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Tuesday, 12 November 1985
Page: 2012


Senator Sir JOHN CARRICK(9.36) —The Senate is debating the Petroleum (Submerged Lands) (Cash Bidding) Amendment Bill 1985 [No. 2]. It is an identical Bill to the one that was rejected in the Senate in May this year. It is identical in every form and its rejection was supported by the Australian Democrats. The purpose of the Bill is to replace the current method of granting leases-that is, a work program bidding system-with a cash bidding system. One must understand the nature of both systems in order to understand what is happening. I know of no system in Australia which has the form of cash bidding that is contemplated in this Bill. I say at the outset that cash bidding bears no relation at all to any tendering system for any project and no tendering board would use the principles that are embraced in this Bill.

If one were to replace the work program method one would, of course, argue that it has been unsuccessful. Otherwise, why should we replace it? It is fundamentally important to say that the work program legislation has been superlatively successful. No one has put forward any argument to suggest that there has been any major defect at all or any degree of failure. On the contrary, to understand this situation it is important to recite the history of the matter. In both cases the Australian Labor Party's decisions in the past have proven very wrong indeed.

The Labor Party, under the Whitlam Government, had a disastrous oil search program. At the start of the Whitlam Government there were 22 or 23 oil rigs in Australia and all but one, I think, were working. At the end of its term of office-in 1975-I think only one was left and it was not working. If my memory serves me correctly, in 1975 only 25 holes were drilled. The need to obtain indigenous oil in Australia was absolutely crucial. The incoming Fraser Government brought in import parity pricing. I remind the Senate that the Labor Party fought with all its might-led by Mr Keating-to oppose import parity pricing. It said that it was disastrous, that it would have all sorts of ill effects. Today the very man who tried to destroy it and said it would damage Australia is the flag bearer for it-Mr Keating. Import parity pricing, which was damned by the Labor Party but was the most successful policy in oil search in Australia, was brought in by the Fraser Government, administered by me as the appropriate Minister, and is now the flag bearer for the Hawke Government.

One of the things that must be understood, and the Minister for Resources and Energy (Senator Gareth Evans) would be sensitive to this, is that what he is seeking to do is hide from the people the fact that this year revenue from import parity pricing has peaked at $4,000m and will fall steadily and very severely year by year. It will fall by $800m next year. These are the Minister's figures, provided at an Estimates committee hearing. In some four years time, the figure will fall to $1.3 billion, a fall of $3 billion in a matter of three or four years. In fact, what we are seeking tonight is not a program for oil search or oil development, but a program to get money by a snide or devious way. The fact is that if oil prices fall any further, the fall in old oil revenue will be much more vast. This, of course, is the reason why the Government had the so-called tax reform. It was not a tax reform at all; it was a back door method to put down a basement of taxes that could be accelerated to take up the fall in the price of old oil.

Two factors worked together in the 1970s to overcome a disaster. In the mid to late 1970s the forecast was that the 67 per cent self-sufficiency of indigenous oil then existing would fall to 50 per cent by 1985, to 40 per cent by 1990 and to 10 per cent or 20 per cent by the turn of the century unless major oil discoveries were made. Australia could not afford to have a fall of anything like that magnitude. In those dollar prices every 10 per cent fall represented $1 billion that would be needed in import revenue. We could not afford to find $2 billion to $3 billion in the years ahead. So, it was absolutely vital that there should have been a successful oil policy and the combination of the work program bidding plus oil parity pricing was for Australia a revolution in oil exploration and oil development which is still continuing, but which is being threatened.

