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Tuesday, 12 November 1985
Page: 2001


Senator SANDERS(8.28) —I rise to support the Petroleum (Submerged Lands) (Cash Bidding) Amendment Bill 1985 (No. 2). I have noted the remarks of the Opposition. I have noted the remarks of Senator Durack, who seems to be a wholly owned subsidiary of the oil barons. In fact, he was reading verbatim from a Peco oil company telex sent to me, which shows that that is where he gets his material. No doubt he will get a pay-off from the oil companies.


The DEPUTY PRESIDENT —Order! Senator Sanders, you will withdraw that remark.


Senator SANDERS —I withdraw it, yes. Senator Durack says Australian companies cannot support cash price bidding. He says that there is not enough cash flow to support cash price bidding. Santos is an Australian company, and it has a very admirable cash flow. I am sure the honourable senator would be very proud of the cash flow of Santos-well up in the range of $30m to $40m. Certainly, it can afford a couple of million dollars for cash price bidding. It does not have to go overseas to borrow, as Senator Durack says it might. There is no problem there at all. Again, this is another red herring from the Liberal Opposition.

Senator Parer says that our resources are declining. We know they are declining. Would this not then be the best time possible to account for these declining resources by turning to alternatives? Senator Durack read from a report by the National Energy Research, Development and Demonstration Council concerning ethanol. I found it quite encouraging because what the report really said was that ethanol was a long term solution to long term disruptions. It said that at present without subsidies it might not work. However, is not the oil industry itself heavily subsidised? Are not all of our other resources subsidised in some way or other? They are all subsidised. Why not subsidise ethanol? The reason is that it would break into the vertical integration of the oil companies. The oil companies have a wonderful thing going for them. They can pump something out of the ground, refine it in their own refineries, ship it and sell it at their own outlets, thus maintaining full price control. They can jack the price up to the disadvantage of everyone in the country and get away with it. That is vertical integration.

Why do they not want ethanol? They cannot grow sugar beet or sugar cane and would have to have someone else do it. The oil companies might not be able to control that. There are plenty of renewable resources in Australia. We are told over and over again that we must produce more oil. I have telexes falling out of my paper clip here about how we must always produce more oil to keep ourselves energy self-sufficient. Will oil keep us energy self-sufficient? Of course not. Oil alone cannot do it. Not even the oil companies would admit, if we could pin them down to it and if they ever told the truth, that oil will serve our needs forever. Of course oil is running out. Why do we not take that into account right now? Why do we not look at the alternatives, such as solar power? Solar power is coming on at a great rate. We are getting to the point with amorphous film solar technology that we can actually produce solar cells with the limitation in cost being the cost of the sub-surface material and the sub-surface material can be the cost of garbage bags; in other words, plastic bags. The price of solar power is plunging.

What about wind? Recently I had the good fortune to travel to Hawaii and other parts of the United States to view wind power at close up. I went to Kohala on the big island of Hawaii, which has 250 windmills. Of course, we are told in Tasmania that wind power simply is not viable. We have the Hydro-Electric Commission down there, another troglodytic, bureaucratic quango, which says that the wind does not blow enough and if it did it would not work anyway. I am here to tell honourable senators that wind power does work. The grid on the island of Hilo in Hawaii has 10 per cent penetration by wind. Ten per cent of the power on the island of Hilo is produced by wind. I was quite impressed with a wind farm in Hilo and I said so. The people there said: `If you get to the United States you must go to the San Gorgonio Pass because we have only 250 windmills here but there they have 1,500 windmills'. I did go to the San Gorgonio Pass and talked to the head of Southern California Edison's wind energy project. He said that the only thing that would stop the further development of wind power was nuclear war. Southern California Edison, which furnished about as much electricity to the grid as all of the electricity companies in Australia would furnish, has on contract 900 megawatts of wind power. A guy at San Gorgonio Pass said: `If you think we have windmills here you should go to Altamont because they have 3,000 there'.

Wind power is here. It is being held back in Australia by the attitude of people such as Senator Durack and the other bomb them back to the stone age Liberals of the Opposition and by the oil companies and the people who do not want to break this beautiful licence to print money arrangement which they have with the oil industry.

We have already discussed ethanol. What about sunflower oil, safflower oil and all the other oils that can be burned in diesel engines? The technology is known and proven. Once again the oil industry will not allow it to happen. What about wood? We can break down wood from ethanol. Wood is a renewable resource. We can burn it. In fact, we do burn it instead of oil in our heating apparatus. There are plenty of alternatives. What we need is a strategy to phase out oil completely to make us completely self-sufficient.

