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Canberra Doorstop

15 August 2011

Subjects: Coal-seam gas, China's economy.

CRAIG EMERSON: A bit cool for you; it's all right for me. I've just come from China where it's 36
degrees. Well, what a mess. Mr Abbott's all over the place on the issue of coal-seam gas as on so
many other policy issues. He's had four different positions in four days. On Friday he said that
landholders should have a right of veto over coal-seam gas exploration. On Saturday it was the
sounds of silence. On Sunday he had one of his lieutenants saying what Mr Abbott really meant to
say was something else altogether. And then today he sought to clarify what he said on Friday.

The problem with Mr Abbott is that he speaks two statements to two different audiences because all
he is is a rank political opportunist trying to harvest votes wherever he can. The big problem for
the nation is that Mr Abbott is a big risk. This issue is one that is riddled with sovereign risk.
As Trade Minister I'm legitimately concerned about the fact that Mr Abbott is sending a message to
Australian gas explorers and overseas gas exploration companies that they may face a veto in terms
of their ability to explore for minerals and energy in this county. This is a big issue of
sovereign risk created by Mr Abbott for one reason and one reason only - his desire to harvest

Mr Abbott has proved himself yet again to be the two Tonys: one Tony saying something in the heat
of the moment, another one pretending to be gospel truth Tony. But the fact is the real Tony here
is the one who is actually setting out to elevate sovereign risk in this country by saying to
foreign investors that they may not have the right to explore for minerals here in Australia. This
sends a very bad message to countries overseas. And what it says about Mr Abbott is that he will
say anything and do anything and in the course of this prejudice the national interest and our
future mineral development in this country.

QUESTION: What is your attitude to Premier Bligh's announcement of no exploration near towns?

EMERSON: Well the issue of access to properties is really properly an issue for state governments
and this is what Mr Abbott has failed to understand. He has sought to intervene. He has sought to
intervene and either doesn't know or doesn't care that the minerals beneath the ground are actually
the property of the Australian people, not the property of landholders. And different states have
different views on how to manage this issue. The Commonwealth is happy to work with the states, but
we will not be intervening and overriding states as Mr Abbott has sought to do.

QUESTION: Do you agree with Ms Bligh's view or do you think that that presents some danger to
sovereign risk?

EMERSON: Well as I say the states have had jurisdiction over these issues for decades now and it is
ultimately up to the states. We're okay about working with the states on these issues. But what we
won't do is send a message to foreign investors, to this country, that perhaps if Mr Abbott were
the Prime Minister of Australia that the minerals would not necessarily be owned by the people of
Australia, but by the landholders or, indeed, that over any and all land, landholders could have a
right of veto.

These matters can be managed sensibly. They can be managed sensibly but the debate is not helped at
all by Mr Abbott's either ignorance or wilfulness in indicating that landholders should have a veto
over any and all gas exploration and, potentially, if it's to be non-discriminatory a veto over all
mineral exploration in this country.

QUESTION: The Greens seem to have the same view, Dr Emerson. Are they a sovereign risk as well?

EMERSON: Well we don't agree with The Greens on their attitude to coal-seam gas. We don't agree
with The Greens at all on their attitude to coal-seam gas. There are many good analysts who agree
with this proposition, and that is that gas is the transition fuel to a low-carbon economy, to a
clean energy future. Australia has very large reserves of gas both off the coast of Western
Australia and on the eastern seaboard. And that is a very valuable asset for Australia. And it is
being damaged; its value has been damaged and downgraded by the political opportunism of Mr Abbott.

To directly answer your question, we do not agree with the Greens position on this matter either.
The agreement, philosophically, is between the Greens and Mr Abbott. There is a Liberal-Green
coalition on this matter.

QUESTION: Does opposition to coal-seam gas potentially undermine the effectiveness of your carbon
package that you brought down last month?

EMERSON: Well indeed. Because coal-seam gas and natural gas more generally is regarded as the
transition fuel to a low-carbon future, to a clean-energy future, efforts to prevent the
development of gas in this country are inconsistent with the transition to a low-carbon future.
That is a fact not only in Australia but around the world. I've just come back from China. China is
still very, very hungry for Australian energy resources, as is Korea, as is Japan, as are most
countries of East Asia. And the fact is that Mr Abbott would devalue this enormously valuable asset
for one reason and one reason only: his aspiration to get into The Lodge.

QUESTION: If you're so clear though that the land under the ground is owned by the people, why is
there a risk posed by Tony Abbott? If that's the law then there's no sovereign risk issue.

EMERSON: There's a big sovereign risk issue because Mr Abbott has said on Friday that his position
is to give landholders a veto over access to those minerals. This would overturn more than a
century of practice in Australia that has gone undisputed in this country for more than a century.
It became a matter of dispute on Friday when Mr Abbott in his overweening desire to agree with
every proposition that is put on radio to him was prepared to sacrifice the stability of 100 years
in this country for his rank political opportunism.

