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Environment and Communications Legislation Committee
Department of the Environment

Department of the Environment

CHAIR: We will recommence with program 4.1—water reform. Did anybody want to make an opening statement before we start? If not, Senator Urquhart?

Senator URQUHART: I would like to ask some questions on the work of the independent expert scientific committee. Looking at page 75 of the PBS, why is the budget of the IESC increasing from $885,000 to $1.035 million next year and the years following?

Ms Milnes : The increase in funding reflects the costs of providing for the committee, so, for example, the number of committee meetings, the salaries paid, the payments made to the committee reflecting the Remuneration Tribunal conditions and other related activities of the committee.

Senator URQUHART: Is there an expectation of increased work for the committee assessing the impact of more coal-seam gas and coalmining development on water resources?

Ms Milnes : In general we expect a reasonably consistent stream of work for the committee. That has been our experience to date. It is about two projects a month on which they provide advice.

Senator URQUHART: So you do not see that increasing any more than it does currently?

Ms Milnes : It is difficult to predict but in general we think that is our best forecast of the future.

Senator URQUHART: What mining projects is the IESC assessing at the moment?

Ms Milnes : At the moment the next meeting is scheduled for June. At this stage there is no request for advice for the June meeting.

Senator URQUHART: What about currently?

Ms Milnes : That reflects the current situation. The process is that about six to eight weeks before the committee meets—and the committee meets monthly generally—the regulators, the Australian and state governments, are asked to provide their requests for advice and it is at that stage that the committee becomes aware of which projects they are being asked to provide advice on.

Senator URQUHART: Okay.

Ms Milnes : Just to clarify, there are no outstanding requests for advice at the moment.

Senator URQUHART: In your experience how often to governments ignore or reject as flawed the advice of the committee? I refer to the ex-Newman government who did that last year. After reading the criticisms of the committee's work made by consultants working for the government and the company, did the IESC reassess its advice and change it accordingly?

Dr Wright : Could you please repeat the second part of that question.

Senator URQUHART: After reading the criticisms of the committee's work made by the consultants working for the government and the company, did the IESC reassess its advice and change it accordingly?

Ms Milnes : Can I ask which—

Senator URQUHART: The first part of my question was how often do governments ignore or reject as flawed the advice of the committee? I referred to the ex-Newman government who did that last year.

Ms Milnes : In general the relevant governments are required to take the IESC's advice into account in a transparent way but it is for them to determine how they use the advice.

Senator URQUHART: Okay. Would the advice you gave to government have been different? Is that what you are saying?

Ms Milnes : The advice is provided by the Independent Expert Scientific Committee, the Office of Water Science plays a role as a secretariat to the committee and then it is for the governments to determine how they take up the advice.

Senator URQUHART: Okay.

Ms Milnes : So you are best to put those questions to the relevant governments.

Senator URQUHART: Okay. What was the IESC's assessment of those criticisms?

Ms Milnes : If the relevant government comes back to request further advice from the Independent Expert Scientific Committee then that is where the committee will make an assessment of that commentary and provide further advice.

Senator URQUHART: I understand it was the Shenhua project that I am talking about.

Dr Wright : Specifically, are you asking what advice the committee has provided or whether there was different advice in subsequent iterations—it is not quite clear what the question is?

Senator URQUHART: If the IESC gives advice to government and government then chooses not to take that advice, is there any auditing of the advice when it is actually changed? If something different is done, do you audit that?

Dr Wright : The IESC provides advice both to state regulators and to the Commonwealth regulator. The decision on whether a project proceeds or not from a state regulator is up to it—there is no back-checking by the state regulator. We are putting in place a system of monitoring to look at how well the IESC is performing but that is not in place yet.

Senator URQUHART: Is there auditing about the advice? If we use the Shenhua project as an example, you give advice and the government then chooses not to take that advice—is it then a scientific approach rather than political pressure that makes it change that advice? Is there an auditing process that you undertake to see why the advice you had given was not taken?

Dr Wright : The advice from the IESC is not changed, there can be requests by the Commonwealth or state regulators for further advice but once the IESC has made advice it does not change that advice—it can provide subsequent advice upon request.

Senator URQUHART: Maybe I am using the wrong word in terms of 'change', if the IESC provides advice to government and then the government rejects it or ignores it, do you then do an audit of that advice when it is changed? If they choose to then do something different to what you have advised, do you then audit what that advice was?

Senator Birmingham: Just so we can try to be clear—are you saying if the final approvals or decisions of government differ from the advice of the IESC?

Senator URQUHART: Yes, if somebody else provides advice over and above the IESC—

Senator Birmingham: And you asked about the Shenhua Watermark, which we can happily use as an example—I am not entirely sure that is where we are up to in the program. As I understand it, both on 26 February and 23 March the minister sought further advice from the IESC in relation to that project and requested further additional advice from the IESC in relation to specific concerns raised by the community when he met with farmers and Indigenous leaders on 27 February. On 7 May the IESC advice was published. So that advice is publicly available and on the department website. The minister has extended the time frame to make a decision under the EPBC application, and that has been extended to 9 July. The minister's decision will be a public decision as well, with the relevant statements that accompany that. So it is all quite transparent and it will be there for all to see; whether or not the decision accords with the advice provided at the different iterative steps by the IESC.

Senator URQUHART: The document you are reading from—are you able to provide that time line to us?

Senator Birmingham: These are just briefing notes, but if you want detail on the process—

Senator URQUHART: I would love to have the minister's briefing notes.

Senator Birmingham: at what stage the IESC can step in and out of a process like that; I am sure there is probably a nice fact sheet ready that the department can provide.

Dr Wright : We certainly have the dates we can provide to you.

Senator URQUHART: That is fine.

Dr de Brouwer : The IESC always publishes its advice that it has provided to the Commonwealth or to a state regulator within 10 days of that advice being given. So there is full transparency around that. I might just add that the officers at the table are not IESC officers; they are departmental officers who work with the IESC. They are not the IESC themselves.

Senator URQUHART: I understand that. I will just go back to that Shenhua example. I understand from that example that the information from the proponent was substandard. Is there any comeback on the proponent for poor or even misleading information? What is the process that you go through there?

Senator BIRMINGHAM: I suspect that needs to be dealt with in the approvals area.

Dr de Brouwer : The issues around the details of the IESC assessment, these officers can talk to. Tomorrow, we have the environment regulation—

Senator URQUHART: So I can put that question to them. So what research projects are the IESC working on at the moment?

Ms Milnes : The role of the IESC with respect to research is to provide advice to the Commonwealth Environment Minister on research priorities and projects, and the IESC provided advice on those priorities in 2013.

Senator URQUHART: What are those projects?

Ms Milnes : There were two priority areas of focus; the themes were around hydrology, ecology, chemicals and cumulative impacts.

Senator URQUHART: That is all I have in relation to the Independent Expert Scientific Committee. I am happy to keep going. I want to get some answers from the department on the update regarding the progress of the bioregional plans.

Dr Wright : That is also us.

Senator URQUHART: Sorry—you can stay seated then. Sorry about that.

Dr de Brouwer : They do many things.

Senator URQUHART: They do—multitaskers. Could you update us regarding the progress of the bioregional plans please?

Ms Milnes : There are bioregional assessments being undertaken in six bioregions. The Lake Eyre Basin is one. The northern inland catchments is another, and that area captures southern Queensland and northern central New South Wales. There is the Namoi and the Gwydir. Clarence-Moreton is another subregion. Northern Sydney is one. Northern Sydney captures the Hunter and the Gloucester areas, Sydney and the Gippsland Basin.

Work is being done progressively on each of those assessments, and there are about four stages for each of the assessment. The first stage goes to really collecting all of the relevant information, and the products are published as they go. For most of those areas, that first stage is well progressed or nearly completed. Where those products have been completed, they are published on the bioregional assessments website. There are products called context statements, for example, which provide baseline information around the ecology, hydrology, geology and hydrogeology of the particular area. Those products have been published for most of the areas. That work is progressing, and the bioregional assessments are scheduled for completion by 2016.

Senator URQUHART: Great. Is the funding on target for these projects?

Ms Milnes : Yes, it is.

Senator URQUHART: What progress is being made on the modelling of the Namoi and when will the new model of the Namoi be completed?

Ms Milnes : That work is underway, and consideration is being given to how we undertake that model—

Senator URQUHART: Sorry, is it the work that is under way or is it the modelling?

Ms Milnes : The work on the modelling is under way, and consideration is being given to the best approach to the modelling—whether we should draw on existing groundwater models and surface-water models or whether we should be creating a new model as a result.

Senator URQUHART: Do you know when that modelling will be completed?

Ms Milnes : The assessment overall will be completed in 2016. I think our work on the modelling in the Namoi area would be pretty well progressed by the end of this year.

Senator URQUHART: What funds are still available for the CSIRO model of the Namoi?

Ms Milnes : I am not sure what your question is there?

Senator URQUHART: Are there funds available for the CSIRO model of the Namoi?

Ms Milnes : The parties that are undertaking the bioregional assessments include the Bureau of Meteorology, CSIRO and Geoscience Australia. In that context CSIRO may do some modelling work, and there is funding available for that work to be done.

Senator URQUHART: So that funding is all on track and still happening?

Ms Milnes : That is my understanding.

Senator URQUHART: I want to ask some questions and I am not sure whether I am in the right spot here, Dr de Brouwer, but I am sure you will tell me. I will not send these people away from the table yet. I just want to ask about some irrigation. Is this the right place?

Dr de Brouwer : Yes.

Senator URQUHART: Thanks very much. In February this year, Tony Abbott confirmed the federal government would contribute $60 million towards the Scottsdale, Swan Valley, Southern Highlands, Circular Head, and North Esk irrigation projects, pending approval of their business cases. Is the funding for these projects coming from the Department of Environment?

Mr Slatyer : Yes.

Senator URQUHART: What program is the $60 million coming out of?

Mr Slatyer : It is being funded from the Sustainable Rural Water Use and Infrastructure Program.

Senator URQUHART: I understand that funding is in conjunction with Tasmanian Irrigation. Is that correct?

Mr Slatyer : Tasmanian Irrigation are the proponents for the project so they develop the project business cases.

Senator URQUHART: Are you aware of how much money Tasmanian Irrigation originally asked for these projects?

Mr Slatyer : To my knowledge the figure that Tasmanian Irrigation has used publicly is $110 million—in a document that outlined their expectations for contributions from different parties.

Senator URQUHART: That was around what I understood, but I just wanted to check. Why has the government announced only slightly more than half of the funding—I think it is $60 million—to complete the five projects listed under tranche 2 of the Tasmanian Irrigation scheme?

Mr Slatyer : Would you repeat that, please?

Senator URQUHART: Why has the government only announced slightly more than half of the funding to complete those five projects that are listed under tranche 2 of the Tasmanian Irrigation scheme? Is there an expectation that private sector make up the underfunding?

Mr Slatyer : The way these programs work is that the proponent is now preparing submissions for projects that would be funded from that $60 million. The arrangements that have worked with the first tranche of funding are that the Tasmanian state government and the private sector beneficiaries of the project all make contributions to the project costs. I am not suggesting that every project in that list of requests would ultimately be funded from this program. The resources have been made available for up to five projects, and we are waiting for the proposals to come forward as to Tasmania's priorities in terms of which projects it would like to advance.

Senator URQUHART: And where do they come from? The Tasmanian government or the proponents?

Mr Slatyer : From the Tasmanian government.

Senator URQUHART: So, given that some or all of these projects were shovel ready for funding 18 months ago, why was that funding then delayed?

Mr Slatyer : The development of those projects involves more than just engineering assessment. They need to make commercial and financial sense. The business case work that is now under way is developing the business case for those projects. For example we and the Tasmanian government would need to be satisfied that the users of that infrastructure will be in a position to pay the ongoing costs associated with it and issues of that nature. That requires a lot of work with the user community for those assets, and Tasmanian Irrigation is undertaking that work. In answering that question, I am not agreeing with your contention that they were all shovel ready; that is a separate matter.

Senator URQUHART: Do you think any of them were?

Mr Slatyer : I would have to take that on notice. I think the short answer is no; they are not shovel ready in the sense that work could commence immediately. If that is incorrect, we will provide further advice on that.

Senator URQUHART: What is the schedule for the delivery of the entire funding, and what are the department's expectations around construction schedules?

Mr Slatyer : I will ask my colleague Mr Roberston to explain that schedule.

Senator URQUHART: Thank you.

Mr Robertson : In terms of this concept of the projects and whether they were shovel ready or not, once Tasmanian Irrigation has the go-ahead and knows it has secured funding from the Commonwealth and the Tasmanian government for the projects—and this is exactly the same process that happened in tranche 1, where nine schemes were funded—they go out to the individual irrigators in those districts and effectively sell the water rights that have been created by the construction of the scheme. It is at that point that they do their final designs on the scheme. They then have to go through their environmental approvals and the other aspects there. So most of those schemes are still in the design stage. When they go to a general district there might be some parts of the district where a lot of irrigators are interested in taking the water and other potential irrigators are not. That will determine their final design.

A lot of the schemes have been funded to date. There have also been environmental approvals, and in some cases EPBC processes have happened. That was the case with the last of the schemes under tranche 1, which is close to being finished now. There were some EPBC studies involved there. So the funding itself at this stage—the Sustainable Rural Water Use and Infrastructure Program as a whole—the funding for the irrigation infrastructure elements finish in the middle of 2019—30 June 2019—and the Tasmanian projects at this stage are really funded over these three years.

Senator URQUHART: When would you expect that? What is the usual time frame? Obviously you have to go through that whole process. What sort of time frame would you generally be looking at?

Mr Robertson : Stage 1 itself started in about 2008 or 2009. It has been progressive, depending on the construction resources and also the capabilities of Tasmanian Irrigation—that is, the Tasmanian government-owned body that is delivering their schemes. The individual schemes themselves could take 18 months to two years for the actual construction phase. It depends on the scale of the scheme. Some involve major off-line dams and others require less work. It will depend on the scale of work. But, when they commence the work, they are often completed within 18 months and, depending on how it intersects with the winter season, they start delivering water within, say, two years of when they started. Some of the smaller schemes have even been a bit quicker than that.

