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National Energy Advisory Committee - Report - Year - 1980-81

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The Parliament of the Commonwealth of Australia


Annual Report


Presented by Command 4 May 1982 Ordered to be printed 5 May 1982

Parliamentary Paper No. 107/1982

PJM TC 6 · β

National Energy Advisory Committee

Annual Report 1980-81

National Energy Advisory Committee

Annual Report 1980-81

Australian Government Publishing Service Canberra 1982

© Commonwealth of Australia 1982

Printed by Canberra Reprographics Pty Limited 119 Wollongong St, Fyshwick, A.C.T. 2609

National Energy Advisory Committee, P.O. Box 5, Canberra, A.C.T. 2600

Dear Senator Carrick,

I have pleasure in presenting to you the 1980-81 Report of the National Energy Advisory Committee.

Yours sincerely,

(G. J. Lynch) Chairman

Senator the Honourable Sir John Carrick, K.C.M.G. Minister for National Development and Energy, Parliament House, Canberra, A.C.T. 2600



General . . . . . . . . . . . . 1

Published (and Completed) Reports . . . . . . . . 2

Summary of Reports Published (or Completed) during 1980-81 . . . . . .

Alternative Liquid Fuels . . . .

Energy Conservation in Buildings . . . Australia’s Energy Resources — 1980 . . Motor Spirit: Vehicle Emission, Octane Ratings and Lead Additives — Further Examination . . . . . 3

Nuclear Power in Australia: Regulation and Control . . . . 4

Membership of the Committee as at 30 June 1981 . . . . . 5

Committee Meetings . . . . . . . . . . 7

Support . . . . . . . . . . . . 7

Liaison and Co-operation . . . . . . . . . 8

Appendix Integrated Summary of Recommendations Made to Date . . . . . . . . . 9


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Annual Report

During 1980-81, the Committee completed the following reports: Alternative Liquid Fuels (July 1980); Energy Conservation in Buildings (December 1980); Australia's Energy Resources — 1980 (December 1980);

Motor Spirit: Vehicle Emissions, Octane Ratings, and Lead Additives — Further Examination (March 1981); and Nuclear Power in Australia: Regulation and Control (June 1981).

Brief summaries of these reports are given below (page 2-4).


During 1980-81, international oil prices remained high and further instability emerged in the Middle East as a result of the events in Iran and the subsequent Iran-Iraq conflict. World-wide activity in energy research, development, and demonstration continued on a large scale, although there were some cutbacks in the United States.

In Australia, there was continued progress towards the achievement of the basic national energy policy objectives of: • energy conservation; • replacement of petroleum fuels by other energy sources;

• increased petroleum exploration and development; and • development of alternative energy sources. The committee notes that the turmoil in the world energy markets since 1973 has caused virtually no disruption to Australian energy supplies. During the year, explora­ tion and development of Australian oil and gas resources continued at a high level. There was further growth of interest in the development of Australia’s energy resources

generally, with a continuing reassessment of some major synfuels projects as further information came to hand; these reassessments are part of the ongoing process of evaluating the feasibility of major resource developments. As the Committee emphasised in its earlier reports, particularly Reports No 9,

'Liquid Fuels, Longer Term Needs, Prospects and Issues’ and No 12, ‘Alternative Liquid Fuels’, the timing of the introduction of liquid fuel alternatives will depend on responses to market forces including the pace of development of technology, changes in

the international energy market, and decisions by governments. In the light of the various developments in these fields, and given the range of options open to Australia, the Committee sees no reason to alter the broad thrust of its recommendations to the Minister, as contained in previous reports. The Committee has,

however, reviewed its previous advice on a number of specific matters. Several significant developments which have occurred since Report No. 4, ‘Motor Spirit: Octane Ratings and Lead Additives’ was prepared, indicated that a further examination of the issues was warranted. The outcome is presented in ‘Published (and

Completed) Reports’ below.


In Report No. 12, ‘Alternative Liquid Fuels’, the Committee pointed out the potential value of methanol and ethanol as fuel extenders. Further reviews of technical studies carried out in Germany, Brazil, and the United States have indicated a greater potential for the use of pure methanol as a fuel than had previously been believed; it now

seems likely that methanol can replace transport fuels (both diesel and gasoline) in suitably modified engines in most applications. Accordingly the Committee is of the view that greater emphasis should be given to the potential of pure methanol as an alternative liquid fuel than was indicated in earlier Committee reports.

