A NSW Upper House committee has called for an industry halt on further coal seam gas (CSG) development until tighter controls take effect.
The committee said government should wait until the Gas Plan, containing 16 sweeping reforms for CSG development from the NSW Chief Scientist, is in place before approving any new CSG operations.
But government has argued that a gas supply crisis looms over NSW, which would hit industry and households, and called for urgent development of CSG to alleviate the impending pain.
“You won't build the trust in the community unless the legislative and regulatory system is overhauled”
In October last year the NSW Chief Scientist Professor Mary O'Kane issued 16 recommendations to beef up protection for the environment and improve the regulation of the industry.
"You won't build the trust in the community unless the legislative and regulatory system is overhauled, and the appropriate financial arrangements are put in place also,” Prof. O’Kane said.
The government’s strategic release framework is slated to be in place by “halfway” through this year to “identify appropriate areas for gas exploration”.
Locations for CSG development would be selected to balance economic, environmental and social factors. The NSW government has frozen new applications for CSG exploration until the reforms are in place.
The government also supports a proposed gas pipeline from the Northern Territory.
NSW Resources Minister Anthony Roberts committed to the Chief Scientist’s reforms and wants to get gas flowing from NSW’s coal seams, to put “downward pressure” on prices and ensure security of supply for the State.
However, the committee was disappointed with Mr Roberts’ response to its question about when the reforms would be made.
“The answer provided on notice failed to provide any time frame for the implementation of the Chief Scientist’s recommendations.
“The Committee finds this response unhelpful and casts doubt on the commitment of the NSW government to implement the report of the Chief Scientist.”
Mr Roberts told The Land he had “made clear” a commitment to the reforms.
“For anyone to suggest otherwise is simply not keeping pace with the reforms set out in the NSW Gas Plan, which we are delivering.”
Retail gas prices are predicted to rise even further than the 11.2 per cent increase which has occurred over the past year, as export facilities at Gladstone in Queensland - linking the Australian market to more expensive international gas prices.
However, the committee heard increasing NSW gas production would not have a significant influence on gas prices.
The Independent Pricing and Regulatory Tribunal’s (IPART) submission said “it is unclear how the development of coal seam gas reserves in NSW might affect domestic gas prices” – in light of the relatively small amount which would be produced in NSW, compared to the global market.
The committee also heard conflicting arguments over long-term gas demand in NSW.
Government argued NSW faces gas shortages, as existing contracts are set to expire and interstate supply will be funnelled into Gladstone’s export hub.
Mr Roberts said 500 heavy manufacturers, 33,000 businesses and more than a million households rely on a secure supply of gas.
Australian Energy Market Operator (AEMO) is the government’s official forecaster. It told the inquiry total gas consumption in NSW would only fall by 1.8 per cent between 2014 to 2019.
However, the University of Melbourne Energy Institute questioned the need for new gas supply in NSW, telling the committee NSW’s gas demand would halve.
The Institute said rising gas prices would make gas fired power uncompetitive with coal for electricity generation, energy efficiency of non-gas powered home appliances such as
reverse cycle air conditioners would decrease household gas use and rising gas prices would drive some gas intensive manufacturing companies out of business and cause others to scale back on their gas use.
The Energy Institute's adviser Timothy Forcey told the committee that AEMO had not factored the predicted decline in gas use for electricity generation into their forecast.
He said AEMO acknowledged information that shows gas for energy generation is declining but did not factor that into its analysis. He argued that if AEMO had done so, forecast gas use would have been lower.
Mike Foley
Senior journalist for The Land.
Senior journalist for The Land.