Senator URQUHART: But they are not all going to happen simultaneously, are they? It depends on that process?

Mr Robertson : Yes, it depends on the resources. Where there are large poly pipes, a lot of those have been constructed in Tasmania as well, so there are also capacity constraints.

Senator URQUHART: That is right; they do. It is in my neck of the woods, actually; just down the road from me. Have all five projects being assessed by Infrastructure Australia?

Mr Robertson : All five of them were subject to the work that Infrastructure Australia did.

Senator URQUHART: What is their advice in relation to those five projects?

Mr Robertson : I do not have the detailed advice with me at the moment. Essentially, with the work that Infrastructure Australia was doing, I think they concluded that the information available to them showed that there were potentially positive cost-benefit analyses. I cannot think of the exact words that Infrastructure Australia used.

Senator URQUHART: Given that you do not have that with you, are you happy to take that on notice?

Mr Robertson : Yes, we can do that.

Senator URQUHART: Thank you.

Senator SINGH: I want to ask some questions about the Basin Plan reforms. I note that, in the budget, basically a big black hole has been left to the size of $250 million in the operational funding required by the CEWH, the Murray-Darling Basin Authority and the Bureau of Meteorology for the final two years in the forward estimates. Can you explain this? Is it a cut or is it tied up with the Basin governance arrangements?

Mr Slatyer : The minister, I thought, had addressed that question earlier and made the comment that the government would be reviewing the expected costs for these activities in the coming budget processes. The other explanation that was given, I think by an official, was that this funding is—

Senator SINGH: You are talking about the end of the 10-year reform?

Mr Slatyer : Yes. We are currently in the second-last year of a 10-year funding commitment that was initiated in 2007-08 and ends in 2016-17. In the course of next year, the pattern of work going forward will be much clearer as the result of the SDL adjustment mechanism becomes known. For example, that will determine the final scale of the Commonwealth Environmental Water Office's water holdings and the costs associated with that. It is clear to us that provision will need to be made for those activities beyond 2016-17.

Senator SINGH: So you do admit that there will need to be provision made for the outgoing activity?

Mr Slatyer : The minister made that clear.

Senator SINGH: Why hasn't this critical funding been brought in? This is the second year in a row where the government has failed to provide any kind of operational allocation in the out years, in the forward estimates. Why hasn't there been any kind of allocation? This is critical funding into the future, so why hasn't there been the critical funding in the budget to ensure that the final years of delivering the Basin Plan reforms actually have the necessary operational support? I just do not understand why everything stops.

Dr de Brouwer : I think, as Mr Slatyer was pointing out, the actual needs of the institutions will also be known at that date. The government had been clear that it was going to meet its legal responsibilities under various legislation, that it would address those financing issues but it would do that when it had a better sense of what those findings from these [indistinct] would be, which will happen in the run-up to next year's budget.

Senator SINGH: So you kind of make it look like a saving, even though you are admitting that there will be funding needed to be allocated in those forward estimates?

Mr Parker : That is not right. It is not a saving, it is not a cut and it is not connected with the governance of the reform process. It is simply that there was a terminating program, which needs to be addressed as an ongoing issue. These are statutory functions, so they will need to be addressed. The issue of that termination funding has been around for many, many years. Just as a footnote, there was some funding delivered in the previous year's budget relating to the implementation of the infrastructure elements of the water reform, which are done within the department. The issue was partly addressed last year and it will be fully addressed next year.

CHAIR: This is an issue that has been tabled from the get-go, hasn't it? This is not something that has just occurred this year? Under previous governments and administrations this has been the same issue?

Mr Slatyer : It is the same issue. It has only been revealed in the forward estimates period in the last two budgets. But it is a matter of fact that these were terminating programs in 2016-17.

Senator SINGH: So, basically, you are saying these important water reforms will continue; you are just not going to put in the forward estimates how you are going to fund them?

Dr de Brouwer : The government has said that, as it gets closer to the day of knowing what those financial funding requirements are of the various institutions, then that would be part of that budget process. That is the next budget.

Mr Parker : Just to give you a specific example of that, the funding for the CEWH, the Commonwealth Environmental Water Holder, will depend in part on the amount of water that it ends up holding and the time profile of that. That is, in part, dependent on the operation of the SDL adjustment mechanism, which is due to happen in the middle of next year. So, coming into next year's budget, we would be in a better position to judge the necessary funding.

Senator SINGH: So there are state government water charges, aren't there, on the entitlements that are held by CEWH?

Mr Parker : Yes, that is right.

Senator SINGH: What are they, for each state? Do you have them?

Mr Slatyer : You will have to ask the Environmental Water Office for that information.

Dr de Brouwer : They are on tomorrow, Senator. But, if you like, we will answer the question now if you ask me.

Mr Papps : Having made the journey, I am afraid I am not going to be much help. I do not have those figures off the top of my head. We have about 80 different entitlement types in the Commonwealth Environmental Water Holdings across the four jurisdictions, and the charges and rates vary both across jurisdictions and across entitlements. So, to give you that detail, I would have to take it on notice.

Senator SINGH: Would I be right in saying they are more than $25 million?

Mr Papps : In fees and charges?

Senator SINGH: Yes.

Mr Papps : It depends each year, according to how much water is used and how much water is stored, because the fees relate to both storage and use of infrastructure. This year, for example, the fees and charges in total will be around $15 million or $16 million, so $25 million is a generous estimate at the moment. But it is conceivable that at some time in the future it would be at least that figure, if not more.

Senator SINGH: So CEWH would need to have a budget to be able to provide or to allocate towards those fees and charges, wouldn't it?

Mr Papps : That is right and, as has been said previously, there is a process designed to ensure that that budget is forthcoming and, as the secretary has reminded us, the size of the budget really depends on the size and nature of the water holding, which will not be known until some little time in the future.

Senator SINGH: Are you aware of National Irrigators Council Chief Executive Tom Chesson's comments on this issue?

Mr Parker : Yes, we are.

Senator SINGH: He said:

It is odd that government is putting aside hundreds, if not billions, of dollars to continue to recover water yet it seems that over the last two years of the forward estimates the government is not going to fund the operation or management costs associated with the huge volumes of water they have recovered.

Mr Parker : I am aware of Tom's comments, but it is not for me to comment on Tom's comments.

Senator SINGH: Page 194 of the budget measures—the white document—goes through a cut of $22.7 million over two years from the Sustainable Rural Water Use and Infrastructure Program. Can you provide some detail about which aspects of the program that money is being cut from?

Mr Slatyer : Those savings are being taken from what had been earmarked for water purchase activities in those years.

Senator SINGH: For water purchase activity?

Mr Slatyer : Yes.

Senator SINGH: So that is what would have been delivered with that money?

Mr Slatyer : Yes. If it had been required it would have been delivered with that money.

Senator SINGH: Based on the current and expected water prices, in the context of the drought getting worse this year, does the department still deem that it would not need the $168.2 million that was taken out of the program for the period 2017-18 and 2018-19?

Mr Slatyer : I think you are referring to figures that were taken from last year's budget.

Senator SINGH: Yes.

Mr Slatyer : It is the department's current view that we have sufficient resources to achieve the gap bridging objectives of the government with the savings that have been taken.

Senator SINGH: At projected and expected market rates, how much water for the environment would that money have purchased?

Mr Slatyer : I think you are asking me to pull out my calculator.

Senator SINGH: It does not have to be down to the dollar.

Mr Slatyer : The funds we have remaining will be sufficient, in the department's judgement, based on the department's views about the market value of water, to fully bridge the gap that the department is required to bridge by 2019 with a combination of water purchase activity and infrastructure activity in line with the government's Water Recovery Strategy. I can endeavour to unpick that more if necessary, but I might have to take the question on notice.

Senator SINGH: If you are taking it on notice, I would also like to know how much infrastructure that would have delivered both on and off farm.

Mr Slatyer : Apologies, Senator, but could you just repeat the first part of the question?

Senator SINGH: It was in relation to the drought getting worse each year and whether the department still deems that it would not need that first $168.2 million.

Mr Slatyer : Yes; I have answered that question.

Senator SINGH: Then I said, 'At projected and expected market rates, how much water for the environment would that money have purchased?'

Mr Slatyer : And I said that, in the department's judgement, enough to bridge the full gap, which is a total of 2,750 gl in various ways, bearing in mind that a significant part of that has already been recovered. I can do the fairly simple arithmetic to explain the balance there if you need it.

Mr Parker : While Mr Slatyer is looking for the data, perhaps I could provide some context. Every year, as part of the budget process, we examine how we have been going with our recoveries and we look at the returns from infrastructure and the returns from the purchase program. We measure that against the necessary amounts of water that are needed to be recovered through infrastructure and purchase to bridge that gap. We measure that against the funding that is available in the forward estimates and also in the period beyond and come to a view and report that to cabinet as part of the budget process as to whether we have sufficient funds to bridge the gap. In each of the last two budget processes the answer to that has been yes and that we have had more money than has been necessary. In that process, small saves have been taken from a very large program and have made a contribution to the broader budget priorities. It remains the case that it is our view that we have sufficient resources to bridge the gap.

Senator SINGH: Do those resources include the infrastructure—because I also asked about infrastructure on and off farm and how much infrastructure would have been delivered?

Mr Parker : We can do that exercise as a piece of arithmetic. In any event, it would be a piece of arithmetic which would come up with an amount of water that would be beyond that necessary to bridge the gap.

Senator SINGH: That is fine.

Mr Slatyer : I will just provide you with some of those figures around that 2,750 gl that we need to recover in one form or another. There is 1,961.9 gl already committed for recovery—that is, it has already been purchased or it is in contracts for purchase of various types. These are all long-term average annual yield figures, which means that there is roughly 790 gl to go. That will be, as I said before, achieved through a combination of water purchase and infrastructure, and the department is confident that it has sufficient resources to achieve that result.

Senator SINGH: The 790? How much water has been received by CEWH in each calendar year since the announcement of the National Plan for Water Security in early 2007?

Mr Papps : I do not know that I have the detail, but let me tell you what I do know. Since the CEWH was established—that is, since 2008-09—it has received in allocations, 5,054 gigalitres. That of course is not its holding; the holding changes each year. It has grown each year. That is the allocations against the holding cumulative over those seven years. In terms of what it has received, I would have to take that on notice and give you those figures year by year. At the moment, our holdings are 2,275 gigalitres, but keep in mind that the holding is the entitlement total and the numbers that my colleagues are talking about in terms of 2,750, for example, are long-term average annual yields. So the currency of the plan is long-term average annual yields.

Senator SINGH: Could you take that on notice as far as the breakdown of the years?

Mr Papps : So you want the entitlements accrued each year?

Senator SINGH: Yes.

Mr Papps : Okay. We will take that on notice.

Senator SINGH: I also wanted to know how much water has been delivered by the CEWH since the coalition government came into office.

Mr Papps : Again, you would have to give me a little time to do the calculation. I can tell you, for example, without doing any calculations, that since the CEWH was established in 2008-09 we have used—that is, delivered—4,332 gigalitres. That is the 'use' figure that relates to the total allocation figure I gave you earlier. When you look at it, roughly 86 per cent has been used so far over that seven-year journey. I would have to get a calculator and do the numbers for you.

Senator SINGH: Maybe we could take that on notice and you could have a look at that.

Mr Papps : Yes.

Senator SINGH: That will provide how much has been delivered. It is how much has been received and delivered, I suppose, that is what I am trying to get a snapshot—not a snapshot, trying to get the whole picture of. If that could be provided on notice, both—

Mr Papps : That will not be a problem; we keep those statistics. I just do not have the detailed breakdown, in terms of the years, you are asking for. I would just make the comment—and we will provide extra context for you when we provide you with the figures—that the amount of water used each year is essentially dependent on two things. It is slightly more complicated than this, but at its heart it is essentially dependent on two things. Firstly, it is dependent on how much water we get—that is, the level of our allocations across all of those entitlements. Secondly, it is dependent on the ecological demand—that is, where we are in the ecological cycle of all the wetland assets that we are involved in, watering, and there are many of them. What is the demand? What level of watering do we need to undertake to meet the ecological objectives associated with that particular asset? Across the basin, that total gives us the equation that we have to deal with, each and every year, around how much water we use.

Senator SINGH: I understand the government's own figures suggest 600 gigalitres of water are recovered, through infrastructure, for a spend of around $4 billion. And 650 gigalitres is through supply measures at a cost of around $1.3 billion. Do you know how these figures are arrived at or reconciled?

Mr Slatyer : Let me start with the supply measures. The supply-measure costing is based on the agreement that was reached when the Basin Plan was settled, that the Commonwealth would pay for supply measures using resources that it had earmarked for water purchase. The supply measures are funded at the same level per gigalitre of offset as it would have cost to purchase that water through the water-purchase program. At an average of $2,000 per gigalitre, long-term average annual yield, that means that—sorry, my colleague is correcting me. There is $2,000 per megalitre long-term average annual yield; that means that 650 gigalitres would cost $1.3 billion. That is the basis of that amount.

The amount for infrastructure: the 600 gigalitres has been embodied, as an assumption in the Basin Plan, as the amount of water that would be recovered in a way that would have the most positive impact on communities. It was an important part of the reasoning in the Basin Plan for arriving at its triple-bottom-line outcome. The cost of recovering that amount of infrastructure has always been factored into our—the cost of recovering that amount of water, through infrastructure, has always been factored into the costings for the department's water-recovery task. As a general rule, we have recently been seeking to recover water through infrastructure at what we call a multiple—that is, how that compares to the cost of buying water just on the market—of between two and 2½. The benefits associated with infrastructure have justified the Commonwealth paying between two and 2½ times the market value of water for water recovery in that manner. So the net cost of recovering the 600 gigalitres is therefore in the order that you describe.