Finally, the Committee notes that many factors contribute to the broad framework within which energy policy has to be implemented. The Committee emphasises that the smooth and efficient supply of energy to consumers and the timely construction of new energy projects are dependent on a range of factors, and importantly upon good industrial relations. It sees as critical a need for adequate supply of capital and increased efforts by both employers and employees to establish sounder industrial relations, if energy supply stability and Australia’s resource development potential are to be realised.

Published (and Completed) Reports

The following NEAC reports have been published (or completed) up to 30 June 1981: 1. An Australian Conservation of Energy Program (September 1977) 2. Australia’s Energy Resources: An Assessment (December 1977) 3. A Research and Development Program for Energy (December 1977) 4. Motor Spirit Octane Ratings and Lead Additives (February 1978) 5. Electric Vehicles (June 1978) 6. Exploration for Oil and Gas in Australia (December 1978)

7. Fuel Economy Goals for Passenger Cars (May 1979) 8. Efficient Use of Liquid Fuels in Road Vehicles (July 1979) 9. Liquid Fuels — Longer Term Needs, Prospects and Issues (December 1979) 10. Strategies for the Greater Utilisation of Australian Coal (May 1980) 11. Natural Gas: The Key Issues (June 1980) 12. Alternative Liquid Fuels (July 1980) 13. Energy Conservation in Buildings (December 1980) 14. Australia’s Energy Resources — 1980 (December 1980) 15. Motor Spirit: Vehicle Emissions, Octane Ratings and Lead Additives —

Further Examination (March 1981) 16. Nuclear Power in Australia: Regulation and Control (completed June 1981) A summary of NEAC reports Nos 1 to 11 was contained in the 1979-80 Annual Report. An abbreviated summary of the recommendations in all reports is presented in the Appendix, pages 11-17. Details of reports completed in 1980-81 are shown below.

The report, Alternative Liquid Fuels examined the possibility of closing the increasing gap between the demand for liquid fuels in Australia and the indigenous production from existing oil fields by producing substitute fuels. The report concluded that there are several technological options already available for the production of liquid fuels from sources other than crude oil and that Australia has the resource base to take

advantage of a number of these options. In a stable energy economy, market forces provide an efficient mechanism for determining the place of alternative liquid fuels, but


the timing of the introduction of such alternatives would depend in part on decisions by governments. The report recommended that the Government should vigorously encourage the development of alternative liquid fuels, but that commercial criteria should be applied to

any decision to produce these fuels on a significant scale. The Government should, as a fundamental responsibility, ensure an investment climate conducive to the commercial development of alternative liquid fuels by the private sector, but should also continue to monitor the need to accelerate substitution, since security of supply of imported crude

was subject to rapid change. The report, Energy Conservation in Buildings was concerned with the efficiency of energy usage in individual buildings, i.e. was not concerned with the much broader question of the usage of energy in the total built environment. Although the use of energy in buildings was increasing as a proportion of total energy use in Australia, the report concluded that the need for energy conservation action was less acute than in many other countries, because of Australia’s mild climate and a continuing trend towards substi­ tution away from oil. The effectiveness of market forces in bringing about the more

efficient use of energy in buildings was inhibited, in some cases, by inadequate availability of information to building owners and operators and by inappropriate building regulations. There was scope also for greater attention to be given to energy conservation aspects in industry and professional education programs.

The report recommended that the energy conservation publicity campaign currently being conducted by the Commonwealth and State Governments should be extended to encompass the energy-efficient design and operation of buildings. The Commonwealth should also commission studies into the development of building performance standards,

develop guidelines for the cost-effective energy-efficient design and operation of all its buildings and facilitate the review of any inappropriate building regulations. The report also recommended that State governments and energy utilities should be encouraged to ensure that their gas and electricity pricing systems did not create disincentives to the

efficient use of energy in buildings. The report, Australia’s Energy Resources — 1980 was an update of an earlier Committee report, prepared during 1977, summarising Australia’s renewable and non­ renewable energy resources. Since the preparation of the earlier report, there have been significant changes in the energy resource situation. New discoveries of energy resources have been made, and the outlook for commercial usage of most energy resources has

changed as a result of many factors, including further exploration activity, changes in energy prices and technology, results from research activity and further resources assessment. These have resulted in important increases in Australia’s uranium resources, and a particularly large expansion in the assessed black coal resource estimates.