I looked at the presentations of the Australian Petroleum Exploration Association. I noted that on every page of those presentations that organisation had statements to the effect that we must keep up our oil exploration and we must keep pumping oil or else we will freeze in the dark and have a very diminished lifestyle. That is the implication in all of this. I think this probably works with members of the Australian public because they have been brainwashed for so many years. At the moment the Australian public is being brainwashed. Look at the commercials on television. We see and hear of the big Australian exploring all over Australia-I might add, at great environmental expense-in order to produce oil for the masses. That company does not say it is in it to make a buck, which would be the honest way. It says it is doing it for Australia's future. What a lot of garbage! We have the quiet achiever doing the same thing. We see Willesee out there in his funny hat with `Esso' on it saying that the Esso company also has Australia's interests at heart. What Esso, BHP and BP have at heart are their bottom line profits. They do not care how they get them. They are brainwashing the Australian public into thinking it is good for the Australian public. It is not. It is good for the oil companies.

Looking through these presentations we can see all sorts of pleas for self-sufficiency. Today I talked to two gentlemen from the Australian Petroleum Exploration Association Ltd-Terry Morahan and Keith Orchison. I said to them: `Will you tell me that cash price bidding will stop any oil company from bidding on the new leases in the northern part of Australia? Will oil companies fail to bid on these leases because of cash price bidding?' They said: `No, they will probably still bid'. I said: `Okay, if they bid will they drill for oil, will they explore?' They said: `Yes, they will probably explore for oil'. I said: `If they find a good show of oil will they produce it?' They said: `Yes, they will probably produce it'. I said: `Where is your shortfall of oil? What is your problem? Why are you worried about balance of payments? You have said to me that in spite of cash price bidding your clients will still bid on these leases'. They said: `Yes, but they will not be small Australian companies. They will be big overseas companies. they will be multinational and transnationals'. That is probably true, but does any honourable senator in this chamber tell me that any small Australian oil company can by itself get into a major off-shore development program? Can any honourable senator tell me that? Of course not, because they cannot do it by themselves.


Senator Cook —As part of a consortium it can.


Senator SANDERS —Exactly, as part of a consortium. In fact, it is the only way in which even major companies can function in such a highly capital intensive operation as off-shore exploration, as part of a consortium. Let us take a look at what happened in 1981 in regard to three leases in the Gippsland Basin. In the instance of lease 1, 54 companies forming seven consortia bid for a lease work program valued at $101m. In the case of lease 2, 43 companies formed eight consortia to bid for a lease work program valued at $92.5m. In the case of lease 3, 57 companies formed 13 consortia in relation to a work program value of $99m. All winning consortia had Australian companies as members. Every one of those consortia had Australian companies as members. Among those Australian companies were Mount Isa Mines, News Corporation and TNT Management Pty Ltd. These are good Australian firms all. I am sure that the Liberal Party would admit that. Where is the argument that somehow cash price bidding will exclude small Australian companies from participating? It is a nonsense.

What are the oil companies and their willing friends, the Liberal Party, really afraid of? They are afraid of spending money. They are afraid of paying the Australian people a fair price for the oil they will pump out of the ground. They are afraid of spending money. I can understand that. If one goes into a store which is giving something away on one day but the next day it wants to charge $5 for it one will complain. At the moment it is a giveaway. We are giving away these resources. Cash price bidding will be a way to get a fair return from the oil companies before the resource rental tax can bite, because it bites only when there are profits made and that may be a long time down the line. How can it possibly inhibit exploration? It certainly has not done so in the United States. My experience is in the United States. I have watched cash price bidding operating in the United States. We do not hear the oil companies there complaining about it. The oil companies in the United States have immense political power. They have not tried to change cash price bidding. In fact, it works quite well. What the oil companies here are saying is: `We control the present situation and we do not want any change'.

What is the present situation? The present situation is a work program which is under bureaucratic discretion. I was in Santa Barbara, California, when the Union Oil Company platform A blowout occurred. That blowout occurred because of a discretionary act by a bureaucrat in a United States geological survey. This discretionary act was to grant a permit to drill with insufficient casing. It was a kind of buddy-buddy deal between the United States GS person and the Union Oil company-between people who worked in the same industry.

One of the difficulties with any controlling bureaucracy is that its members often come from the industry it is supposed to control. This happened in the case in California. The result was a massive blowout which blackened beaches up and down southern California. It killed 8,000 birds and ruined the tourist and fishing industries. It is only now that Santa Barbara is recovering. The hazards are great when one deals with bureaucratic discretion. Also it is unfair to the bureaucrats. One has to ask a bureaucrat to make a decision to grant a lease on a work program on the basis of his analysis of what that oil company may or may not be able to do. It is much fairer-in fact, I think that, if they were honest about it, the oil companies would prefer it-to have a cash price bidding system on which they could bid.

In the free market-place which the Liberal Party should be supporting, the bids themselves will even out. If an area is highly prospective, if it does look good for oil exploration and production, the oil companies themselves will determine this and they will bid higher. If the area does not look good they will bid lower. No one forces the oil companies to bid high. They have control over the system. It is a very workable system. Incidentally, on looking through all the papers put out by Australian Petroleum Exploration Association Ltd I saw one statement which I found quite insulting to the Aboriginal people. Under the heading `Aboriginal Land Rights', at page 9 of one presentation, it says:

APEA believes that State Governments should have responsibility for land rights legislation and should control access to land for exploration and development.