Senator SINGH: Given that environmental water recovery through this infrastructure investment has some kind of cost multiplier of between two and seven over buyback, is the current budget allocation for the Sustainable Rural Water Use and Infrastructure Program, which we were talking about, on page 194, adequate to meet the water recovery target of 2,750 gigalitres that is set through the Basin Plan?

Mr Slatyer : We answered that question earlier in general terms when we advised that the department's judgement was that we did have sufficient resources. One of the reasons for that is that, in describing the multiple as between two and seven, some of the very high multiples at the outer end of that range were the result of negotiations back in 2008 with the states for the cost of some state priority projects. Those projects are now largely washing through. The infrastructure work in front of us is at the level of multiple of the type that I was describing to you, rather than at that higher end, so we are getting better value as time goes on from the infrastructure investments that are being made. That is one of the reasons that the department has confidence that it has sufficient resources to bridge the gap, as we answered before.

Senator SINGH: Will farmers who have property rights over their own water and who wish to sell to the Commonwealth be prevented from doing so by a buyback cap?

Mr Slatyer : There would have to be a much higher level of apparent demand than we have been experiencing for that to be a risk. We have run buyback tenders in the previous year that have been not well subscribed, and we believe that there is enough commercial activity in the water market to provide people who are keen to sell their water with opportunities to do so without just relying on government purchase. The indications are that sellers of water are increasingly able to take advantage of choices and options, including from the regular operation of the water market through private and commercial sales.

Mr Parker : To add to that, the short answer is no. The cap will not limit the ability of people to sell water to the Commonwealth, if I understood your question. The reason is that what will limit the Commonwealth buyback in spending on infrastructure is when we have bridged the gap to 2,750 through purchase, infrastructure supply measures and so forth. At this point in time, we expect to have bridged the full gap to 2,750 before we hit the cap on purchases at 1,500. So we do not expect at this stage the 1,500 cap to limit the purchases that the Commonwealth makes.

Senator SINGH: What do you base that on? You do not expect, but—

Mr Parker : We base that on the purchases that we have to date, on the infrastructure yields and on the recoveries from other programs, including state programs, and as a result of that—it is a matter of arithmetic but informed by the full range of information on the returns from infrastructure and the amounts of water that we have in the bank, so to speak—the size of the remaining gap is not sufficiently large to take us beyond the need to purchase 1,500.

Senator SINGH: Has modelling been performed on the impact of a buyback cap on the value of water entitlements across the basin?

Mr Slatyer : No, it has not to our knowledge—not by us.

Senator SINGH: Why is that?

Mr Slatyer : Because we do not believe that it would have a material effect on the underlying water market value. As Mr Parker was saying, the caps are unlikely to bind in any event, so there is plenty of market activity other than Commonwealth purchasing that is driving the underlying value of water in the market.

Senator SINGH: How will the Commonwealth be able to show value for money with the cap on buybacks?

Mr Slatyer : We will continue—

Senator SINGH: You are just going to rely on the rest of the market—is that what you are saying?

Mr Parker : I am not sure we fully understand the question.

Senator SINGH: You have to demonstrate value for money, surely, in your proposed cap on buybacks. How are you going to do it? You have not done any modelling.

Mr Parker : With buybacks, the Commonwealth purchases water at assessed market value. We do valuations. We study the market to see what, in fact, the market value of the water is. We set our benchmark price for our tender processes with that information, and on that basis we satisfy ourselves that we are getting good value for money from that program. That process in itself, unless I have missed something in your question, should not be affected by the 1,500 cap.

Senator SINGH: You can probably predict my next question, because it follows on.

CHAIR: I have a follow-on from that, and that is: in factoring the cost and the value that Senator Singh is referring to, where do you factor in the implications for communities of continuing to take more and more productive water out of their base, which is their economic base? If we get 1,500 and we take no more, have we factored in what that guarantee of certainty is likely to do in terms of the value that is placed on those regional communities?

Mr Slatyer : That is probably more a policy question, but I just make a couple of comments. One is that that is, I think, the underlying reason that the government has established a policy of preferencing infrastructure as the means of recovering water, and it is also a reason that the government has established the cap on buyback. So that is one thing that I would say. The other is that the water purchase is a procurement activity of the Commonwealth, so it is bound by procurement policy and guidelines. The infrastructure investments, which are much larger, are investments which are directly aimed at supporting the economic development of the sector.

CHAIR: Thank you.

Senator SINGH: I was asking a similar thing.

CHAIR: Excuse me. Mr Parker wanted to say something.

Mr Parker : The essence there is that the cap provides certainty to the community. The budget papers, as required, disclose a financial risk that if the cap does engage—we do not think it will engage, but if it does engage—then the Commonwealth would need to recover water through more expensive means—that is, infrastructure. That is disclosed in a perfectly transparent way in the budget papers. It is an unquantifiable risk.

CHAIR: Unquantifiable but certainly not of major proportion.

Mr Slatyer : That is right.

CHAIR: So, possibly, we need to have a look, as best we can, at what the quantification is on the river communities—

Mr Slatyer : The cap is there just in case that risk is engaged. It is intended to provide certainty to the community that in the event that the residual recovery task is larger than we expect, it would not be done through purchase.

Senator SINGH: How can you promise that the cap promotes certainty for communities? Under the current policy, there is no certainty that water recovery targets can be achieved or ecological targets can be achieved. How can you provide certainty for communities?

Mr Slatyer : The Basin Plan establishes the ecological and environmental objectives, and that requires the recovery of a certain amount of water or its environmental equivalent. So it requires the recovery of 2,750 gigalitres of water or, under the adjustment mechanism, environmentally equivalent measures. That is what guarantees the environmental outcome. The Basin Plan guarantees that by law. How the Commonwealth achieves the water recovery task does not in any way diminish or compromise the environmental outcomes that are required by the Basin Plan.

Senator SINGH: What happens if the buyback cap is applied, infrastructure fails to recover enough water and a gap remains to be bridged?

Mr Parker : That is not a situation that we are imagining will occur. There are provisions in the Basin Plan to handle that contingency if the gap is not bridged by 2019, when the sustainable diversion limits come into effect. Those consequences are laid out in law in the Basin Plan as made in 2012.

Senator SINGH: Could that impact farmers' water entitlements?

Mr Slatyer : The structure of the arrangements is aimed at avoiding that possible consequence. Ultimately, the final scale of adjustment will depend on how state water-sharing plans are implemented and give effect to the requirements of the Basin Plan. There are complex provisions in the Basin Plan about what is required to accredit those plans. Everything is framed on the basis that the Commonwealth will be able to recover the adequate water through water purchase and through infrastructure measures to recover the gap. We have been seeking to advise you of our confidence that we have the sufficient resources to achieve that result.

Senator SINGH: Confidence—okay. The government's latest water recovery shows, I think, 450 gigalitres to be recovered through efficiency measures and 650 gigalitres through supply measures as part of the 2016 SDL adjustment mechanism. What confidence do you have that this combined 1,100 gigalitres of water will be achieved? What specific projects will achieve these outcomes?

Mr Slatyer : Let me start at the back end of your question. The 450 gigalitres is required to be achieved through what are called efficiency measures. Efficiency measures are projects that recover more water for the environment without incurring any economic detriment. The Basin Plan deems two types of projects to qualify as efficiency measures. The first type are on-farm efficiency works, which we are currently implementing as part of the gap bridging task. The department is fairly confident that there will be continued demand for on-farm efficiency work from farmers, due to the very high levels of interest in the current on-farm efficiency programs. The guidelines and procedures for the efficiency measures program are currently being developed, and we are planning to run some trials over the next 12 months. That type of project we know about, and we know there is demand for it, so we are quite confident in the capacity to recover more water from those kinds of projects. The other type of project that the Basin Plan deems to be allowed are projects that are certified by state governments as not having any economic detriment. We are yet to engage with state governments on the types of projects they might bring forward for that purpose. Frankly, it is a little early in the cycle—given that these projects are meant to roll out right through to 2024—to be settling that degree of detail.

Senator SINGH: Are there any state projects on the horizon?

Mr Slatyer : States have not yet approached us, and we have not yet engaged with states about those projects. We are discussing the first category of efficiency measures with them at the moment. We are trying to set up some trial programs for that purpose. You asked about the 650-gigalitre target for water that is offset on the SDL gap. The objective of that, of course, is to achieve the same environmental outcomes that the Basin Plan requires but with less economic impact. I have explained that the agreement at the time was that the funding for those would be sourced from resources that would otherwise have been used for water buyback. We are working very concertedly with state governments in the development of projects—these are called supply measure projects—that will count towards the 650. Those projects are currently being modelled and evaluated by the Murray-Darling Basin Authority. I cannot give you any more information about those, because they are right in the process of evaluation at the moment. We have a healthy set of projects that are being brought forward by states and are currently being evaluated.

Senator SINGH: I understand that the water recovery strategy for the Murray-Darling Basin assumes that up to 650 gigalitres of offsets can be achieved through supplier measures for the same cost as would be equivalent for water volume purchasing.

Mr Slatyer : Yes.

Senator SINGH: So what models or figures is the government relying on to justify that assumption?

Mr Slatyer : That assumption was adopted in anticipation. It was adopted at the time that the arrangement was negotiated back in 2012. That funding provision was made. That agreement was entered into at that time. However, the reason that we think it is a reasonable assumption is that there are two categories of projects which are likely to be quite inexpensive. The first is the Living Murray Initiative—the benefits you get from the full utilisation of Living Murray works that have recently been completed in the Murray system. The full utilisation of these works was not factored in as an assumption in the original Basin Plan work. Therefore, if these projects can be used really smartly and cleverly and to their full advantage, then they have potential to provide offsets; whereas, the costs to them have already largely been incurred.

The other types of projects are projects that change the operating rules of the system, so that it is possible to move water through the system by changing the operational procedures for the river. The issues with those are quite complex. They do not cost money, you do not have to build things to achieve those types of offsets, but you have to make sure that you are not imposing any third-party impact or having some unintended consequence. The work to evaluate those kinds of effects is going on right now.

As I was saying to you, there is a lot of work going on right now to develop these projects. So there are two categories of projects which will be relatively inexpensive offset measures. Doubtless there will be other projects which are quite costly measures where new infrastructure is required, but at this point in the process we think that the assumption was made when the final Basin Plan was negotiated or settled two years ago as to a reasonable assumption in terms of the cost of delivering the offset measures.

Senator SINGH: How many gigalitres have been recovered through buybacks to date?

Mr Slatyer : 1,162.3 gigalitres in long-term average annual yield terms.

Senator SINGH: And how much through infrastructure?

Mr Slatyer : 581.4 gigalitres in long-term average annual yield terms. By recovered I include there, as I said before, water that is under contract for recovery. So not all that water has yet been formally conveyed and transferred to the environmental water holder.

Senator SINGH: That is good to know. When I get the other figures, I will not be—

Mr Slatyer : These numbers are not reconciled with the numbers that Mr Papps will give you.

Senator SINGH: Yes. Thank you for clarifying that. Of water contracted to date, what is the average cost per gigalitre under buyback?

Mr Slatyer : I will have to take that on notice.

Senator SINGH: Okay, and the follow-on question I was going to ask is: what is the average cost per gigalitre under contracted environmental water recovery infrastructure?

Mr Slatyer : It will not be difficult to do those calculations. If we can provide you that information during the hearings we will.

Senator SINGH: On and off farm.

Mr Slatyer : Otherwise we will take it on notice.

Senator SINGH: All right. Thank you.

Senator WATERS: I was under the assumption that we would have some folk from IESC here, but we have clarified that is not happening this time.

Dr de Brouwer : They were here earlier on. They will be here tomorrow with environment—the IESC questions?

Senator WATERS: Yes, in 1.5?

Dr de Brouwer : Yes 1.5.

Senator WATERS: That is good to know—problem solved.

Dr de Brouwer : They are coming back. We can do it tomorrow, though.

Senator WATERS: If they are here and happy to, 1.5 is always very busy with lots of people. Given there are fewer people here tonight, with the chair's indulgence, I would be happy to take the opportunity.

Dr de Brouwer : It could go either way, Chair.

CHAIR: That is fine. Questions and answers are the same wherever they happen to be.

Senator WATERS: Thank you.

Dr de Brouwer : These officers are departmental officers from the Office of Water Science; they are not IESC, who are externals, but they work with the IESC.

Senator WATERS: Thank you—hence the source of confusion. Are the IESC appearing tomorrow, or similar departmental officers?

Dr de Brouwer : Departmental officers.

Senator WATERS: Right, thank you. That was our original understanding. I might try to ask some of these questions, but they were primarily directed at IESC itself.

I was particularly interested in the Santos LNG expansion project in Queensland, which is a coal-seam gas project that they have applied to be expanded. It was the subject of extensive IESC advice, as many of these projects are. There was quite a lot of additional research work and data gathering that IESC had recommended Santos undertake. I was hoping to ask IESC, but I am happy to hear if you can answer about the progress of that work, who was undertaking that work and what the time frames are for that additional work?

Ms Milnes : I think that question is best directed to the relevant regulator. The Independent Expert Scientific Committee provides advice to the relevant Australian government that has requested the advice—

Senator WATERS: And asks the natural knowledge gaps?

Ms Milnes : And then it is for the Queensland government, or the Commonwealth government in this case, to determine how it takes up and responds to the committee's advice.

Senator WATERS: Is the committee ever tasked with filling the knowledge gaps that it itself identifies?

Ms Milnes : That may go to identifying research priorities. The committee—

Senator WATERS: I mean the project-specific work.

Ms Milnes : The Independent Expert Scientific Committee has a role in providing the Commonwealth environment minister with advice on research priorities. So part of what will inform their research priorities is their experience in providing their advice to relevant governments.

Senator WATERS: So if a project—for example, the Santos one—is identified to have significant gaps in the information base that IESC advises the minister of and recommends those gaps be filled before an approval decision is taken, is it ever the case that IESC themselves are then charged with filling those knowledge gaps or is that the purview of the proponent under the direction of the department or the minister?