These changes, and the demonstrated need of government and other users for a sound and up-to-date understanding of the nature and extent of Australia’s energy resources necessitated the preparation of a revised report. The report, Motor Spirit: Vehicle Emissions, Octane Ratings, and Lead Additives — Further Examination presented a further consideration of matters originally dealt with by NEAC in an earlier report entitled ‘Motor Spirit: Octane Ratings and Lead

Additives’ (dated February 1978). The 1980 report was submitted for consideration in conjunction with the report of the Australian Transport Advisory Council’s Committee on Motor Vehicle Emissions (COMVE) entitled ‘Report on the Development of a Long­ term National Motor Vehicle Emission Strategy’ prior to the ATAC meeting of

20 February 1981. Significant developments since 1978 warranting a further examina­ tion of issues included the move, both in Australia and overseas, towards more stringent emission standards for hydrocarbons, carbon monoxide and oxides of nitrogen coupled

with the growing use of unleaded motor spirit in some overseas countries, notably USA and Japan, to meet those standards.


The report concluded that decisions concerning lead in motor spirit and motor vehicle emissions standards should now be developed in terms of an overall strategy which would be cost effective in meeting health and environmental objectives. If gaseous emission standards significantly more stringent than at present (i.e. those incorporating a HC standard more stringent than lg/km) were required, then an unleaded/catalyst strategy was almost certain to be the most attractive. An unleaded strategy would therefore be appropriate if emission standards were set to meet the National Health and Medical Research Council’s recommended long term guidelines.

The report. Nuclear Power in Australia: Regulation and Control considered the administration and legal questions which would need to be addressed if nuclear power stations were to be introduced in Australia in the next 20 years. The report concluded that legislation, regulation and inspection functions should be identified and responsibility for these assigned before nuclear electricity generation could proceed in Australia.

The report recommended that the Commonwealth, State and Northern Territory Governments should develop with minimal delay a legal framework, using comple­ mentary legislation as appropriate, for licensing and regulating health, safety, and environmental and third-party liability aspects of nuclear power generation. Within this

legal framework, uniform standards should be defined for all aspects of nuclear power generation and related construction, licensing arrangements and procedures, and all other relevant aspects of the nuclear power generation process.


Membership as at 30 June 1981

At 30 June 1981, the Committee comprised 19 members. These members were selected with a view to covering a wide spectrum of expertise in the energy field, and were appointed for a prescribed term. Membership of the Committee is drawn from Common­ wealth and State Government Departments and authorities, private companies, uni­

versities, and learned societies. However, members are appointed on the basis of the personal contribution which they could make to the work of the Committee, as distinct from any representational role. The membership of the Committee at 30 June 1981 was as follows:

Chairman Mr G. J. Lynch Former Director Esso Australia Ltd

New South Wales

Members Mr J. R. Ashton Commissioner Hydro-Electric Commission

of Tasmania

Mr R. Austen Chairman and Managing Director Austen and Butta Limited

New South Wales

Dr R. R. Booth Assistant Commissioner State Energy Commission Western Australia

Mr J. P. Burnside General Manager South Australian Gas Company South Australia

Mr J. B. Carter Principal Adviser National Energy Office Department of National

Development and Energy Australian Capital Territory (Executive Member)

Mr J. A. Dembecki Chairman and General Manager Energy Authority of New South Wales

New South Wales

Sir Donald Eckersley, OBE Primary Producer Western Australia

Mr N. A. Galwey State Electricity Commissioner State Electricity Commission of Queensland Queensland

Professor Stuart Harris Professor of Resource Economics Centre of Resource and Environmental Studies

Australian National University Australian Capital Territory

Mr J. F. Kirk Chairman and Managing Director Esso Australia Limited New South Wales

Mr J. E. Kolm Former Technical and Research Director ICI Australia Limited


Mr L. E. Marks Chairman Australian National Railways Commission

South Australia

Mr J. V. Monaghan Director National Energy Office Department of National

Development and Energy Australian Capital Territory


Professor M. G. Porter Director Centre of Policy Studies Monash University Victoria Mr B. P. Webb Director-General Department of Mines and Energy

South Australia Mr D. A. Wittwer Executive General Manager Oil and Gas Division BHP Company Limited Victoria

The Committee noted with appreciation the contribution made by the following members who retired during the year. Mr G. R. Bruns, a member of the Committee, died on 11 July 1980. The Committee expressed its sympathy to the family of Mr Bruns.