In the recent Estimates debates in this Senate I asked the Minister for projections as to what the oil self-sufficiency of Australia would be in the years ahead. The figures given by him and broadly confirmed by the Bureau of Mineral Resources run something like this: The present self-sufficiency, which is in the order of 80 per cent, would fall by 1992-a handful of years away, some seven years away-to 42 per cent unless there was a major find of oil. They were the figures given in the Estimates. Indeed, if one looks at the address by the Chairman of Broken Hill Proprietary Co. Ltd in the Australian Petroleum Exploration Association Journal, he says that by 1995 self-sufficiency will be down to one-third. The situation is that unless major discoveries are made, and made very quickly, we will have a fall in self-sufficiency-a fall that cannot be coped with at all by imports. Today's figures on the balance of trade show that there is no way on earth in which we could afford to import more oil. Today's balance of trade figures are disguised by the fact that at this moment we are earning overseas export earnings by exporting some 20 per cent of our indigenous production. In other words, at this moment when we have a surplus, we still have a very adverse trade balance. If in fact it were to decline, and every 10 per cent decline below 70 per cent will cost us more than $1 billion, there is no way in which Australia could in fact pay for its oil. It gets worse than that. Every time that the dollar is devalued further it costs us more in world trade. In fact, as our trade balance gets worse, it would cost us more and more.

The primary thing to do is to stay with the policies that have been successful. We should stay with import parity pricing because it has been superlatively successful. It is now acknowledged to be so by the Hawke Government which depends on it for the basis of its revenue and acknowledged so by the Treasurer (Mr Keating) who went around Australia blackguarding it and saying that it was a tragedy. I remember the Treasurer, then in the Opposition, going around Australia saying that it would be a terrible thing that, under the Fraser Government, petrol would increase in price to 40c a litre. It never did but it has got to 57c a litre under the Hawke Government. So much for the Treasurer and so much for the Hawke Government that blackguarded us.

Let us have a look at this whole question of work program bidding. When I look at the cash bidding I can only think of a line out of one of the ballad poems of Kipling, and that line says: `He that hath the largest purse shall have the longest life'. In other words, he that pays the most gets the bid. I know of nobody in any business venture who makes that quantitative decision and stays with it. If one thinks about it, it is unreal. First of all, it is entirely quantitative. It gives to him who has the larger purse the longer life. Kipling was rather cynical about that form of justice or mercy. I commend the poem to honourable senators. This policy does not ask a person or corporation to submit any of the qualities of that person or corporation-any of the qualities of integrity, the financial solvency, the ability to perform in the past, the readiness to undertake the task or the whole question of whether it is the best of the persons or corporations to do the job. Any tender board of any kind of quality and integrity at all, before it looks at price, tests the whole quality of each of the corporations that bids. The questions must be asked: Is it of integrity? Has it got financial solvency? Has it got the equipment to do it? Is its performance of the past such that it shows that it can do it? Nobody would make a decision on price alone. The Government's concept is altogether an outrageous one. It is against every kind of commercial principle that one understands, but it is silly because it is not going to get the Government more money.

Let us have a look at this situation. First of all the Government says: `We are going to take this front end bid from you whether or not your oil exploration is a success or a failure. In fact, that firm pays for the working expenses in the cash bid, and because it has got more working expenses it pays less tax. In fact, the income tax take or the company tax take is reduced. If the venture is successful and there is no front end cash bid, the Government gets the profit from the well. If the firm is successful and there is a cash bid it is put in as working expenses and the Government does not get that much; so there is nothing in it in the end for the Government. It comes down to a situation of fundamental principle. What it means is that the Government says that it does not care about the qualitative nature of the bidder at all so long as the bidder gives it the largest amount of money. I repeat: Never in my life have I heard of a business practice based on that principle. I have never heard of that in a tender board. In fact, if it were done in a tender board it would be regarded as corrupt. No tendering system can justify itself unless it is stated in the first place: `I have looked at the works program that these particular contractors have put before us. I have looked at their performance, their integrity and their equipment and this one is the best bid'. One does not give it to the person who bids the most.

Australia is one of the least prospective countries in all the world, one of the countries where the chances of finding oil are less than most and where the prospectivity is larger off-shore than on-shore, but infinitely more costly off-shore. It costs $10m at least to drill one well. It is imperative that we continue to attract investment and re-investment in Australia. I reject the idea that it does not matter that leases go to the highest bidder-that `he that hath the largest purse shall have the longest life'. I had never thought that Kipling's cynicism would find its place in the Australian Labor Party and its decisions. That kind of situation is one of the ugliest I know. It means that very many Australian companies will not, of their own, be able to come into this. Someone has said that they will be able to get into conglomerates or into groups. The fact of the matter is that we need to encourage as many Australians as possible to invest. The following very significant statement is made in the Australian Petroleum Exploration Association report: `In Australia today we are using oil much more rapidly than we are finding it'. What are we doing at this moment? We ought to be maintaining the fundamental programs that were successful.