Ms Milnes : That is really for the relevant government to decide—who is best to undertake that.

Senator WATERS: Sure, but does IESC ever get tasked with that job?

Ms Milnes : I am not aware of an occasion on which it has been tasked to undertake the specific research.

Senator WATERS: So they are in charge of identifying the loopholes but not then filling them?

Ms Milnes : It depends on—

Senator WATERS: The gaps in knowledge?

Ms Milnes : It depends on what advice is requested of the committee by the relevant regulator.

Senator WATERS: Advice on project referrals under the EPBC Act?

Ms Milnes : Yes, or the questions may also come from the relevant state governments under their respective regulatory regimes. But it is really a decision for the relevant regulator.

Senator WATERS: Sorry—just to belabour the point: I am asking whether the relevant regulator—in this case, the Department of the Environment under the EPBC Act and the water trigger—has ever asked IESC to fill the knowledge gaps that IESC has identified in numerous project assessments? This is just one example. Who does the work? Are they independent, or is it the proponent who does that work is what I am trying to get at.

Ms Milnes : It is for the regulator to determine that—who does the work.

Senator WATERS: Yes. And in the past, what has the regulator determined?

Ms Milnes : It would generally point back to the proponent to undertake that work, and then—

Senator WATERS: 'Generally'.

Ms Milnes : the proponent may engage a consultant to undertake that work.

Senator WATERS: Yes. And so my question is: has IESC ever been asked to undertake that work?

Ms Milnes : Not to my knowledge.

Senator WATERS: Thank you. I might attempt to pursue this questioning of IESC if and when we have them, depending on the limitations that we have just established. Can I now move to the department, still on coal-seam gas? Do we have the folk from the Office of Water Science here?

Ms Milnes : I am the Assistant Secretary of the Office of Water Science.

Senator WATERS: Great!

Ms Milnes : Part of our function is to provide the secretariat support for the Independent Expert Scientific Committee.

Senator WATERS: I am interested in the long-term impacts of coal-seam gas. Clearly, there is a lot of concern about the long-term impacts on groundwater expressed by a variety of bodies, including IESC; the National Water Commission, while we had them; and CSIRO, while they had funding. Can you tell me who, if anyone, in government is looking at the long-term impacts of coal seam gas on the environment?

Ms Milnes : The Office of Water Science's functions include undertaking the bioregional assessments. The bioregional assessments would go to looking at the longer term impacts of coal seam gas on water resources. The other function undertaken by the Office of Water Science is to commission research and research projects. Those research projects are grouped under themes—hydrology, ecology, chemicals and cumulative impacts. There are a suite of research products that have been completed or are being undertaken that would go to looking at the longer term impacts of coal seam gas on the environment. The third element of that is, of course, supporting the independent expert scientific committee to provide advice on individual projects, on development proposals, and that goes to looking at the impacts on water resources.

Senator WATERS: I appreciate your setting that out so clearly. On the first one, bioregional assessments, my recollection from previous estimates is that they were moving quite slowly and they had begun in a host of marginal seats, beginning—from memory—with New England. Can you update me on how they are progressing?

Ms Milnes : The bioregional assessments are being undertaken in six bioregions. The work is focused at the moment on the first stage, which is around collecting the relevant information. Products in that stage have been completed across many of the bioregions. They provide baseline information on the ecology, hydrology, hydrogeology and geology of the area. So that work is continuing to progress.

Senator WATERS: I just have a few follow-up questions. Can you list the six bioregions? Can you confirm for me that none of the approvals have to stop rolling out while those bioregional assessments are being undertaken? That is my understanding, but I would love it if the government had changed their mind on that one. And who is doing that work?

Ms Milnes : The bioregional assessments are being undertaken in six bioregions, as I said. Lake Eyre Basin is the first bioregion, and the areas of focus within that basin are the Galilee, Cooper, Pedirka and Arckaringa subregions. The second bioregion is the Northern Inland Catchments, and the areas of focus within that are Maranoa-Balonne-Condamine, Gwydir, Namoi and the Central West, which is an area in central-west New South Wales, kind of the Macquarie catchment. The third bioregion is the Clarence-Moreton. The fourth bioregion is Northern Sydney, and that covers the Hunter and Gloucester subregions. Then there is the Sydney Basin and the Gippsland Basin.

Senator WATERS: None in WA?

Ms Milnes : No. They are focused—

Senator WATERS: Oh, because it is mostly shale and tight, not coal seam.

Ms Milnes : They are focused on areas where there is coal seam gas and coalmining potential.

Senator WATERS: Of the research projects that have been completed and some that are still being undertaken, can you just share a little bit more about which ones they are and who is doing that work? I had previously thought that IESC themselves were doing that work—I think that was the intention when the national partnerships agreement was first entered into in 2011 or whatever it was—but in the most recent estimates I was informed that, actually, no, IESC are not themselves doing that work. I am interested in who is.

Ms Milnes : I think one of your questions went to how many products have been produced so far, or what research has been done so far.

Senator WATERS: Yes, if you are calling research projects products—sure.

Ms Milnes : There are 20 products that have been produced under the bioregional assessments so far. They go to the contextual information, if you like. There are context statements and resource assessments. The context statements I mentioned provide the baseline data. The resource assessments look at the region and identify all exploration and all production going on on coal seam gas and coal mining. They set out clearly what the resource is and what the resource potential is and then what activity is being undertaken in that area.

Senator WATERS: How does that interact with the setting of the baseline under your context statements, given that much of those activities had commenced before the so-called baseline was set.

Ms Milnes : The resource assessment will go to informing how the modelling is undertaken and informing what has been called the coal resource development pathway. That will be what is modelled to determine what the potential impacts are.

Senator WATERS: So a baseline is going to be modelled? It is not a true baseline.

Ms Milnes : No. You have a baseline and then you will have a change scenario.

Senator WATERS: My point is that the baseline—

Ms Milnes : The context statements and the resource assessments will go to setting out the baseline and informing the coal resource development pathway, which is what will be modelled to determine the changes from the baseline.

Senator WATERS: I understand the purpose of the baseline; my question was about when in time the baseline is set, given that much of those activities are in Queensland.

CHAIR: Excuse me, ladies, are you ready to break?

Senator WATERS: I was just getting going. I am happy to keep going.

Senator URQUHART: I am happy to keep going.

CHAIR: Please keep it to 15 minutes, Senator Waters.

Senator WATERS: I will try to get through all my questions in that time but I am not sure if we will.

CHAIR: It is your call. I am just reminding you that you will lose questions in the next one, even though I know you have not got that many.

Senator WATERS: Okay. Thank you.

Ms Milnes : I will take that question on notice. There is a time set for determining which side of the baseline it goes on. I think it is 2010, but I should clarify that.

Senator WATERS: It is a pretty important question as to the validity and the utility of the baseline. Can you ever so briefly run me through the projects that you said were still being undertaken but are not yet completed in that commissioned research project, or point me to a web page where it is listed?

Ms Milnes : They are all available on the independent expert scientific committee's web page. There are about 20 research projects that have now been published. There are a few outstanding and there a few that we have recently commissioned.

Senator WATERS: So IESC is doing most of those research projects. They are then doing the individual advice on EPBC projects. Who is undertaking the bioregional assessments?

Ms Milnes : That is led by the Bureau of Meteorology in conjunction with CSIRO and Geoscience Australia. The work draws on input from natural resource management bodies in the relevant areas and also is being done in close consultation with the state governments. They have a role as well.

Senator WATERS: I will just confirm once more my understanding that the approval and assessments process for coal seam gas does not stop while this research work to actually understand the long-term impacts of coal seam gas is being undertaken. Those approvals are still being issued despite the fact that this research is underway. Is that correct?

Ms Milnes : As the relevant governments go about making their decisions, they are drawing on the best available science, and that includes the advice of the independent expert scientific committee as well as the work that is being done on the bioregional assessments and what has been progressed so far and also the research that has been done.

Senator WATERS: Given that that research is incredibly important and the approvals and decision maker should really be armed with the best information before making potentially damaging decisions, what is the state of funding? Obviously BOM and CSIRO have lost money. We know that. How about IESC? Has IESC lost money in either this budget or the last?

Ms Milnes : The funding for the bioregional assessments and the IESC has been maintained. It is unchanged.

Senator WATERS: What level was it? I recall it being quite low but I do not have the figure to hand.

Ms Milnes : The initial allocation for the area was around $200 million. That included funding provided for the national partnership agreement.

Senator WATERS: It did—much of which was doled out to the states.

Ms Milnes : It was paid to the state governments upon completion of their milestones, taking into account reports of the COAG Reform Council.

Senator WATERS: Yes, I remember all of that. But how much does IESC get specifically to do all of this necessary research work?

Ms Milnes : There is administrative funding provided for the independent expert scientific committee. That has ranged from about $800,000 through to about $1 million each year. That funding goes to making payments to committee members in line with the determinations of the Remuneration Tribunal, to holding the meetings and related travel costs.

Senator WATERS: Do they get additional money to do the research work?

Ms Milnes : Again, the IESC does not undertake the research per se. Its statutory role is to provide advice to the Commonwealth environment minister on research priorities.

Senator WATERS: Right. Sorry, I thought we just canvassed this when you were talking about the research projects. So it is not, in fact, IESC that conducts those research projects; it just divvies them out and delegates them. To whom?

Ms Milnes : No, it is the Office of Water Science that commissions the research projects. The role of the committee is to provide advice to the Commonwealth environment minister on research priorities.

Senator WATERS: Who is then doing the research?

Ms Milnes : That varies according to the project. It will be done according to Commonwealth procurement guidelines, identifying those people that have the best expertise to undertake the research.

Senator WATERS: Of the 20 research projects that you just said had been completed, and the remaining few still underway and listed on the IESC website but not in fact done by IESC, who did the majority of those? Are they all Geoscience-CSIRO bodies or—

Ms Milnes : Some will be Geoscience Australia, some CSIRO. Others are consulting firms like SKM, for example.

Senator WATERS: Some of it is private work. Is that all on the website or not?

Ms Milnes : On the published products it is clear who was commissioned to undertake the work.

Senator WATERS: And that is on the IESC website under published products?

Ms Milnes : Yes.

Senator WATERS: Apart from private industry, the bodies doing that work are in fact the same ones that have had severe funding restrictions—mostly off the back of the last budget but locked in on this budget. I am concerned that they do not have enough resources to undertake that research in a timely manner, given that the approvals processes are not stopping to wait while the research is being finished. Has anybody expressed that concern to you?

Ms Milnes : For this research that is being undertaken, it is commissioned by the Office of Water Science and the funding is provided to whoever is commissioned to undertake the work by the Office of Water Science.

Senator WATERS: How much money do you have to dole out for that purpose?

Ms Milnes : Our budget there has been more than a few million dollars each year.

Senator WATERS: Can you be any more specific?

Ms Milnes : Yes. I can, perhaps, take that question on notice and provide you with some further details.

Senator WATERS: More than a few. Less than 10, though?

Ms Milnes : Less than 10, generally. And it varies from year to year.

Senator WATERS: I will accept these on notice, but it is good to have a ballpark—

Dr de Brouwer : You mentioned at the start, or during, the conversation that the majority of the money went to the states. With the national partnership arrangements, $50 million out of that $200 million went to the states. So it was not the majority. It was a sizeable proportion, but the majority did not go to the states directly through the national partnership arrangement.

Senator WATERS: It was not 50 per state. It was 50 all up?

Dr de Brouwer : Total of 50—or 49-point-something. Roughly 50.

Senator WATERS: Where did the rest of the 150 go?

Dr de Brouwer : Where Ms Milnes has gone through—

Senator WATERS: 150 and 10 are quite different.

Dr de Brouwer : It is also over a number of years.

Senator WATERS: Four years now, yes.

Dr de Brouwer : Some of what Ms Milnes was talking about was expenditure per year as opposed to over—

Senator WATERS: Thank you. Perhaps you could also take on notice, just to clarify, where that 150 got spent. I have asked this before, but I just cannot remember what the answer was. If you have got that to hand, that would be helpful.

Ms Milnes : Yes, I can take that on notice.

Senator WATERS: Just continuing on that line, is anybody looking at the long-term downstream impacts on the Great Artesian Basin from coal seam gas extraction?

Ms Milnes : Those issues will be considered again as part of the advice the Independent Expert Scientific Committee provides on individual projects. So where it is relevant, that is often a question that is asked or an issue that is considered by the Independent Expert Scientific Committee. It is also work that is being done as part of the research that is being undertaken. One of the research projects, for example, looks at the hydrogeology of relevant basins, including the Great Artesian Basin. Then where it is appropriate it may also be an issue considered in the bioregional assessments.

Senator WATERS: Thank you. I will look into that further before asking some more questions on that. My last tranche of questions - and thank you for your patience, Chair - is about the work, and I am not sure whether it is the Office of Water Science that is working in partnership with NICNAS to do the national assessment of chemicals used in CSG mining.

Ms Milnes : That is work that has been commissioned by the Office of Water Science. That is work that is being undertaken by NICNAS, as well as CSIRO, as well as the chemicals assessments section within the environment department. Geoscience plays a role in an advisory capacity.

Senator WATERS: Okay. But the Office of Water Science commissioned those folk to do that work. I am sorry, what was the name of the departmental section?

Ms Milnes : The chemicals assessments section within the department.

Senator WATERS: Do we normally ask them questions here on 4.1 or elsewhere?

Dr de Brouwer : They will be here for hazardous waste, I think, tomorrow.

Senator WATERS: If you do not mind I will persist, and please respond to the best of your knowledge.

Dr de Brouwer : It might be on tomorrow afternoon.

Senator WATERS: Thank you. The national assessment was originally due last year. Last time someone was able to tell me that it had been pushed out to about the middle of this year. Is there any further update on when that national assessment of chemicals and coal seam gas will be completed?

Ms Milnes : There is nothing in addition to what you have been advised, Senator.

Senator WATERS: So it is still on track for mid-2015?

