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Wednesday, 16 October 1985
Page: 1348


Senator GARETH EVANS (Minister for Resources and Energy)(5.20) —I move:

That the Bill be now read a second time.

This Bill amends the Pipeline Authority Act 1973 in accordance with Heads of Agreement negotiated recently by the Commonwealth with the Australian Gas Light Co., AGL, in relation to haulage of gas on the Moomba-Sydney pipeline, construction of a northern lateral pipeline to Bathurst, Orange and Lithgow and related matters.

For some years the Commonwealth has been attempting to renegotiate the principal contract between the Pipeline Authority, TPA, and AGL-the 1974 haulage agreement-to overcome its lack of provision for recovery by the Pipeline Authority of unanticipated losses. These losses result from the Australian Gas Light Company's past and continuing inability to market gas at the levels it had nominated in the schedules to the agreement. At the end of 1984, the losses stood at $59m. Because of the structure of the agreement, this is an unserviced debt which by the end of the contract period, 31 December 2006, would exceed $1,000m and, depending on what assumptions are made about inflation, interest rates and volumes taken, could reach $2,000m in dollars of the day.

Despite extensive negotiations and exchanges between the Commonwealth, AGL and the New South Wales Government for over seven years, and especially since April 1983, no real progress was made until late last year. But a settlement has now been reached between the three parties under which AGL and the New South Wales Government can receive the benefits they seek, while the Commonwealth will achieve full recovery by 2006 of all past and future costs of construction and operation of the Moomba-Sydney trunk pipeline, the existing lateral pipelines to Wagga Wagga and Canberra, and the proposed lateral to Bathurst, Orange and Lithgow.

A revised formula for haulage tariffs over the next 20 years will-without increasing the real costs to New South Wales consumers-enable the Commonwealth to recover all of its past and future costs, provide compressors required along the trunk pipeline and extend a lateral pipeline to Bathurst, Orange and Lithgow. After 2006, haulage tariffs will cover costs of service, which costs will include a profit component.

Extension of natural gas supplies to Bathurst, Orange and Lithgow will be a most important outcome of the new arrangements. Construction of the $35m pipeline from Young to the three cities will employ a substantial work force, both directly and indirectly, and should result in a major industrial expansion in this important area of Australia. Natural gas supply will offer security to existing industries and opportunities for establishment of new undertakings.

As part of the new agreement, AGL will assume control of existing gas undertakings in the three cities and embark on a $20m expansion and refurbishing program of supply facilities. Rights and conditions of employees of existing undertakings will be fully protected. The retail price of gas to households in each centre will be no more than 10 per cent above prices in Sydney and will be uniform throughout the supply area. When these arrangements come into force on 1 January 1988, it is expected that future increases in the haulage tariff will never exceed increases in the consumer price index and will most probably be considerably lower.

It is necessary that in future the Pipeline Authority and AGL work together co-operatively on the task of carrying gas to New South Wales and Australian Capital Territory consumers. Both parties need to use their best endeavours to ensure that gas is carried safely, economically and without supply failure, and that a viable natural gas market is maintained. To assist towards this objective, the Commonwealth has agreed to AGL's participation in the decision making of the Pipeline Authority by having a representative on the Authority. The amendments to section 6 of the Act will permit this to be done. The appointment of an AGL nominee will permit closer co-operation and mutual support in the planning and operational activities of the two bodies, each of which has much to offer by way of experience and expertise, not only in pipeline operations but also in other aspects of the natural gas industry. The Pipeline Authority and AGL already have a close commercial relationship through what is virtually a sole supplier-sole purchaser situation. Like other part time members of the Authority, the AGL nominee will of course be bound by all of the provisions of the Act affecting such members, including the conflict of interest provisions of section 9.

The proposed amendment to section 15 removes the present requirement for the passage of specific legislation before construction of any new pipeline can be undertaken by the Authority. This amendment is sought for the following reasons:

(a) Section 15 appears to require prior legislative approval for such essential elements of pipeline construction as route surveys, plan preparation and property and easement surveys, but also calls for inclusion in the enabling Bill of a detailed description of the pipeline route-which cannot be adequately prepared without some survey having been undertaken. The present provisions inhibit preparatory works of the kinds mentioned, and also such necessary preliminaries as stockpile site preparation and site office establishment.

(b) This difficulty will be enhanced when there is a heavy legislative program.

(c) All of the requirements of section 15 are applicable when any new pipeline, no matter how short, is proposed.

(d) Separately from the provisions of this Act, there are adequate financial controls over the Authority through the need for ministerial approval for contracts involving expenditure exceeding $500,000-section 29-as well as Treasurer's approval for larger off-budget borrowings.

(e) The Authority's accounts are subject to the Auditor-General's and Senate Estimates committee scrutiny.

(f) Technical matters are properly the responsibility of the Authority which Parliament has established for that very purpose, and which possesses the necessary expertise. It is considered unnecessary and inappropriate for the Parliament to consider such matters as detailed descriptions of proposed pipeline routes and the limits of deviation, as is required by section 15 at present.

Passage of the amendment to section 15 will permit the Authority to initiate preliminary work on the lateral pipeline project, including the ordering of pipe, valves and associated equipment to ensure timely commencement of construction, and so meet the construction target date of late 1987 for supply of natural gas to Bathurst, Orange and Lithgow. Industrial and domestic consumers and local government authorities throughout the central west area-as well as the State Government-are all anxious to ensure that this target date is met. Legislative provision for nomination of an AGL representative on the Pipeline Authority, and early commencement of the lateral pipeline to Bathurst, Orange and Lithgow, are essential Commonwealth contributions towards a renegotiation of the 1974 haulage agreement from which the Commonwealth stands to gain substantial financial benefits.

I commend the Bill to the Senate.

Debate (on motion by Senator Sheil) adjourned.