Parliamentary Inquiry finds NSW CSG will do nothing to stop gas price rises

MEDIA RELEASE – 25 February 2015

Jeremy Buckingham, the Greens NSW mining spokesperson, and Deputy Chairman of the Legislative Council Inquiry into ‘supply and cost of gas and liquid fuels in NSW’ today welcomed the conclusions and recommendations of the Inquiry which found developing coal seam gas in NSW would do little to reduce gas prices, and criticised the lack of foresight and regulation in the development of coal seam gas for export in Queensland.

The Inquiry concludes:

On the dynamics of domestic gas price:

Paragraph 3.55: “The more impartial, economic evidence before this Committee leads us to favour the proposition that increased domestic supply of gas will not by itself lead to reductions in gas prices, or even a reduction in the rate of price increases.  This is because the predominant driver of domestic gas prices will be the international gas price and an indigenous NSW gas supply would be very small in the context of the world gas market and will not impact upon the world price. This means that government regulation of the gas market will be necessary to have a significant impact on price or to guarantee domestic supply.”

Paragraph 4.52: “With gas now being produced in Australia on a scale that completely eclipses any demand by domestic residential or industrial users, any difficulty with supply or increased price can only be as a result of rent-seeking by private interests, allowed by market and regulatory failures. Governments in this State and other jurisdictions should take action to prevent, or remedy this occurring.”

On the past failure to recognise knock-on impacts of moving to gas exports:

Paragraph 4.46: “The committee expresses its disappointment that no-one appears to have recognised the significant disruption that the move to LNG export would have on the domestic gas market.”

 

On gas reservation policy:

Paragraph 4.48: “Given the importance of gas to New South Wales households and industry, particularly manufacturing businesses, and the changing dynamics of the eastern Australian gas market, the committee considers that an Australia-wide domestic gas reservation policy is needed to assist in containing gas prices and ensuring security of supply.”

Paragraph 4.56 and Recommendation 2: “The committee recommends that while the recommendations of the Chief Scientist are being implemented, the NSW Government pursue through the Council of Australian Governments the implementation of an Australia-wide domestic gas reservation policy.”

Greens MP Jeremy Buckingham said: “The Inquiry has found it is the pursuit of coal seam gas for export as LNG that is squeezing supply and driving prices up, and that coal seam gas projects in NSW will make no meaningful difference to this equation.

“The Resources Minister, Anthony Roberts himself admitted that modelling he’d seen showed the completion of both Santos’ Narrabri and AGL’s Gloucester projects would only lower gas prices by 3%. For such a tiny benefit, coal seam gas is simply not worth the risk.

It is a massive failure of governments and the industry that no thought was given to the knock on consequences of moving into the export of coal seam gas. The inquiry heard evidence from business, economists and unions that billions in economic activity and tens of thousands of jobs particularly in manufacturing are being put at risk.

“What we are witnessing here is both the market failing to benefit Australian businesses and households and governments failing to regulate the market to address this issue.

“A domestic gas reservation may have been possible as a condition when governments gave the initial approval for LNG exports, but implementing such a reserve now through various state and federal governments will be difficult.

“Government policy should focus on transitioning our energy system away from fossil fuels to clean renewable energy. This should include programs to assist households and business to shift away from gas.

“The inquiry revealed major issues with a lack of transparency in the upstream gas market. The Greens and Labor members of the inquiry voted for a recommendation that the Australian Consumer and Competition Commission investigate the upstream gas market for cartel or other anti-competitive behaviours. Unfortunately this recommendation was defeated by the government members and the Chair,” he said.

Contact: Max Phillips – 9230 2202 or 0419 444 916

The Legislative Council Inquiry Report is available here