Ms Milnes : The work is ongoing on it, yes.

Senator WATERS: Sure, but when was it due to complete?

Ms Milnes : I think, as we indicated last time, we were not able to provide a firm date around the completion of that, but we expected it would be some time this year.

Senator WATERS: Why is it not possible to have a firm date?

Ms Milnes : I think what we indicated last time was that the work is ongoing and this goes to the complexity of the project.

Dr de Brouwer : You might want to put it to us tomorrow, Senator.

Senator WATERS: I think, unfortunately, I have another commitment right at that very time, but anyway, I will persist. My understanding is that the scope of that national assessment is limited to surface water and shallow groundwater but not deep aquafers. I perhaps got the optimistic and hopeful impression last time that the work had begun with the shallow aquafers but perhaps might progress to look at deep aquafers in future. Is that correct or is that just wishful thinking on my behalf?

Ms Milnes : Yes. The focus of this work is on the impacts at the surface, including shallow groundwater. We indicated last time that the issues we were looking at included how you might assess the impacts on the deep groundwater.

Senator WATERS: Is there an intention to then assess those impacts after working out how you might do so?

Ms Milnes : That is still an issue that we are considering. Some of the work in the current assessment that is being undertaken would inform that work.

Senator WATERS: So the decision on whether to look further into the impacts on deep aquafers will be informed by what you find about the impacts on shallow acquires and surface water?

Ms Milnes : That is correct.

Senator WATERS: Is there any intention to expand that chemicals assessment to cover shale and tight gas, given the hydraulic fracturing process is similar, irrespective of the gas that is being mined?

Ms Milnes : The focus of the work at this stage is on coal seam gas.

Senator WATERS: Is there an intention to expand that, that you are aware of as yet?

Ms Milnes : There is no intention to expand that.

Senator WATERS: Is there any work being done on shale and tight gas under any of those research projects or bodies that we canvassed earlier?

Ms Milnes : The focus of the work is around coal seam gas.

Senator WATERS: Because of the constraints of the water trigger?

Ms Milnes : It is not so much to do with the water trigger, but that is the mandate of the independent expert scientific committee and the mandate of the funding, if you like.

Senator WATERS: My understanding is that in last year's budget the Office of Water Science was scheduled to be abolished as of 30 June next year. I hope that is not right.

Ms Milnes : I am not aware of that.

Senator WATERS: Good.

Ms Milnes : I am just checking with the secretary.

Senator WATERS: I hope that is a genuine misunderstanding.

Dr de Brouwer : I think that is news to everybody.

Senator WATERS: Good; I am pleased. So the Office of Water Science within the department will continue at the same level of staffing with the same level of funding?

Ms Milnes : Yes, that is my understanding.

Senator WATERS: Well, that is the first piece of good news for the night, thank you.

CHAIR: I think that is probably a little bit pessimistic.

Senator WATERS: It depends on your perspective. That brings me to the end of my questions. Thank you very much for your help.

CHAIR: Senator Urquhart has a heap of questions on notice—sorry about that. We will now take a short break.

Pr oceedings suspended from 09:21 to 09:35

CHAIR: Welcome to officers from program 2.1: reducing Australia's greenhouse gas emissions. You have indicated that you do not wish to make an opening statement, so we will proceed to questions.

Senator WATERS: Building on the discussion we had earlier about additionality in relation to land clearing and avoided land clearing under the ERF, I am interested in knowing particularly under whichever methodology or process you look at whether or not the land clearing for which somebody has a permit is likely to proceed on the basis of whether it would actually cost them more to clear the land and run stock than the cost of clearing the land? To cut a long story short, do you look at the economic viability and likelihood of those land clearing permits being utilised, before you consider them additional for the purposes of the ERF?

Mr Taylor : On a sector-wide basis, yes, but not on a project by project basis. The concept there is that with the methods there is a baseline setting process that looks at what the business's usual circumstance would be in most cases, in the absence of a project. As a consequence of that there is land clearing going on everywhere, where it is permitted, and you assume that people have gone to the expense, the effort and the economic driver of actually going out and securing those land-clearing permits, and on that basis they exercise those land-clearing permits. That is the basis for setting the baseline in the method. It is not an individual farmer—will they clear that particular piece of land on a project by project basis? It is set as a method baseline.

Dr Kennedy : I might be able to help you. There is an issue called 'financial additionality', which I think is the issue you are going to. It is often discussed around crediting or offset type arrangements. In addressing additionality you are really trying to address the issue Mr Taylor is talking about: is someone going beyond what would ordinarily have occurred in the ordinary course of business? Regarding the baseline, when we often talk about a baseline we are really trying to establish for an activity in a sector, be it in energy efficiency or a sequestration activity—the planting of mixed environmental species—what is the baseline against which to then compare the action?

When we go through the processes that Mr Taylor and Ms Tilley can talk to you about, going through technical working groups to set these baselines, we focus on really trying to establish what the ordinary course of business is. We do not try to look into the minds of project proponents and ask if they would or would not have invested in this project if they were not issued units. That was a decision taken when the Carbon Farming Initiative was established back in 2010. It was an issue debated at the time. Senator Milne, who I remember briefing, was engaged in the discussion around whether we should have financial additionality as an aspect of trying to determine whether the activity is genuinely additional abatement. The decision at that time—and the government has maintained it as it has amended the CFI to effectively extend the CFI methods across other activities—was not to pursue this idea of financial additionality.

The crux of the issue you are asking about is this: are we taking the individual financial considerations of a project into account? The answer to that is no. We are really looking to see if, in the ordinary course of business, the clearing activity, or planting activity or energy efficiency activity would have happened. In these crediting approaches, it is important that you monitor them on an ongoing basis. So, one of the aspects of the expansion from the CFI into the ERF is for regular reviews of these methods to ensure that whatever baseline we have set, that we are crediting above, remains relevant to the ordinary course of business.

There is also the capacity, if we become concerned about the baseline leading to over-crediting, or potentially under-crediting, to refer that to the independent committee called the Emissions Reductions Assurance Committee, which we spoke about earlier today, to review a method. The last thing I would say is that all these methods go through their technical processes—if you like, we bring the experts together—but then we expose them to public consultation to give people an opportunity to put submissions in to say, 'I would regard that as the ordinary course of business. I do not think someone should or should not be credited for it.' We receive submissions around that and then this information is all passed on to those committees as they make their assessment to the minister.

The minister can only make these methods as legislative instruments—and this was a process established under the Domestic Offsets Integrity Committee—if the committee advises him that the method satisfies the tests as set out in the legislation. So he or she cannot make a method unless the committee has advised that they are satisfied that it does. Then, of course, it is subject to parliamentary scrutiny. So we have a number of layers of scrutiny in these methods so that we can be as sure as possible that any credits that are being issued are for genuine abatement. But we would be the last to pretend that it is especially precise, down the nth degree, so we also include things like fixed crediting periods. So if we are crediting an activity, say an energy efficiency activity or other sequestration activities, there are other things that ensure the integrity. For sequestration activities there are permanence requirements, for example, that you maintain a planting for a number of years, and then we only credit, for example, under some methods, for, say, seven years. It may well be that some more abatement has been generated beyond seven years, but a seven-year window, if you like, is a conservative way of estimating the abatement. It ensures that if we have inadvertently missed that baseline slightly we are not crediting ad infinitum on an ongoing basis. It adds to the nimbleness of the crediting arrangement. Sorry it is a little long-winded, but these are—

Senator WATERS: I have a lot of follow-up questions from all of the things you have said, but carry on.

Dr Kennedy : These are practices that we have both learnt and adopted from the introduction of the Carbon Farming Initiative, but also from other crediting arrangements, such as the international crediting arrangements around the CDM mechanism and those sorts of things. These are schemes of a similar nature.

Senator WATERS: I will start with my list of questions that flowed from that information, and thank you for it. Do the ERF bidders not bid in on a project by project basis? If they do, why are you not assessing on a project by project basis whether or not that land clearing would have gone ahead anyway? Because you were saying you look at that on a sector-wide basis.

Dr Kennedy : The government establishes the method and then under that method any proponent can come forward to register a project using that method. The regulator has further additional criteria he has to ensure when he registers that project, such as that the project is new—

Senator WATERS: A fit and proper person et cetera.

Dr Kennedy : Exactly. But in the design of the CFI and, subsequently, the ERF, looking at it on a project by project basis would be a very complex administratively—

Senator WATERS: Indeed. But it is free money you are dishing out.

Dr Kennedy : And it would lean very heavily against participation in the scheme, which is why we also, to ensure that the crediting is appropriate, have limited crediting periods and all the other steps that I spoke about in determining the method. We take a conservative basis on estimating the abatement likely to be undertaken from a method. One of the ways to manage the risk that you are talking about would be to go project by project, but that—

Senator WATERS: Perhaps for projects of a certain size. I get that for tiny ones, and those tiny ones would not be applying anyway, because it would not be worth their while. Presumably, the land clearing is of such a significant size that it is worth their while to even bid in the first place, which might indicate that it is worth your while to look at whether it is genuinely additional and whether they might not have been economically viable to act on that permit to clear anyway, if you get my drift.

Mr Taylor : I guess there is a further point. The methodology has set out a suite of eligibility criteria, and those eligibility criteria really quite clearly define, at a project level, whether you are eligible to participate. That is scrutinised on a registration by registration or project by project basis by the regulator at the time. But those eligibility criteria set the limits for everybody who applies around what is happening in the sector and the industry. So people have to be able to meet those eligibility criteria to come in. For example, they cannot have a permit that was issued after 2010, otherwise they could be in. They are the sorts of checks and balances that are in the eligibility criteria, that were built in through the public consultation and through the technical working groups and things like that to minimise the risk of overcrediting or crediting in a circumstance where people should not be eligible for crediting. So each project is assessed against the eligibility criteria at the time of registration by the regulator.

Senator WATERS: Okay.

Ms Tilley : May I add a conceptual point as well? Certainly in some of the internal and external discussions around, as Dr Kennedy said, 2010 and 2011 in the development of the carbon farming initiative, as well as in some reviews of international schemes such as the CDM that have either used financial additionality tests or considered using them, even if that seems to be the purest policy intent, applying that policy intent is very difficult. So, from a government or a regulator's perspective, to be able to put yourselves in the shoes and the minds or the boardrooms of people who are making decisions about whether they would do a project as a normal course of business or only if they received an incentive for it is a very difficult thing to do, and in situations where you ask a project proponent to provide verification, documentation and evidence as to their costs, there is information asymmetry. The proponent is in a position of power to provide the evidence that backs their argument, rather than the government or the regulator being able to have a very transparent decision-making process about financial additionality for an individual project.

Senator WATERS: So you take their word for it.

Ms Tilley : My reading, even prior to taking on this job, about financial additionality tests is that they are fraught.

Dr Kennedy : We looked at this issue when I was the head of secretariat for Ross Garnaut's update of the climate change review, where Ross was particularly interested in the issue of financial additionality for offset arrangements and the CFI, and initially Ross and I were both attracted to this notion. But, as Kristin pointed out, when you have a test that really starts to look like you are putting yourself in the mind of the person making the decision, it is very hard then to establish what the underlying motive is, which is why we—and then in subsequent legislation it was implemented—have come back to these checks where we try and take, if you like, a more objective, sector-wide look at what is the baseline of activity but not leave it there. We look at these other checks and balances and monitor closely any crediting that is being undertaken, and, as I said earlier, if there was any evidence of crediting, there are these quick steps to quickly relook at the method and reset the method if required.

Senator WATERS: Okay, thank you. I will look into those additional checks and balances further. But I have just one final question on this before I move on to a different line of questioning. You mentioned that, in setting the baseline, you would look at the permits that had been obtained and effectively assume that people had all obtained their permits and set the baseline according to that. Hopefully I have not misconstrued you there. What about illegal clearing, which in Queensland has been quite rampant at times? How do you factor in illegal clearing when you are setting your baseline for the purposes of assessing additionality?

Mr Taylor : For the method we have been speaking about with the permits—since we were here last I have gone back and had a look—I do not think there are any projects registered in Queensland. The nature of the permits that are required to be eligible—to meet the requirements of the method—do not exist in Queensland.

Senator WATERS: Is that the case for all methods? Pardon my interruption, but we started going here last time.

Mr Taylor : There are two different avoided-land-clearing methods. One can be used anywhere in Australia and the other, as it turns out—it is not limited by state or anything like that, but the permits that meet the eligibility criteria by default do not occur in Queensland.

Senator WATERS: But there is that one that could apply anywhere, which would include Queensland?

Mr Taylor : There is another method that Queenslanders could use. To date I do not think there have been any projects registered using that method in Queensland. That method, though, sets a baseline in a different way. There are different parts of the eligibility and the additionality. One is this concept of regulatory additionality. If you have to do something by law, you are not eligible. That is one part of it. If you have cleared illegally or by law you cannot clear, you disqualify yourself.

Senator WATERS: Sure, but more in the setting of the baselines?

Mr Taylor : In the setting of the baseline for the Queensland method, the way it works is you have to be able to demonstrate a historical suite of clearing cycles—the land has demonstrated some sort of economic or primary agricultural use that requires ongoing clearing. This method, having established that that is the pattern of land use in that area, then rewards a change in land use. So you have to have that physical evidence of that baseline being established, then the project starts and that cycle is broken. Then you enter into this permanence period. It is quite a robust method.

Senator WATERS: I can conceive of that when the situation is like what we discussed earlier—where you do not need a permit, such as for much regrowth clearing in Queensland. I am sorry for labouring the point, but I am still not quite clear about how at times immense rate of unpermitted illegal clearing are factored in when you set your sector-wide baselines above or below which you can then calculate your additionality.

Mr Taylor : The concept is set using legal operations. If you have landholders who have had the right to legally clear their land and they have this pattern of clearing land, they are eligible. If you have landowners who either have illegally cleared their land or do not have a right to clear their land, they are not eligible. They are out of the equation for the ERF projects.

