitability at marked levels of between 4 to 7 percent on average. In some cases, we found that the impact of additional carbon costs could erode firm profitability entirely. Erosion of firm profitability at these average levels could be significant enough to change investment incentives.

It further says:

Over time, relatively higher domestic transport and freight costs will stimulate a geographic realignment towards increased urbanisation and reduced rural and regional economic activity.

…       …            …

The anticipated geographic realignment may create second- and third-order effects that increase the economic impact from covering transport fuels in the CPRS. For instance, structural unemployment is likely to rise due to a draining of economic activity from more remote regions.

As I said, there are some alarm bells in these comments from the ACCI. The reflection on increased urbanisation touches on an issue that I believe is probably an unintended consequence of the government’s handling of the CPRS. But it basically warns that we risk a depopulation of regional Australia. I, for one, would hate to see that happen. Judging by the actions of some Labor governments at state level and the federal government’s handling of issues such as the water buybacks, I fear that the view is that it is much easier to manage a population if they are not living in rural and regional locations. It is a real concern for all MPs from regional localities.

I will now reflect on a report that came directly to this place through the Senate Select Committee on Climate Policy. The recommendations enclosed within its report also reflect heavily on the legislation we have before the House and the opportunity we have to take the time to get this right. Among its recommendations, the Senate committee on climate policy’s report makes the point very clearly that there is a need to accurately model the impact of the CPRS in the context of the changed global financial circumstances and the impact they will have on individual regions. The committee says:

The committee considers the modelling undertaken by Treasury to be inadequate and recommends that the Government direct Treasury to undertake further modelling.

It lists a whole range of areas where modelling is required. It goes on to say:

The committee recommends that the CPRS legislation not be passed in its current form.

Obviously, that was prior to the CPRS legislation being knocked back, in the previous sitting weeks. But I think it is still relevant when we look at what is going to happen in the next few months. We are looking at what technology or opportunity is there for climate change mitigation. We also need to look at how this is going to play out in the world scheme of things. Do we wait until we get some indication from the global community in relation to where it is prepared to move on total global emissions? I would certainly suggest that we should be waiting and taking the time to get it right.

I call on the government to commission the modelling on the impact on individual regions that is referred to by the Senate committee report. I fear that without that modelling we are flying blind. I also fear that we are misleading our communities by not telling them what the true impacts are. There is a general consensus in the community that there is an issue with climate variability. Call it climate change or call it what you like, but there is a general acceptance in the community that looking after the environment is a very important initiative and something that we are all very conscious of. But I do not believe that we have ever actually come clean with the community and told them what the costs are going to be or what the real impacts are going to be for some of the regional communities. As I said earlier, the Gippsland and Latrobe Valley region is very much at the pointy end of any decisions that are made about our agricultural industries, the oil and gas sector and the power sector.

I believe we need to keep a very firm sense of perspective in this debate regarding these issues of energy security and, in the case of the legislation before the House, regarding carbon capture and storage technology. Given that our nation’s contribution to global greenhouse gas emissions is less than two per cent, we need to be extremely mindful of the international effort. How far is the international community prepared to go in partnership with Australia? I believe that any policy which results in job losses in my region will have an adverse impact on every part of community life. The government must take time to accurately model the likely impacts and come clean with the Australian public. We need to be telling Australians what the costs will be in terms of potential job losses, energy prices, fuel prices and the overall cost of living.

I am concerned that the Prime Minister stands in this place and talks about saving Kakadu and the Great Barrier Reef, but he never talks about the cost. It is a ridiculous proposition in any case. As if Australia acting alone can actually achieve anything that will come remotely close to saving Kakadu or the Great Barrier Reef given our total contribution of less than two per cent to total global emissions. It is farcical for the Prime Minister to stand in this place and make those claims. We cannot act alone if we are serious about trying to save these icons, if indeed they are even jeopardised—and that is a whole different argument we can have.

The community accepts that we need to take action, but acting alone and ahead of the world without any global commitment to the reduction of emissions is a farcical situation. I call on the Prime Minister to start being more honest with the Australian community about what can really be achieved by Australia taking action in this manner and what the costs will really be. It may be sacrilege for those opposite but there are many people who have a more pragmatic and practical approach to this issue and they do not blindly extol some of the virtues of the extreme green religion. They are prepared to act prudently and not sacrifice Australian jobs in the process. I would rather see this debate focus on the issues which all Australians can support rather than this juvenile typecasting of being either sceptics or true believers.

There is overwhelming sentiment and goodwill in the community for action to protect and sustain the environment for future generations to enjoy some of these great attractions that we have across our nation. There is no question that Gippslanders are no different from other Australians in this regard. We are passionate about our local environment. We have magnificent beaches, forests and local waterways. We are very practical people and we have thousands of people involved as volunteers in groups like Landcare who are getting their hands dirty and doing the practical environmental work that is required despite the cuts in funding by the Rudd government. It was amazing to listen to the Minister for Agriculture, Fisheries and Forestry in this place yesterday shamelessly promoting the 20-year anniversary of Landcare, yet not even referring to the massive cuts in the number of Landcare facilitators across Victoria which have occurred on his watch.

As I mentioned in my previous contribution to the House, the real practical environmentalists are in our regional communities. Farmers and landholders are investing in whole-of-farm plans to reduce nutrient run-off into local streams and undertaking a range of practical works. We have many industries that are interested in technology to clean up their operations. I think the brown coal power industry will obviously be partners in anything that comes out of the legislation before the House today. But there is still a great deal of confusion about climate change and the government’s proposed response with the emissions trading scheme. We do need a proper debate and a fair, open and honest debate in language that people can understand exactly what we are talking about.

I refer to the contributions of other members in relation to this legislation, particularly the member for Werriwa, who pointed out that there will not be just one approach to these very complex issues. I agree wholeheartedly. To use country parlance, I suggest that there is more than one way to skin a cat. There will be a suite of measures required in terms of carbon capture and storage, storing more carbon in the soil and developing all the renewable energy forms, which have general support of the House given the passage of the RET legislation quite recently. Just like the member for Flinders who spoke extensively about a range of other options for sustainably managing the environment, I believe there are many options which need to be fully explored in addition to this carbon capture and storage legislation. We need to be acting responsibly, and in my mind that includes protecting our energy security and our baseload power supply from the Gippsland-Latrobe Valley region and acting in a way that protects jobs in the future for the Gippsland community. I commend the previous speakers and the minister for his interest in the legislation. His attendance in Gippsland earlier this year was much appreciated by the community. I also commend the former minister for the work that he has done in this area. I thank the House.