I repeat: Has anybody criticised the work program? One of the interesting things about those who supported the cash bidding in tonight's debate was that none of them discussed the programs at all. They all talked of other things. What an extraordinary situation. We had a discourse from the Australian Democrats making claim after claim that was absolute nonsense, first of all attacking the oil companies and casting all sorts of aspersions, and then saying: `Is it not a good thing that the big foreign oil companies will have the money to make the bidding?' They then made what, I suppose is the most inaccurate statement I have heard in this Senate-a statement about the extravagance of the present state of research into solar energy and wind energy. In fact, the expert advisers to this Government and previous governments and the expert advisers around the world will say that whilst one should strongly encourage renewable energy, the fact is that at this stage of our development it will be insignificant. If every house in the world had a solar array on its roof it would save 10 per cent of energy. I do not want to destroy the concept at all, but the making of that solar array, with all its metal, copper pipes and vitreous materials, uses very considerable energy indeed, and it is therefore not a great net conserver of energy.

If one wants to look at wind energy, one need not go to Hawaii. One can go to Rottnest Island in Western Australia and see the windmills there and the tests that are being run. One can go to Western Australia and see very good solar energy research going on. Australia in many ways in its universities is leading in solar research but it is absolutely wrong to suggest that these are alternatives. The Australian Science and Technology Council, ASTEC, has advised this Government that, at least for the next 30 years, there will be no alternative to an enormous growth in nuclear power generation throughout the world, that even with the expansion of coal and oil production and pollution from acid rain there will be no alternative and that the renewable energies will not take its place. Here we have somebody rejecting entirely the advice of ASTEC, the most prestigious scientific body in Australia, to catch a headline.

I want to take this matter carefully and put it into position. The fact is that this Bill is the same as the one that was here before and rejected by the Australian Democrats. It seeks to replace a work program system which was the most successful system of lease arrangements that this country has ever seen. Nobody has said that this work program of lease arrangements has any major defects at all. If honourable senators vote against it tonight they will be voting for a cash bidding system which is unique in Australia. No Australian firm would use it at all for tendering and we would be rejecting the most effective program for lease arrangements that we have had in Australia. If honourable senators support this rejection they will be saying that when they examine the tenderers for a lease every one of them will want to know: First of all, is this a company of integrity? What does it bank think of it? Who are its financiers? What is its performance like? Can it guarantee to do the program? What is its equipment like? What has it done before? Is it a good conglomerate with Australians? Under this system, if we vote with the Government, we put away all those considerations and say, as Kipling says: `He that hath the largest purse shall have the longest life'. What honourable senators will be saying if they support the Government is that the fellow who has the biggest purse will get the tender for the lease, no matter what the other considerations are. Let us make no mistake about that.

I speak as a former Minister who for three years operated that program in the most successful three years of oil research and development that this country has ever seen. If we start to experiment we are going against that situation. I remind honourable senators of the figures: Unless we make major oil finds in the next seven years we will have dropped from 80 per cent self-sufficiency to 42 per cent in 1992 and to 33 per cent in 1995, with absolutely no chance whatsoever of using import replacements to get oil in. Today we saw that we have a deficit of something like $1,640m in our trading balance. We could not afford the billions of dollars needed for replacement.

This judgment is not some glib thing. It is this: Are we willing now to risk what was the most successful program for Australia, a program that changed Australia from being an oil hungry community, a country that was energy short, into a country that was energy efficient? Are we willing to take that risk? Are we willing to do that against the advice of reputable firms such as BHP who say that the cash bidding system will be devastating, particularly for Australian firms, since it will take from them the ability to act?

What are we changing this system for? It can be for only one reason; that is, that it is a backroom way of grabbing money. There again, I remind the Senate that it does not do that because if we take the money by way of working expenses at the front, we cannot take it by way of tax at the other end. We can only have it once.