Dr Kennedy : Another way of putting that is that any sort of illegal activity going on is not impinging on the baseline for the person who has been in a regular clearing cycle and is about to change their behaviour. When we are looking at measuring the abatement on that block of land, we ask: has that block of land had a regular clearing cycle and are they now about to change that regular clearing cycle?

Senator WATERS: And so somebody else's illegal clearing has no bearing on that. I understand that.

Dr Kennedy : Exactly, and an important aspect of the regulatory issue is that methods cannot be introduced to start crediting for a loosening of a regulatory set of arrangements, although they can be tightened if regulatory arrangements are tightened up. To make that clearer: if, in a state based framework, regulatory arrangements change such that land clearing is more enabled than it was previously and then someone changed their behaviour, we would not begin to credit the behaviour.

Senator WATERS: It is not regulatory additionality.

Dr Kennedy : There would otherwise be a perverse incentive in there to change. However, if the regulatory regime tightened up, we would have to look again at the method, to look at changing it—because now it is not satisfying the test. So it is a one-way tightening test.

Senator WATERS: Thank you. I appreciate your having gone into such detail on that.

CHAIR: Senator Waters, how much longer are you going to go with this?

Senator WATERS: I am sorry; it did take much longer than I had anticipated.

CHAIR: I am going to have to stop you in a minute, so you can either speed it up or—

Senator WATERS: I only have three more questions, so I will try to go super fast. I am interested in the existing abatement from the previous CFI projects and how that has been carried forward to ERF for the purposes of carbon accounting—the double-dipping, effectively, to use that most recently extremely controversial term.

Dr Kennedy : There are a series of CFI projects that have transitioned across and the government took the decision to reset the crediting periods on those transitioning methods. Ms Tilley can talk to those. Is that what you are thinking of?

Senator WATERS: I think so, yes. I am still learning about the interaction of all of these programs.

Ms Tilley : Ms Munro from the Clean Energy Regulator gave some statistics on projects that were existing projects prior to the new legislation. We can answer from a policy design perspective.

Senator WATERS: Yes. I am interested in how they are counted. Were they counted when they were CFI projects against national greenhouse accounts and, if so, how are we now counting them? Is that the transition process?

Dr Kennedy : Do you mean in the projections exercise, in tracking towards the target? These were projects that were previously getting credits under the CFI. They are now getting credits under the amended CFI, or the ERF. Some of them will get credited for a longer period, potentially, than was initially anticipated. That is a little unclear because they could have applied for second crediting periods under the CFI. But now they have transitioned to the ERF and those protects will generate units for as long as their crediting periods allow them to. In some cases that is seven years; in other cases that is much longer, for sequestration projects.

Many of the units were purchased in the first auction. That is the abatement that flows from those projects. The inventory—the measurement of Australia's greenhouse gases, which Mr Parker and his colleagues can talk to—is measured entirely independently from this exercise. The greenhouse gas inventory is the estimate of Australia's emissions, a fully independent assessment of Australia's emissions. So the extent to which these policies are changing Australia's overall emissions will be reflected in the credits, but the final test for our international obligations will be in what the accounts say.

They are two separate exercises, if you like. One is the policy, the crediting exercise trying to drive emissions down, but then, appropriately, entirely independently, our greenhouse gas accounts are measured, audited and then internationally submitted. I think it is the latter that you are interested in.

Senator WATERS: It is. I am trying to get at whether the projects that are now being delivered through ERF contracts will count towards our five per cent national greenhouse gas emission reduction target, on top of what they would have when they were CFI projects. When did they get accounted for?

Dr Kennedy : They will not count twice. To the extent that they have driven down emissions in Australia, they will count once, and that will be measured independently. If for other reasons Australia's emissions rise outside these projects, then that is entirely a separate matter. Or if, for example, the policy design is not quite right and we are not crediting appropriately then the ultimate test will be the greenhouse gas accounts and whether we track to and meet the target. The policy instrument provides the incentives to drive emissions down, but in a measurement sense they are not directly linked. The units that we are generating under the CFI, now ERF, are not the same units or the same accounting that is used in the international accounting to meet our greenhouse gas accounts. One is an independent measurement exercise, if you like, and one is a policy instrument.

Senator WATERS: Thank you. I will leave it there, because it is 10 o'clock and my brain just clocked off. So I will come back to you with more questions in that area.

Senator URQUHART: As part of the smaller government changes it was announced that the ERF expert reference group would be abolished. In the letter of committal, the co-chairs of the group offered their assistance in getting the ERF operational. Will you be utilising the expertise to help develop the safeguard mechanism?

Dr Kennedy : That is a matter for government, Senator Urquhart. The expert reference group has not been meeting and the government has indicated that it has been disbanded at this stage. The minister has not indicated bringing the group back together. He is currently considering the 88 submissions that came in in response to the issues paper. Should he wish to bring that group back together to take advice, I am sure he will, but he has not taken a decision to do that.

Senator URQUHART: So that has not been done yet. Okay. On the safeguard mechanism, I did ask the Clean Energy Regulator and they referred me back here: can you give me an update on the progress to settle the safeguards mechanism?

Dr Kennedy : As I just mentioned, the issues paper is out, the submissions are in, the minister is currently considering those submissions.

Senator URQUHART: You said 88?

Dr Kennedy : Eighty-eight submissions have come in. Submissions should be able to be made public soon; we are just in the process of briefing the minister. It will be a matter for the minister. That has been the case with the green paper and the white paper. We made those submissions public after we finalised the briefing.

Senator URQUHART: When you say 'public', they will be put on the website?

Dr Kennedy : Yes. The government will go through its decision making processes. There is another round of consultation to go through, and that is through the exposure of the draft rules and regulations to support the implementation of the safeguards mechanism with the intention that the rules and regulations are made by 1 October.

Senator URQUHART: Have you assessed all of those 88 submissions yet?

Dr Kennedy : We are in the process of briefing and discussing the submissions with the minister at the moment.

Senator URQUHART: But have you assessed all of them?

Dr Kennedy : We have read all of them and we are advising on them.

Senator URQUHART: Will there be a new reference group? Obviously, as you said, it is up to the minister whether he takes up the expert panel, but will there be a new reference group or committee to help with developing that safeguard mechanism?

Dr Kennedy : That will be a matter for him. There has not been one established at this stage.

Senator URQUHART: Are you able to run us through the key concerns or priorities that are outlined in the submissions?

Dr Kennedy : We are happy to give you a broad sense of some of the issues coming forward in the submissions. There is a set of issues coming around about the extent to which the historical baselines account for incremental expansions in business-as-usual growth and associated emissions. There has been a set of concerns from the oil and gas sector about variations in their emissions that arise from their activities that are not directly under their control—the body of ore they are mining or gas they are extracting. James, do you want to mention a couple of the others?

Mr White : As Dr Kennedy indicated, most of the submissions are from business and industry groups; we have got 88 and 65 of those are public and 23 have been expressed as being confidential. In terms of the key issues that have been raised, the way the consultation paper worked is that it was set out to cover the remaining design issues that the government said in the ERF white paper last year that it would consult further on. That really focused on the treatment of new entrants and how best practice might be applied. The consultation paper was framed around the emissions management or flexible compliance framework and the treatment of the electricity sector, and the submissions necessarily went to those kinds of issues. If it sounds like a slightly narrow set of issues that have been raised, that is why—because a lot of the safeguard mechanism framework has already been established, either through the white paper last year or through the amendment legislation that went through last November.

In relation to the flexible compliance, or the emissions management system, companies in particular were concerned about incremental production growth. They have expressed in their submissions that a lot of their emissions increases are associated with production increases through de-bottlenecking their plants and so forth. We have mature industries that are talking about production growth of one to two per cent a year that they get through systematically going through and trying to apply plant efficiencies. Those things can lead to emissions increases but actually decrease the emissions intensity of the facilities, because the emissions growth is not as high as the production growth.

The consultation paper talked about a model where facilities that were expanding production could have baselines increased when they reached the 20 per cent production increase threshold or 20 per cent capacity increase threshold. A lot of companies have come back expressing concern about that and suggesting that, if an emissions intensity test were applied and if the absolute baseline were exceeded, then a secondary commissions intensity test could be applied—which the government said in the white paper last year it would consult on—and that that would actually avoid those facilities exceeding their baselines for basically what are efficiency improvements in their plants. That is one area which goes to both the treatment of incremental expansions and the emissions management systems.

There was also the treatment of new entrants. The consultation paper proposed two approaches to the treatment of new entrants. In the white paper last year, what the government said was that baselines for existing facilities with a history of data through the National Greenhouse and Energy Reporting System would be set at the high point of the reported emissions data from each facility. What it also said was that new entrants or significant expansions of existing facilities would be treated at best practice. The consultation paper raised a series of options about how best practice might work, but it also set out some possible approaches to treat facilities that fall into the gap. There are some facilities that do not have the five years of data and the high point but are not completely new entrants. They have actually already started operating recently or they are close to finishing construction, like a lot of the LNG plants in Queensland, so there is a question about how to set the baselines for those kinds of facilities. The consultation paper set out an approach that enables those facilities to have a baseline established through a process called the independent assessment approach that does not require them to go all the way to best practice, because, for those facilities, effectively it is too late. They have already begun construction or their design is well established and they have taken a final investment decision.

There was a proposal in there that the independent assessment approach be something that is brought forward with the company's own information being brought forward—statements of how it would manage greenhouse emissions, statements around the consistency with any recent environmental impact statements and an assurance audit by a registered greenhouse energy auditor. That would get them an interim baseline. Then, after three years, a permanent baseline would be determined on a true-up. Companies commented on that. In broad terms, they were supportive of the independent assessment approach, although they considered that perhaps it could be a longer period of time for that true-up in some cases.

The consultation paper also talked about one area where emissions effectively could rise or emissions intensity could rise, to a large extent outside the control of the facility operator, which is an issue around inherent variability of greenhouse gas emissions associated with natural resources and reserves—in very broad terms, the kinds of reservoir fugitive carbon dioxide you might get in natural gas wells, fugitive methane entrained in coal seams or just the variability that you get in mining and resource extraction operations. We have different depths of resources or different grades of ores that you have to deal with. There was a process set out where some of those facilities, effectively, in those particular sectors, could apply for a reset of their baseline if they expected to exceed it over the next few years, as a result of factors that they probably could not control. There was comment on that.

The government had also said that it would talk about the specific treatment of the electricity sector in the white paper last year. The consultation paper talked about—the default approach could be the electricity sector to have individual baselines, the same as everyone else in the safeguard mechanism. The electricity sector itself had put forward a view that—particularly for the grid-connected parts of the sector—they act more like a single entity than a series of individual facilities. This is because power has to be moved around the grids as needed and if you clamp down on one part of the grid it is like squeezing a balloon—it may pop up somewhere else.

They proposed the idea of a sectoral treatment for the electricity sector. The consultation paper talked about a possible sectoral option. Companies commented on that. There was a range of responses from the electricity sector and also interest from large electricity-using industries, like the aluminium industry. In broad terms, that covers the main topics. There are a lot of other technical views about the range of units that could be used for offsets and so forth.

Senator URQUHART: Thank you; that was quite comprehensive. I want to refer to the methodologies pending this from the website. I see that of eight of the submitted methodologies and methodology variations six are with the applicant requiring further information. Could you run us through these applications off your website, why they are with the applicant and what the time frame for completion is?

Dr Kennedy : We had just better establish whether you are on our website, the ERF website.

Senator URQUHART: Yes. It is the—I am just looking for it.

Dr Kennedy : You may be on the regulator's website; either one is fine. We can run through the methods—

Senator URQUHART: It is called methodology proposals.

Dr Kennedy : Is that recent?

Senator URQUHART: Yes.

Mr Taylor : The way methods are developed now, they are developed within the department in consultation with technical working groups. They are no longer proponent-driven methodologies as they were, previously, under the Carbon Farming Initiative. The first tranche of methods under the ERF, since it has been established, has been 15 new Emissions Reduction Fund methods made. There are a number of them that are under development. They are not so much with proponents as they were, in the old language, under the CFI. They are in joint development with the department and technical working groups and industry bodies, and stakeholder reference groups.

Methods that are currently being worked on include: one for herd management, for beef cattle, to reduce emissions from there; commercial and public lighting; a facilities method, for large industrial facilities; high-efficiency commercial appliances—that is, an energy-efficiency method for making appliances more efficient, reducing their consumption of energy; oil and gas fugitives; refrigeration and ventilation fan upgrades—again, that is an energy-efficiency style method; and sequestration of carbon in soils, using modelled abatement. Some of those are quite close to being completed and some are in relatively early stages of their work, at this stage. But they are all moving through the system.

Senator URQUHART: What is the time frame for completion of that?

Mr Taylor : It is quite variable. Some of them could be within—across that span there are probably some that are in weeks through to, possibly, six months on some of those, depending on what technical issues need to be resolved through public consultation and technical working groups and emissions-reduction assurance committee findings on those. Sometimes they can have a couple of loops. More recently, most of the methods have had a reasonably smooth path through their development process. I think this is in part because of the input of the technical working groups and the public consultation and the technical assessments that are done independently. By the time they get to the Emissions Reduction Assurance Committee they are usually in pretty good shape. That is quite a change from the CFI, where they were proponent-driven methodologies, and they would be presented to start that scrutiny process. You were never quite sure of the quality of the product that was going to come in. Some of them had very long gestations as a consequence of starting with just a concept and needing to be finessed into a final instrument.

Dr Kennedy : There are 41 methods in operation at the moment. We would be happy to provide to you the list of those methods and what they are. We can provide that quickly—and then a list of these 15 methods that you mentioned, Hilton, that are under development. I think that information is available to the public. If not, we are happy to provide it in a table.

Senator URQUHART: That would be great. How often has the Emissions Reduction Assurance Committee met to date?

Mr Taylor : They have met approximately monthly since they were established. I think they must be up to about their sixth meeting or thereabouts.