Emeritus Professor F. B. Bull, OBE Engineering Consultant South Australia Mr G. R. Bruns Economic Consultant Victoria Mr H. Flume AGL Canberra Limited Australian Capital Territory Mr D. J. Ives Deputy Secretary Department of National

Development and Energy Australian Capital Territory

Mr E. D. Murray, MC Former State Electricity Commissioner State Electricity Commission of

Queensland Queensland Mr H. J. Souter Former Secretary Australian Council of Trade



Professor Sir Rupert Myers, KBE Vice-Chancellor University of New South Wales New South Wales

Professor D. J. Nicklin Professor of Chemical Engineering University of Queensland Queensland

Assistance by Co-opted Members

The Committee was grateful for the substantial assistance given by co-opted members during the year.

Mr H. Babbage Director of Refining Caltex Oil (Australia) Pty Ltd New South Wales Mr K. Dawson Former Chief Engineer (Resources)

State Electricity Commission of Queensland Queensland


Dr R. G. Downes Former Director of Conservation Department of Conservation Victoria Mr D. J. McGarry Managing Director Australian Oil and Gas

Corporation Limited New South Wales

Miss J. C. Miller Senior Statistician Joint Coal Board New South Wales

(Power and Energy) Australian Atomic Energy

Dr J. L. Symonds Chief Scientist

Commission New South Wales

Committee Meetings

The Committee met in plenary session seven times during 1980-81. Meetings were held in the State capitals or in Canberra. An Executive Committee, consisting of the Chairman, the Standing Group Convenors, the senior Departmental representative and the Executive Member, met approximately monthly. On average, each Standing Group met 5 times during the year.

The Committee is supported by several Standing Groups, comprised of members of the Committee itself and co-opted members, and a secretariat, comprising a number of officers providing part-time assistance to NEAC within the Department of National Development and Energy.

The Standing Groups undertake preliminary drafting of reports within the areas allocated to them by the full Committee. As at June 1981, standing Groups were as follows:

Hydrocarbons Group Production and utilisation of petroleum, coal and natural gas in Australia, and matters relating to transportation.

New Energy Group All aspects of the development of new energy sources.

Electricity and Conservation Group Electricity generation and utilisation (including nuclear energy), and energy conserva­ tion.

Economic Group Energy economics, resources, trade, forecasting, and social and environmental matters. The Standing Groups seek advice and opinion from a range of sources in the field relevant to the subject matter under consideration. Some of the Groups include co-opted

members with special expertise from outside the Committee.



Liaison and Co-operation

The Committee has links with the major bodies working in the energy field in Australia, and, in particular, with Commonwealth and State committees and councils, companies operating in the energy sector, universities, and various associations. Commonwealth bodies with which the Committee has contact include the Australian

Science and Technology Council (ASTEC), Australian Atomic Energy Commission (AAEC), the National Consumer Affairs Advisory Council (NCAAC), the Australian Transport Advisory Council (ATAC), the National Energy Research Development and Demonstration Council (NERDDC), the Commonwealth Scientific and Industrial

Research Organisation (CSIRO), and the National Health and Medical Research Council (NH&MRC). Since the formation of NERDDC in 1978, on the Committee's recommendation, a close connection has been maintained with the work of the NERDDC through circulation of draft reports, work programs, and minutes of meetings.

Similar liaison has been established with State Government departments, energy supply authorities and advisory bodies: this has taken the form of inviting members of such bodies to speak at NEAC meetings, seeking information from them in preparation of material for NEAC reports, and consulting with them prior to the completion of NEAC reports. Examples of State instrumentalities involved in this way are the various

State electricity and gas authorities and State Government Departments of Mines and Energy.