I believe that the most important thing for Australia is that its energy self-sufficiency should be maintained. It is the most difficult country in the world for oil exploration. It is very interesting to watch the lobbying going on at this moment in this Senate. Indeed, the Minister for Resources and Energy (Senator Gareth Evans) himself knows that the arguments I am putting forward are fundamentally right and what the Democrats are now doing is spurious and totally wrong. They cannot have voted here in May against this Bill and now be turning around and voting for it unless there are other reasons. That is the fundamental point. Bearing in mind that all the reports say that we are using oil faster in Australia than we are finding it, that we have to find oil and that it is absolutely vital that we spur on exploration--


Senator Sanders —You are a tool of the oil companies in this chamber.


The ACTING DEPUTY PRESIDENT (Senator Tate) —Order! I call Senator Sanders to order. I ask Senator Sir John Carrick to address the Chair.


Senator Sir JOHN CARRICK —Mr Acting Deputy President, I was addressing the Chair. I will not waste my mind addressing Senator Sanders. I have already pointed out to the Chair that I have never heard so many inaccurate statements made in the Senate as were made tonight by Senator Sanders. Let us make no mistake at all-if the brain fever birds want to go on and on and act like larrikins it is for them to do so. It is not for me to respond to them. Fundamentally, I want to say to the Senate--


Senator Crichton-Browne —Mr Acting Deputy President, I raise a point of order. For the second or third time tonight Senator Sanders has demonstrated to the chamber what he is like. Some moments ago he described Senator Sir John Carrick as a tool of the oil companies in this chamber. Senator Sanders is nodding his head in agreement that he said it. I know you did not hear it, Mr Acting Deputy President, but it has now been confirmed. In my view, that is a reflection on the integrity of Senator Sir John Carrick. I ask that it be withdrawn.


The ACTING DEPUTY PRESIDENT (Senator Tate) —I believe that is a reflection on the honourable senator. I ask Senator Sanders to withdraw.


Senator Sanders —It may be a reflection on him. I am sorry if he considers it to be so. I do withdraw that statement, although I do believe that through the comments of Senator Sir John Carrick he has certainly shown a predilection to support the oil companies.


The ACTING DEPUTY PRESIDENT — Order! I have asked you to withdraw, Senator Sanders.


Senator Sanders —I will withdraw that particular statement.


Senator Sir JOHN CARRICK —Let it be known that I would not have wanted any withdrawal from Senator Sanders. I regard his comments in this chamber as so debased that I would take no reflection upon myself of anything he said. I make the very simple comment to this chamber: Let the people of Australia and the Senate judge whether my three years as Minister produced for Australia-not for oil companies-the greatest upsurge in search and development and the greatest movement towards energy self-sufficiency that this country had ever had. In fact, by the time the Fraser Government lost office this country had become the enormous beneficiary of such policies. Certainly no one in Australia, other than Senator Sanders with his gutter language, would ever suggest that I was the tool of any company, any corporation, any person. In fact, I stand as my own man on these matters. I am enormously proud of the fact that import parity pricing-which Labor derided and which it now grapples to itself with hoops of steel-and the work program leases were the immensely successful programs that gave to this country a waterproofing in energy the like of which it has never seen and which has been carried over till now. Those programs are now being disturbed.

I repeat that nobody has ever proposed a justification for naked cash bidding based on quantity alone; he that hath the largest purse shall have the longest life. Nobody has suggested that that bears any relationship to ethical tendering at all. Nobody has said that the work program leasing was unsuccessful. How could anyone say that? It was successful. Nobody has suggested that cash bidding will bring any qualitative value at all to the issue. In other words, what we have been asked to do tonight is to divide and vote for this Bill on the basis of some kind of deal. No kind of reason, no kind of rational argument at all, can support the argument for cash bidding. It can be done only for the short term purpose of Labor trying to raise money in the knowledge that its revenue from old oil will fall by $800m next year. It can be done only by the Australian Democrats not changing their arguments validly but making some arrangement with the Government. If the Australian Democrats do that this country will be the poorer, because it has had eminent success from a policy of work programs. It will face considerable dangers and, in my judgement, considerable unethical practices if indeed the only way it chooses a corporation by the size of its purse.