Senator URQUHART: In reference to the ERAC and the methodology determinations, can you run us through their current work. What are the things that they are doing now, and is it primarily on submitted methodologies or do they or the department propose methodologies to them? What is the process and what are they doing?

Mr Taylor : The process is that the methods start their gestation through a prioritisation process looking at sectors where there is likely to be significant amounts of abatement that is technically feasible to get, can be measured, can be repeated and can be done at a sensible cost.

Senator URQUHART: Who prioritises that?

Mr Taylor : It is a combination of input from the public, from technical working groups, from the department, and ultimately it is a government decision on which methods are progressed over a period of time. Following the prioritisation process, those methods are farmed out to expert groups within the department, who then work out through these broader networks to develop up the methods. That involves all of the technical machinations within the methods, but also the policy setting around eligibility, ensuring additionality, looking at business-as-usual, establishing baselines. All of those matters are considered during that method development process. The Clean Energy Regulator also looks at them during this process to ensure that they are implementable and administrable as a legal determination. When they are in pretty good shape, they go, for a first pass, through the Emissions Reduction Assurance Committee for them to agree that they are in good enough shape to go out for public consultation. Following that consultation and a final work through of those comments, they are then taken back to the Emissions Reduction Assurance Committee for their final endorsement before they can be taken to the minister to be made into a legal determination.

Senator URQUHART: What current work and methodology determinations are the ERAC undertaking?

Mr Taylor : They have a monthly agenda of approximately four methods that come through. All of the outcomes of those meetings are put into the public domain, and there are comments on each of those.

Senator URQUHART: On the website?

Mr Taylor : On the website, yes. They publish their findings on each method. It is not common that we say: 'At this particular meeting, these methods are going.' We do not schedule that publicly, because they swap around quite regularly depending on public consultation findings. Some leapfrog over the others and some get pushed back a couple of meetings. The broad list that I read out before is indicative of the work that will come through that committee over the coming weeks and months.

Senator URQUHART: What are the priority methodologies that are currently being considered?

Mr Taylor : Some of the highest priority ones were these beef cattle methods, the commercial public lighting facilities, high energy commercial appliances, oil and gas fugitives, refrigeration and ventilation and fan upgrades and sequestration of carbon in soils using a model method. That is the immediate—

Senator URQUHART: So they are all under consideration at the moment.

Mr Taylor : Absolutely. They are not in front of the ERAC yet—they get taken to a meeting and taken through—but these are the things that are really being focused on at the moment.

Dr Kennedy : They will be in front of the ERAC in the coming months though, Senator, those ones, and then another list will come behind them.

Senator URQUHART: Do you expect all or most of the methodologies currently being assessed will be eligible for use in the next ERF auction?

Mr Taylor : That is impossible to say on two counts: (1) we do not know when the next ERF auction will be, and that is a matter for the regulator to determine; and (2) it is impossible to say when the ERAC will finally approve these methods. I would expect that some of them will be available, yes, but it is impossible to say which ones are most likely or not, depending on timing and their passage through the ERAC.

Dr Kennedy : Of those 41 methods in operation, I think around 15 have been made under the new legislation—

Mr Taylor : That is correct, yes.

Dr Kennedy : so there are already over a dozen methods out there where projects can register and use those methods in subsequent auctions beyond—I think Ms Munro went through it earlier today. They were predominantly CFI methods, only a couple, but in subsequent auctions, when Ms Munro determines they take place, projects under these new methods will be coming forward.

Senator URQUHART: I would like to ask some questions about the auctions now, and I will try to make sure I do not repeat some of the questions that were asked earlier of the Clean Energy Regulator. Of the 47 million tonnes of abatement contracted in the recent auction, how much will be achieved by 2020 and what is the trajectory?

Dr Kennedy : I might have missed this, but I do think Ms Munro went through this earlier today. More than half of the abatement purchased under the first auction is expected to be achieved before 2020. I think there is some information on questions of this nature on the auction results on the Clean Energy Regulator's website, which would be the best place to go to, but we will continue to do our best to answer those questions.

Senator Birmingham: I think Ms Munro outlined the numbers of projects being funded in terms of the years of scope of their contract, and obviously within that it gives some indication as to when delivery will occur, but for longer projects there are earlier periods for delivery of abatement built into some of those longer projects as well. But I think Dr Kennedy is right, that it is more than half. I think Ms Munro took on notice to provide a trajectory as each of those projects provides abatement as to how that builds up over the period to and beyond 2020.

Senator URQUHART: Okay. We have been assured that the $2.55 billion for the ERF will not be topped up. If this is the case, what assurances do we have that this will be sufficient to meet the current minimum five per cent reduction target by 2020? Have you done any modelling since we last asked, bearing in mind that contracts are mostly seven or 10 years.

Dr Kennedy : I will ask Senator Birmingham to comment further on this, but the government's language in I think the white paper announcement and the announcement of the $2.55 billion was that this was an initial allocation to the ERF. I have not heard the language of 'it will not be topped up' and that that was the only allocation that was made. The government, through the minister, was confident that it would meet the emissions reduction targets with the policy. There has been no change to the funding arrangements. Ms Munro has the capacity to contract that $2½ billion for projects that are successful under the auction. The only thing that will change from budget to budget is if there is any change in the way the moneys flow in purchasing that abatement. It is a contract-on-delivery model. The government pays no money upfront through Ms Munro; it is paid when the units are handed over. There are likely to be between-year movements, which would see small changes in the between-year appropriations or the movement of funds which is usual, but the $2½ billion is committed and, if you like, the financial arrangements put in place are such that that money is available and able to be contracted to purchase abatement.

As to the modelling aspect, we have spoken about that here before and this will continue to be the case. It is difficult for us to talk specifically about modelling related to the tonnes that might be purchased from that $2½ billion, or we immediately reveal what we expect is the average price. Price information, of course, is available to the market on an auction-by-auction basis. It was $13.95, from memory—the weighted average price paid at the first auction. Even though that is the weighted average price, many proponents were getting a price that varied from that. They got the price that they were bid and if they were successful, they were paid that price.

The reason we do not go into detail about the modelling of abatement from the $2½ billion is that that would reveal the department's expectation of future prices and immediately run counter to one of the aims of the ERF—that is, to extract the maximum abatement from the money that is on offer. If we begin conditioning the market to what we regard as the expected price, we reduce the capacity for the government to pursue that policy aim. The government has always been clear in these areas of auction that it is a pay-as-you-bid model—in other words, it wants to pay as best it can just what it needs for each project to get over the line and enough for that abatement to come forward. Unlike a model where everyone gets the same price and you might pre-announcement that price, what it means is that one has to be very careful about statements around exactly how much you get from sums of money or you will run counter to policy aims.

Beyond that, all I can say—and Senator Birmingham may wish to elaborate—is that the government remains confident that this set of policy instruments will see it meet the emissions reduction target of five per cent.

Senator URQUHART: Surely, we cannot rely on the results of one auction to provide certainty of reaching a target?

Senator Birmingham: I will deal with that and pick up where Dr Kennedy finished off. We are confident still of meeting the target. We have seen the reappraisal of the abatement challenge to meet that target undertaken—don't make me comment again, Senator Singh, on facial expressions. We have seen the abatement challenge reappraised and fall from 2013 to 2020 by around 1,100 megatons of CO2 equivalent to some 236 megatons of CO2 equivalent in 2014-15. That has resulted in the economy becoming less emissions intensive and that is a trend we expect will probably continue. The analysis of the task at hand has been well assessed.

We are pleased, and the minister has expressed his clear pleasure, at the result of the first auction. As you know, 47 million tonnes of abatement is being contracted as a result of that first auction, at an average price, as Dr Kennedy outlined, of $13.95 per tonne. There is significant optimism about further auctions. What we saw in this first auction was that the more established methodologies dominated the projects that have been successful. We would expect that the newer methodologies that have been approved for abatement, as people consider and analyse opportunities, will feature more into future rounds of the auction. The 107 contracts from that first auction have a total value of over $660 million. Of course, the total budget available to the Clean Energy Regulator at present to make contracts is $2.55 billion, so there is still nearly $2 billion available for them to allocate in subsequent auctions. The government is confident that, at present, this is a sufficient allocation for the Clean Energy Regulator to continue to build on the success of the first auction.

Mr Parker : In addition to the story of deepening markets as these methods mature and new projects come through is a story that we have certainly seen, for example, in the water infrastructure area, where the value for money continues to improve over time.

In addition to all of that, the ERF is not the only policy instrument which ultimately bears on meeting the 2020 target. There are other policy instruments at the Commonwealth level. The renewable energy target is one of them. The number which has been agreed between the government and the opposition there is higher than the number which was factored into the most recent projections. Then there are also a range of policy options at the state level. There are a range of policy options which are being implemented at the city level and at the local government level, and a range of abatement opportunities which have been taken up by all sorts of private firms and so forth where the cost of abatement makes an economic proposition all by itself, without the need for any policy incentive. So there is a whole bunch of things which impacts on the abatement task and, as the assistant minister has said, the government is confident that we will hit it.

Senator URQUHART: Regarding the successful bidders, were there any existing projects under the CFI that were unsuccessful at auction?

Senator Birmingham: The Clean Energy Regulator is the entity that conducts the auctions. I do not know whether they would necessarily be in a position to reveal that. They have their protocols there. That would have to be a question you would put on notice for them.

Senator URQUHART: As a department, you do not know that?

Dr Kennedy : No. In general terms, we knew the arrangements that were set for the auction would lead to unsuccessful bidders. There was a mechanism within the auction arrangements to take—from memory—bidders up to an 80 per cent mark off a maximum price. But, appropriately, the department is not involved in any way in that decision making.

Senator URQUHART: That is all right. If you do not know we can put them on notice.

Dr Kennedy : Exactly. Put those on notice, but to the Clean Energy Regulator.

Senator URQUHART: According to a joint media release of 30 April from the Minister for Foreign Affairs and the Minister for the Environment, a number of round table discussions were held, or are being held, on Australia's post-2020 emissions reduction targets.

Dr Kennedy : Yes.

Senator URQUHART: Are you able to provide more details of these discussions?

Mr Parker : Yes, we can provide an outline of that.

Dr de Brouwer : Ms Brunoro will speak to that.

Ms Brunoro : The round table was associated with a post-2020 target process. A task force has been set up in the Department of Prime Minister and Cabinet. Round tables were held in the last three weeks. Four round tables occurred, one each in Sydney, Melbourne, Perth and Brisbane. The four round tables brought together a broad range of peak industry, environmental organisations and academic stakeholders. Indigenous organisations were represented as well. The focus of the round tables went to the questions that were outlined in the issues paper that was released at the end of April by the task force. There were three questions that were presented in that issues paper. The first centred on what Australia's post 2020 emissions reduction target should be. The second question went to some of the target parameters that should be considered by the task force in their deliberations—things like what would be Australia's base year, what would be the end year and those sorts of target parameters. The last question went to what would be some of the policies that the task force or the government should consider in going about achieving a post 2020 target.

Senator SINGH: Were these public or private meetings?

Ms Brunoro : The round tables were invitation round tables.

Senator SINGH: So were media allowed in? Were they public or private meetings?

Ms Brunoro : They were private meetings.

Senator SINGH: Are there any more scheduled?

Ms Brunoro : No. That would complete the round tables.

Senator SINGH: So just Perth, Brisbane, Melbourne, Sydney?

Ms Brunoro : That is correct.

Senator SINGH: Why not the other capital cities and the territory capitals?

Ms Brunoro : I think the actual timetable of the round tables was set by the task force themselves, which are in the Department of Prime Minister and Cabinet. They were ministerial chaired round tables. Two of them were co-chaired by Minister Bishop and Minister Hunt; two of them were chaired by Minister Hunt. I think there were some availability concerns with respect to the number of round tables, but I think there were quite a number of organisations represented, so there was also the view that it covered a broad spectrum of views across business, environmental NGOs and academic institutions.

Dr de Brouwer : There has been no shortage of opportunities to present views to the government. When the consultation paper went out, the government invited people to provide their views, as Ms Brunoro went through. So it has been a very open process.

Senator SINGH: I was just asking why two of the biggest renewable energy states in the country were missed out—Tasmania and South Australia.

Dr de Brouwer : That is really a matter for PM&C.

Senator SINGH: So PM&C chose, through the task force, who were to attend these round tables? Is that right?

Ms Brunoro : The process for deciding attendees was drawn across a whole breadth of departments, so there were a range of departments who were supporting the task force process, which extend beyond the Department of the Environment. There was the Department of Agriculture, the industry department, infrastructure department et cetera. There were a range of stakeholders who indicated an interest to the task force themselves, but a list of stakeholders that expressed key interest to that broad group of departments was also put forward and pulled together.

Senator SINGH: So the short answer is that the task force decided who was attending these meetings. The task force sent out the invitations, I presume?

Ms Brunoro : There were also suggestions coming from the ministers' offices from interest expressed to ministers.

Senator SINGH: But who sent out the invitations?

Ms Brunoro : They went from the task force.

Senator SINGH: Did any state ministers attend?

Ms Brunoro : Not the round table meetings.

Senator SINGH: What about NGOs.

Ms Brunoro : There were a range of NGOs who were represented.

Senator SINGH: Are you able to provide the committee with a list of the attendees for all of these meetings?

Ms Brunoro : Yes.

Senator SINGH: So there were 430 written submissions received—at least, that is what is in the joint Bishop/Hunt press release that was issued on 30 April. Did these submissions come through to the environment department or the task force?

Ms Brunoro : They went directly to the task force.

Senator SINGH: Did the task force share them with the environment department?

Ms Brunoro : Yes.

Senator SINGH: Presumably the environment department was represented on these consultation meetings?

Dr de Brouwer : We are on the task force as well as part of the—

Senator SINGH: You were part of the task force?

Dr de Brouwer : Yes, part of the task force and part of the normal interdepartmental processes that support the task force.

Senator SINGH: So you did receive the submissions via the taskforce? You are kind of part of the taskforce, but the department itself received the submissions through the taskforce. What can you tell us about the submissions? There were 430 written submissions. Is that still the correct number?