In other words, APEA does not want to have Aboriginal control because Aboriginal control might mean that the oil companies would not have open slather as they do now. Therefore, they want to limit the rights of Aboriginal people, or anybody else who would try to inhibit in any way the production of this golden cornucopia of money concerned in the oil industry. Much has been made of local industry involvement. However, I am sure that if the Opposition really took a good hard look at what is happening in the oil industry it would understand that the Australian content in a production field has to be 50 per cent anyway. By law small Australian companies are involved in this process during the production phase off-shore. So there is really no argument that smaller firms will be disadvantaged in any way. They can continue operating as they always have, as members of consortia.

What about the argument that the Australian Democrats' support for cash bidding at this time is some sort of repudiation of our former position? I suppose it could be seen as such. However, we have seen new data. We have decided that we can change our minds. Honourable senators will have to admit that the sign of an intelligent approach to a problem is that when one is confronted with new data one can change one's mind; one is not locked into a doctrinaire position, as seems to happen so often with the Liberals in this place. We can change our minds, and we did.

At the time the cash bidding Bill was put to the vote, the Democrats were still looking at alternative ways of deciding who should get oil leases in highly prospective areas. We had not reached a consensus on the best possible way of doing it. Former Senator Jack Evans put forward the bank guarantee system as another way of approaching the problem. However, the industry did not accept that system. In turn, it responded with a modified `dry hole' work program which, at the time, was not fully acceptable to either the Australian Democrats or the Government. The vote against the Bill, therefore, was taken in the context of a further investigation of all the options. In the months since the Bill was voted on the industry has still refused to accept former Senator Evans's bank guarantee scheme. It still does not want it. It does not want anything. It does not want any control. It wants the complete right to rip oil out of the ground with no control at all.

The modified `dry hole' work program which was put forward in draft form has been refined and the suggestions have been incorporated into work program bids for all areas other than those deemed highly prospective. But there are still problems with the modified work program, such as the discretionary powers to be given to the Minister to allow variance of the programs. It is this variance of programs that worries me. It worried me in Santa Barbara and it worries me here. In general, the Australian Democrats are not in favour of a Minister being given wide discretionary powers. We believe the Parliament should have these powers, not individual Ministers.

After a further five months of negotiation, it is clear that no solution can be found taking the work program path. Therefore, the Australian Democrats have looked again at the cash bidding system. Former Senator Evans was concerned in May that, as the cash bid areas in the Timor Sea were very expensive, high risk exploration areas, the requirement for money upfront would discourage exploration. That is the oil company argument. That is what we were told by the industry. However, since May the interest of exploration companies in the Timor Sea leases has not declined. They still want to get in there. They are anxious to get in there. They hope that somehow the Bill will be either defeated or passed and they will be able to get their drilling ships in there and get into that area. They know that they can make a lot of money out of it. They are lining up for a chance to bid on these areas. They do not care what the system is because these are the most prospective areas available. Do not worry, they will go for it.

Will cash bidding discriminate against local companies? I have already mentioned some of the reasons and I have pointed out that consortia are an accepted way to go off-shore. Local companies will be able to participate as members of consortia. They can raise the finance in the normal way by way of share issues and borrowings. They did participate in the Gippsland Basin exploration. There were multi-million dollar work program schemes in that area. It presents no difficulty to them. What about the argument that cash bidding is simply a revenue measure? In May the Government refused to provide us with any figures on the amount of money likely to be raised by this measure. We have now been told that, on the basis of amounts paid to buy into existing leases under the work bid program, the likely income will be between $20 billion and $50 billion.


Senator Gareth Evans —Or more.


Senator SANDERS —The honourable senator says: `Or more'.


Senator Siddons —Billion, did you say?


Senator SANDERS —It is million, not billion. Would that it were billion. One could run the whole Government on that for a number of years. That is a small amount in comparison with revenue from royalties, but it is a reasonable price for the country to exact for access to the best known oil fields left in Australia, as it will be some time before the Government receives any income, if oil is found, under the new resource rental tax system.

I think that the facts are clear. If one eliminates all the propaganda and the scaremongering tactics of the oil companies, which in fact today were running around saying that the Bill would not even come on and they were waving a letter from the Minister for Resources and Energy, Senator Gareth Evans, which referred to an agreement to a work program-they said that this was an agreement to stop cash price bidding-one will see that they were trying to confuse people today. They constantly try to confuse people. The facts are that they can operate very well indeed with a cash price bidding system. It will not be a contemptible burden to them. They can operate with it. They can explore for oil. They can produce the oil. Australia will be able to obtain the benefits from oil. The arguments of the companies are specious.

I urge honourable senators to consider my earlier contribution on renewable resources. I think we must look to renewable resources. We must bite the bullet. At the moment research funds are being swallowed up in other areas such as atomic energy and other big hit areas. I think that the Government would be well advised to put some of this new found revenue-$20m to $50m-into renewable resources so that when the oil runs out we will have some means to power Australia. The Australian Democrats support cash price bidding and we feel that all sensible people in the Senate should do likewise.