QUESTION: But Minister, isn't he also pointing out the policy failure at a state level whereby you
can have farmers going home and finding people exploring for coal-seam gas on their property. I
mean that's a considerable issue and one that's actually presented - was presented - to Abbott last

EMERSON: Well, indeed the states are grappling with this issue. They are grappling with this issue
and all the information available to me says that at least the major coal-seam gas explorers are
not only consulting and working with local landholders, but they are quite prepared to pay very
substantial amounts of money for any drill hole that is actually drilled. Now that's a cooperative

That's the cooperative approach that is being pursued by major coal-seam gas explorers in
Australia. Mr Abbott wants to end that. He wants to end a cooperative approach and just say that
landholders can have a veto over the exploration for coal-seam gas in this country. Now if this
principle of Mr Abbott takes hold just think of the consequences. If he were to apply that in a
non-discriminatory way then it would apply not only to coal-seam gas; it would apply to hard
minerals. It would not only apply to prime agricultural land; it would apply anywhere and
everywhere around Australia.

And it would be not unreasonable for other landholders to say, 'Mr Abbott, if you were the Prime
Minister, if this good enough for landholders for coal-seam gas exploration, it's good enough for
us because we are landholders in other minerals in other states and therefore we should have the
same rights to'. What does Mr Abbott say to them?

QUESTION: So you're saying it would bring the mining industry to an end?

EMERSON: No, I'm saying that Mr Abbott poses a very substantial risk to the mining industry of this
country. He, by his statements, is elevating sovereign risk for mining in this country. It is an
elevation of sovereign risk that goes beyond the issue of coal-seam gas exploration to the broader
industry. And I note that some companies have expressed some concern about this. If I were in the
mining industry I would be expressing a lot of concern about it. If I were a coal-seam gas explorer
I would be expressing a lot of concern about this.

Because what you don't know with Mr Abbott is this. Is he gospel truth Tony or is he heat of the
moment Tony? And if he were Prime Minister, would he be ringing up radio hosts and asking what
their policy position is on a particular issue so he could follow it? I mean this is the level of
superficiality of the alternative Prime Minister of Australia. That's why he's a risk. That's why
he's elevated sovereign risk.

QUESTION: So turning on its head, Minister, do you support miners having an unchecked right to go
and explore for minerals, gases and so on as long as it's not something that they have direct
control of - i.e. in the soil?

EMERSON: What I support is the role of the states in making these decisions and the willingness of
the Commonwealth to work with the states on these issues. For the best part of a hundred years or
even more we have actually had essentially a cooperative approach on the issue of mineral
exploration in Australia. Mineral exploration in Australia overwhelmingly occurs either on freehold
land or on leasehold land and in those circumstances there usually would be consultation with the
freehold owners or the leaseholders. That's been working pretty well for a hundred years in this
country and Mr Abbott wants to overturn it by saying to landholders you have a complete right of
veto no matter what the circumstances.

QUESTION: You say the farmers don't really have anything to complain about?

EMERSON: No, I didn't say that at all. I said these are matters that are appropriately managed by
the states and I know some states are putting in a genuine effort in respect of coal-seam gas
exploration to find the right balance, particularly where we're in a situation where large
coal-seam gas explorers already engage constructively with landholders. This is just a flow-on from
what's been going on for a hundred years. Mr Abbott just wants to turn that on its head and give
people the right to veto.

Now today he says that's not his position. Well you know it's a day ending in A-Y. It's Monday.
Tuesday, he could have five positions in five days. Mr Abbott has had four positions in four days.
Just wait and see. On the fifth day he'll have another position.

QUESTION: What's your view on Barry O'Farrell's moratorium on fracking?

EMERSON: Well again these are ultimately matters for the state but I would urge everyone in
Australia to accept that coal-seam gas exploration and development as a whole is in this country's
national interest. Why? Because the world is turning to gas as the transition fuel to a low-carbon
future, to a clean-energy future. We are sitting on vast reserves of natural gas in this country
and why would you devalue them by making completely irresponsible statements, reckless statements,
risky statements as Mr Abbott has made.

QUESTION: We've got plenty of gas in WA for instance.

EMERSON: There is plenty of gas in Western Australia and there's plenty of gas on the eastern
seaboard. And there's plenty of demand for gas that would take up the known reserves in both
Western Australia and on the eastern seaboard. This is a great asset for this country. Coal-seam
gas is a great asset for Australia and Mr Abbott has sought to devalue that asset by increasing
sovereign risk.

QUESTION: Just more broadly in the context of some of the economic uncertainty overseas. There's
some speculation today that's been around for a while that China's growth is going to slow a little
bit, go down to about 7 per cent. What does that mean for trade with China and demand for some of
our commodities and steel? Is that going to have an impact?

EMERSON: It is speculation. In fact I think inflation reached 6.5 per cent just recently in China.
A fair bit of that driven by food. I've just come back from China. The feeling is that at least
among some senior people in the Government of China that the inflation rate may well have peaked.
In any event, China's changing its growth model away from an export-led strategy to domestic
consumption and spreading the benefits of growth more widely across the country of China. That
actually opens up brand new opportunities for Australia in terms of our services' exports.

In 2010 China became Australia's biggest service export market. And what was clear from the
delegation that I led of more than 100 business people is that businesses and the leadership in
provincial China are very interested in our offerings of services. So while minerals and energy
exports will continue to grow strongly in China, at the same time we'll be diversifying into