Ms Brunoro : I think the number is higher than that. There were some late submissions. We can get the most accurate figure for you from the taskforce.

Senator SINGH: Thank you. What was the range of opinions about what the target should be?

Dr de Brouwer : In general, that really is a matter for PM&C. They are leading the taskforce.

Senator SINGH: But you received the submissions.

Dr de Brouwer : Yes, we did, but the taskforce has been run in PM&C. They are the natural ones to provide that to senators. They are responsible for the taskforce, Senator.

Senator SINGH: But you were represented on the taskforce and you cannot answer the question?

Dr de Brouwer : We can answer, but they are also well placed to answer that. It is their taskforce and they are the ones who are generally better able to provide those answers.

Senator SINGH: Dr de Brouwer, I would think that Ms Brunoro would know the answer to that question. Were you represented on the taskforce, Ms Brunoro?

Ms Brunoro : We have a secondee on the taskforce. We provide support from within the department for a range of analysis and support tasks. I am not technically on the taskforce myself.

Senator SINGH: Which of the officials here have read the submissions and could answer my question?

Ms Brunoro : I have read a series of the submissions. I have not read all, I think, 500 submissions.

Senator Birmingham: The full analysis of the submissions is a task that the taskforce is undertaking. They are submissions to the taskforce that is undertaking that process for the government, taking a whole-of-government approach with the government, and that is why it is appropriate that, if you want detailed answers around the operation of the taskforce, you go to PM&C because it is their taskforce.

Senator SINGH: That is fine, Minister. I am not asking for detailed answers. I am asking: what was the range of opinions on what the targets should be? I understand from my previous question that the department has received those 430 or more submissions. There is a department representative on the taskforce. The fact that the department has received the submissions would give the department some understanding of the range of opinions that have been received in relation to what our targets should be. This is the environment department, so I can understand why you would need to have those submissions sent to you and you would formulate, in reading them, what the opinions and outlines were of those submitters. I am asking on behalf of this committee if you can provide the range of opinions and what our targets should be according to those 430 submissions. You can take that on notice.

Senator Birmingham: Senator, if you are willing to put it on notice, you really should put it on notice for—

Senator SINGH: No, I do not want to put it on notice. I am giving Dr de Brouwer that opportunity.

Senator Birmingham: Senator, I am willing to take a wild stab in the dark and say it was a broad range. I am willing to say it was probably a broad range, because I would have thought that, with that number of submissions—

Senator SINGH: Have you read them, Minister?

Senator Birmingham: With that number of submissions and knowing the diversity of public opinion on this topic, you could be extremely confident it was a broad range. No, I have not, of course, been privy to those submissions, but I would place a good bet with you that it was a broad range. Officials may be able to give some indication more specific than my broad range or they may simply back up the fact that it is a broad range. If you want a specific answer, I again suggest that the right place to do it is with the Department of the Prime Minister and Cabinet—about the taskforce that they are coordinating and that they will be preparing the responses from.

Ms Brunoro : At a very high level, it was a broad range and there was quite a significant number of submissions that did not nominate what the target would be. They focused on the kinds of things the government should consider when setting a target. The range extended from above the Climate Change Authority's suggestions. The Climate Change Authority put out their recommendations recently. There were submissions that went beyond those targets to 2020 and 2030, and there were submissions which suggested that the government should not take any action on climate change. So it was fair to say it was quite broad. Those who did nominate a specific target did focus on the Climate Change Authority's recommendations.

Senator SINGH: Thank you. Could I also ask that that question be taken on notice?

Dr de Brouwer : We will pass that question on to the Department of the Prime Minister and Cabinet. They really are the authoritative answer on what that range is. I think they will be preparing material summarising the submissions. That is their responsibility and properly given to them.

Senator SINGH: I appreciate it being taken on notice, however it is answered, by whichever department. Thank you, Dr de Brouwer. It is your call. Finally, what is the process from here on developing the post-2020 targets in preparation for Paris talks? I understand there are a number of meetings in the lead-up to Paris. I think Bonn is next month. What is the preparation that this department plays a role in in the lead-up to Paris?

Senator Birmingham: Just for a little bit of clarification, are you talking about process for the finalisation of the targets that Australia commits to or the broader range of discussions that the government would be involved in as part of that process?

Senator SINGH: Apologies. I am talking about the process in developing the post-2020 targets.

Senator Birmingham: Dr de Brouwer might be able to speak on that process in terms of the fact that the taskforce will be reporting back and that will go to cabinet and so on.

Dr de Brouwer : The government has been very clear that they intend to release publicly Australia's post-2020 targets by the middle of this year.

Senator SINGH: Is that before or after the Bonn meeting?

Dr de Brouwer : The Bonn meeting is in early June, and the government has not specified exactly what it means by mid-2015. The process that supports that, as normal for these things, is a cabinet process, as the minister referred to. That cabinet submission is brought forward by the Minister for Foreign Affairs and the Minister for the Environment—the Minister for Foreign Affairs having responsibility for international negotiations and the Minister for the Environment, my minister, having responsibility for the policies that implement the target. There will be a cabinet process that will draw on the work being done by the taskforce in PM&C. We can talk more about that process. It really goes into the internal deliberative processes of government now.

Senator URQUHART: I have just got one question on the GHG accounts. The minister is quoted as saying the reduction in carbon pollution came at a cost of around $5,000 a tonne under the previous Labor government's policies. More recently, announcing the results of the first ERF auction, the minister claimed that the carbon price delivered emissions reductions at over $1,300 per tonne. Can you detail how these figures were arrived at, why they have changed and who bore the cost?

Senator Birmingham: The figures are a calculation of the emissions reduction that was estimated to have occurred during the life of the carbon tax, which was compared against the cost of permits, or the tax supplied under the carbon tax to come up with the figure of thousands of dollars per tonne. Those costs were paid by electricity companies and other companies around Australia, who passed them on to Australian businesses and households, and so ultimately all Australians paid.

Senator URQUHART: Sorry; can I just step back? The figures were arrived at by the calculation of the emissions reductions versus what?

Senator Birmingham: Versus the revenue from the carbon tax.

Senator URQUHART: That is how you arrived at the figure?

Senator Birmingham: Yes, indeed. Emissions reduction divided by carbon tax revenue is the pretty simple analysis. There might be a little more to it which I can provide on notice if need be, but the short version there is that is the approach. Equally, we have outlined that the Emissions Reduction Fund, which is directly contracting abatement, is a $13.95 per tonne average—as Dr Kennedy explained before. Some are more; some are less. That is about achieving the 47 megatonnes of abatement, if my memory is correct, out of the $600 million-odd of contracts related there. In both cases, it is abatement divided by the cost.

Senator URQUHART: You offered to provide some more detail on notice. Can I take you up on that offer, because I know that Senator Rice has some questions, and I do not want to take her time.

Senator Birmingham: I am sure the minister will be happy to provide the analysis of the costs of abatement under the carbon tax versus the costs of abatement under the Emissions Reduction Fund.

CHAIR: Senator Rice, you have got 10 minutes.

Senator RICE: Good evening. I was wondering if I could ask some questions about the proposed inclusion of energy from the burning of wood from native forests under the renewable energy target and eligibility for renewable energy certificates, starting with what the government expects the energy generation potential to be from the burning of wood from native forests for energy.

Mr Archer : I might begin to answer to that question. It is probably fair to say that all we really have to go by is the past experience that we have—that is, that electricity generated using native forest wood wastes as a fuel source was previously eligible under the Renewable Energy Target Scheme, and that was the case from the commencement of the Mandatory Renewable Energy Target in 2001, through to November 2011. In that time, there was only one renewable energy certificate created specifically from the category of biomass from native forest wood waste. It is also the case that native forest wood waste embodied in either manufactured wood waste products from construction or furniture, or sawmill residue may also have been used to generate—

Senator RICE: We have not got much time. So, to cut to the chase, from native forests—basically, it has been based on previous experience?

Mr Archer : We do not really have any basis at this stage for forecasting what future experience may be.

Senator RICE: You have not done any projections of any different situation into the future compared with what—

Mr Archer : No, we have not gone into that detail. Our overall expectation based on past experience is that we are not expecting a lot of additional generation as a result of this measure.

Senator RICE: Do you know of any generators that are ready to make use of this?

Mr Archer : I am personally not aware of any.

Senator RICE: From native forest? No, you are not aware of them? Could you detail any industry bodies or businesses that have been requesting inclusion of the use of wood from native forest in the renewable energy target?

Mr Archer : There were submissions made to the 2014 review of the renewable energy target, and I gather some 46 submissions did address the question of the status of native forest wood waste.

Senator RICE: Are they public submissions?

Mr Archer : Yes, they are; they are public submissions. The review was based in the Department of Prime Minister and Cabinet, so through the PM&C website.

Senator RICE: Have there been any other submissions to government that are not public, that you are aware of?

Mr Archer : Not that I am aware of.

Senator RICE: Could you take that on notice and see if there have been any other submissions to government actively requesting native forest wood to be included?

Mr Archer : Yes, I can do that.

Senator RICE: Do you know whether any energy retailers have expressed interest in acquiring RETs from native forest wood burning?

Mr Archer : No, I am not aware that that is the case. That is not to say it is not the case, but I am not aware that that is the case.

Senator RICE: Okay—and/or whether there have been any energy retailers advising against allowing native forest wood to be included as RETs?

Mr Archer : It is really a commercial decision for the liable entities under the scheme as to where they source the certificates. They need to meet their liabilities. I have not heard either way in relation to their views.

Senator RICE: Again, if you can take on notice whether there has been correspondence or advice either way from energy retailers about the inclusion of energy from native forest wood.

Mr Archer : Yes, I can certainly take that on notice.

Senator RICE: Okay. Is it planned to include the provisions for the burning of wood from native forest as part of the legislation that is going to be introduced, or by specific regulations?

Mr Archer : While the government has announced that it intends to reinstate eligibility for native forest wood waste, it has not made any announcements specifically about how it will do that. It is really for the government to state its intentions in that regard.

Senator RICE: Has the legislation or the regulations been drafted?

Mr Archer : We are working on a package. But, as I said, it is really a matter for the government as to when and what the nature is of its announcements in relation to the specifics of that.

Senator RICE: So, working on a package—when is it expected that it will be ready to be introduced to the parliament?

Mr Archer : We are working as fast as we can. We have been advised that it is the government's priority to prepare that legislation; and, partly, that is to provide the certainty that the industry is seeking.

Senator RICE: What is your time line, then? What are your expectations of when you will have something ready for government to introduce?

Mr Archer : The word I would use is 'imminent'. It is probably the best word I could use to describe that. But, again, it is really a matter for the government to decide when legislation will be introduced.

Senator RICE: In terms of the legislation regulations, is it expected that they will be similar to or different from the pre-2011 regulations?

Mr Archer : The general intent will be as it was previously, which is that it is not the idea that you would encourage harvesting of native forest wood waste for the sole purpose of energy production. Once again, for the details of that, you will have to wait and see.

Senator RICE: All right. In terms of the pre-2011 regulations, are there any power generators that are operating under the transitional arrangements in the 2011 legislation—operating under the regs that existed?

Mr Archer : Yes. I would actually have to take that question on notice. I am not aware that there are, but to be certain I need to take that on notice.

Senator RICE: If you could—and how many, what they are, how much power they are generating. In particular, do you know whether there are any processes of auditing them for whether they complied with the conditions under those regulations?

Mr Archer : I guess that sort of relates to the question of whether there are any. I will take that on notice.

Senator RICE: And, finally, given that it is one minute to 11: you have not done any further analysis, you were saying, based on past history; but have you done any analysis regarding potential carbon dioxide emissions from the proposal to include the burning of native forest wood under the RET?

Mr Archer : No, we have not. But, again, I think the general principle here is that this is native forest wood waste that would either be burnt anyway or be left to rot on the forest floor. The idea is that it is actually beneficial from an emissions point of view to have electricity generated from that wood waste, rather than have emissions emanate from it and no electricity generated.

Senator RICE: So you have not done any further analysis as to whether there would be other further CO2 emissions—what the carbon accounting of it would be?

Mr Archer : No.

Senator RICE: One final question: the Climate Change Authority in its review in 2012 recommended the government should commission a new study about the likelihood that the logging of native forests would increase if native forest wood waste was not eligible fuel under the RET. This was not considered in the Warburton review, but I am wondering whether, in the process of deciding to include wood waste, such a review was considered?

Mr Archer : We are considering and advising the government on what would be the most appropriate arrangements for reinstating native forest wood waste eligibility. Yes, the CCA made recommendations in that area, as did the Warburton review. All those factors are being taken into account.

Senator RICE: Has there been any internal review following that line of recommendation from the Climate Change Authority?

Mr Archer : I am not sure about how much detail to go into on our internal workings on this issue but, as I said, we have generally taken into account those previous recommendations and the subsequent work of the Warburton review.

Senator RICE: The CCA recommended that there be a review, so has there been any review of that type?

Mr Archer : There was been the Warburton review, but other than that there has not been a review.

Senator SINGH: Senator Rice asked about the package—Mr Archer, you said you were preparing a package for government on the inclusion of biomass into the—

Mr Archer : It is a package that relates to all the announcements that the government has made about reforms to the renewable energy target.

Senator SINGH: But including biomass, though?

Mr Archer : That is correct.

Senator SINGH: Did you say to Senator Rice that the package includes biomass being introduced through legislation or regulation?

Mr Archer : No, I was not specific.

Senator SINGH: No. Well, which is it?

Mr Archer : The answer I gave was that the details will be in the package, which will be revealed at the time of the government's choosing.

Senator SINGH: Right, okay. Thank you.

CHAIR: I have just been advised that the average tax per tonne of reduction in emissions under the carbon tax was $13,000 per tonne as opposed to $13.59, which is 93 times more expensive.

Thank you very much for your patience all day today and we look forward to seeing you again tomorrow. The committee stands adjourned until 9 am tomorrow.

Committee adjourned at 23:02