Integrated Summary of Recommendations to date

Exploration and Development (a) Oil and Gas • Strong level of exploration effort to be maintained. • Natural gas pricing for new gas to be on a basis which provides a proper incentive

for exploration.

• Natural gas supply contracts to continue to be commercially negotiated. • Gas export schemes to be considered on a project by project basis. • Examination to be made of possibility of extending the shareholder rebate scheme to onshore explorers.1

• Co-ordinated policy to be developed jointly by the Queensland and South Australian Governments for the orderly development of the Cooper Basin. • Priorities to be specified by the Government for the use of natural gas LPG and condensate.2 • Exploration permit holders to be encouraged to explore lease areas in a timely

and satisfactory way.

• Commonwealth’s access to information concerning onshore exploration leases to be improved. • Consolidated approach on environmental matters to be developed by Common­ wealth and State Governments. • Options for synthetic gas supply to consumers in remote areas to be examined.

(b) Coal • Possibility of increased coal use in those States and Territories where there are limited coal resources to be examined. • Pricing of domestically consumed coal to be examined.

• Activities of current and potential overseas coal-producing competitors to be monitored.

• Potential customers to be made aware of development-retarding effects of low coal prices and the lack of long term market guarantees.

• Expansion and development of coal transport and port facilities be encouraged. • Applications of coal slurry pipelines to be considered.

(c) Resource Data • Information on the Australian resource data base to be improved.3

Extension of the benefits of the shareholder rebate scheme to onshore petroleum exploration and development activities was announced in the 1979-80 Budget.

The Commonwealth Government announced in April 1980 that it considered the highest domestic priority use for LPG to be as a motor vehicle fuel, particularly for fleet vehicles in capital cities; the use of LPG as a petrochemical feedstock was also considered to be a high priority.

3 Under the National Energy Research, Development and Demonstration (NERDD) Program, a grant has, inter alia, been approved to Joint Coal Board for support of a coal resource data system to handle NSW information and serve as a possible model for other States.


New Energy Sources (a) General • Increased funds for energy research and development to be provided. • An Authority to be established charged with the planning and co-ordination of

energy research programs.4

• Joint Government, industry and user study groups to be established to ensure that alternative liquid fuel options are fully and effectively available when needed. • Further research into electric vehicles to be encouraged.

(b) Alternative Liquid Fuels • The development of alternative liquid fuels to be vigorously encouraged, but commercial criteria to be applied to any decision to produce these fuels on a significant scale. • Specific alternative fuels —

— for LPG, logistic and marketing arrangements to be improved5 — for methanol and ethanol, downstream distribution implications to be examined and the Mobil methanol-to-gasoline process to be monitored6 — for shale oil, investment climate a particular consideration — for oil from coal, a balanced R and D effort to be supported and information to

be evaluated and disseminated — for substitute diesel fuels, limited investigations to be supported.

(c) Nuclear Power Commonwealth, State and Northern Territory Governments to develop a legal framework for licensing and regulating health, safety, and environmental matters.7

Conservation and Substitution (a) Fiscal Incentives • The use of LPG to be encouraged.8 • Variations in motor vehicle sales tax rates and registration charges, differential

fuel excises, etc. to be considered. • Existing tax concessions to be extended to cover coal-fired facilities.9

4 The National Energy Research, Development and Demonstration Council was established in May 1978 to provide advice to the Minister on the development and co-ordination of a national program of energy research, development and demonstration in Australia.

5 The LPG Task Force (comprising representatives from Commonwealth and State Governments and the oil, gas and transport industries) was established by the Commonwealth in late 1978 to advise on appropriate measures to encourage the automotive use of LPG. The Task Force is organised into three working groups, covering technical, marketing, and supply aspects.

6 Under the NERDD Program, studies are being conducted into the possible use of methanol as a gasoline extender — covering market size, production, blending, distribution, use in gasoline-powered engines, and administrative and policy considerations.

On 5 June 1981, the Commonwealth Government announced that legislation was to be developed in conjunction with the States and the Northern Territory to allow responsibilities for the regulation and control of nuclear activities to be implemented as far as possible by the States and Northern Territory, with the Commonwealth maintaining a co-ordinating role.

s The Commonwealth Government announced significant incentives to encourage LPG use in the 1979-80 Budget. The Government announced further major incentives in April 1980.

9 The Commonwealth Government announced substantial taxation concessions in relation to substitution of non-oil fuel equipment for oil-fired industrial plant through the provision of enhanced depreciation allowances in the 1979-80 Budget.


• Studies to be carried out into the effects of higher petroleum prices on the consumption of fuels.10

(b) Energy Savings in the Refinery/End-Use System • Decisions concerning lead in motor spirit and vehicle emissions standards to be developed in terms of an overall strategy which would be cost-effective in meeting health and environmental objectives.11

• The octane number of regular grade motor spirit to be increased from 89 to 92.12 • The Commonwealth Government to accept the concept of self-regulation by the Australian automobile industry to achieve fuel economy improvement, and monitor progress.13

(c) Energy Publicity Campaign and Training and Advisory Services • Governments to improve consumer awareness of the importance of energy conservation.14 • An education campaign and a differential excise to be used to encourage use of

the new regular grade fuel. • Governments to give consideration to a public relations program to improve the image of coal within the community.

(d) Energy Conservation in Buildings • Energy conservation publicity campaign to be extended to encompass the energy efficient design and operation of buildings.15 • Governments to help industry groups, etc. to publicise examples of cost-effective

energy-efficient design and practice, and encourage suitable courses by educa­ tional institutions.

• Energy pricing systems to avoid creating disincentives to the efficient use of energy in buildings.

10 Under the N ER D D Program, grants have been approved for programs to assess the impact of higher oil price levels on petroleum consumption.

11 The Australian Transport Advisory Council (ATAC) met on 20 February 1981 to consider a report prepared for them by the Committee on Motor Vehicle Emissions. At that meeting ATAC resolved that: • Australia adopt a nationally uniform policy requiring new vehicles manufactured after 1 January 1986 to be designed to operate on unleaded petrol and to meet the equivalent of US 1975 emission standards.

• Measures be introduced on a national basis to require the availability of 91.5 octane unleaded petrol at a significant number of fuel retail petrol outlets from 1 July 1985. • Governments develop a national policy to achieve an early progressive reduction of lead content in petrol used during the period prior to 1986.

1 The Commonwealth Government announced on 27 June 1979 that it would be encouraging oil producers to decrease the octane rating of premium motor spirit. Subsequently, the refining companies reduced the octane rating of super grade petrol from 98 to 97, leading to a substantial saving in crude oil. In addition, further savings have been made as a result of the introduction of a new 92 octane grade motor spirit by a

major company.

13 The Commonwealth Government announced on 27 June 1979 its decision to proceed with a voluntary program of national fuel economy goals for passenger vehicles based on the N EA C recommendations. The Commonwealth Government published a ‘Fuel Economy Guide — 1980’ on 23 July 1980, and progress with vehicle fuel consumption improvements is being monitored.

14 The National Energy Conservation Program jointly funded by the Commonwealth and the States was launched in October 1979.

15 The Australian Minerals and Energy Council agreed on 3 March 1981 that the scope of the National Energy Conservation Publicity Program should be broadened beyond liquid fuel conservation to include energy usage in areas such as non-residential buildings and housing.


• Commonwealth to commission studies into the development of building perfor­ mance standards. • Governments to develop guidelines for the cost-effective energy-efficient design and operation of their own buildings. • Building regulations which hinder the energy-efficient design and operation of

buildings to be reviewed.

(e) Public Sector Energy Management • Governments and other public bodies to demonstrate proper energy management in their own establishments. • Energy costs in transport systems under Government control to be evaluated.

(f) R and D into Conservation • Projects concerning energy-efficient modifications of engine and vehicle design to be supported.

(g) Interfuel Substitution (See also O il and Gas’ above). • Consideration to be given to installing coal gasification plants where natural gas and LPG are not available.

• Options and benefits of the greater use of coal and coal-derived electricity in preference to petroleum product use to be examined. • Levels of financial support for an accelerated coal resource identification and assessment program to be increased.

Strategic Stockpiling • Policy of strategic stockpiling of crude oil and petroleum products to be adopted.16

16 The Commonwealth Government announced in October 1980 that expenditure on oil storage facilities for business purposes would be allowed as a deduction for taxation purposes in the year in which the expenditure was made.