How Baird dug himself into a hole on gas policy KEITH ORCHISON 5...

How Baird dug himself into a hole on gas policy

• KEITH ORCHISON
• 5 HOURS AGO
• 2

• INDUSTRIES
• RESOURCES AND ENERGY
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You don’t get many better examples of the tangled web governments weave when they pursue popularity or try to dodge unpopularity than the Metgasco saga in New South Wales.

A Supreme Court judgement has now sat the Baird Government on its backside. It has reignited not just the question of what it does about a single well in NSW’s Northern Rivers or even how it manages gas supply for the state, but whether it knew it was acting unlawfully last year when it delivered what Judge Richard Button describes as “a bolt from the blue” on the small gas explorer.

Coming on the eve of ANZAC Day and coinciding with a week of wild weather in NSW, Judge Button’s decision against the government has received (understandably) muted media attention.



Metgasco’s plan to drill for gas on a farm outside the little NSW Northern Rivers village of Bentley (596 kilometres from Sydney, population 150) became a green activist cause celebre in early 2014 with the farmer, to quote the Australian Petroleum Production & Exploration Association, “subject to abuse, personal threats and vandalism”.

For the Baird Government, only weeks after the dramatic downfall of Barry O’Farrell and a year from what threatened to be a dangerously tough election despite a landslide victory in 2011, the prospect of a band of police confronting large numbers of blockaders in the full glare of the nation’s TV stations was a political horror story.
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Suddenly, the whole thing went away -- at least in political terms for the duration of the run-up to the state election. The government’s Office of Coal Seam Gas emailed Metgasco a letter suspending its activities on the grounds that it had not engaged in effective community consultation.

This particular problem has now returned for the government, with teeth.

Judge Button has ruled that the agency’s action was unlawful, finding it did not observe proper procedural fairness and had confused consultation with persuasion.
While the immediate media attention is on whether the government will appeal the decision and whether Metgasco will pursue a further case for damages, there are bigger issues.

The first is: did the government know it was acting unlawfully or did it act without realising this?

Was it up to no good or was it just incompetent?

The obvious challenge the court decision presents for the government may be the least of its problems if the NSW Legislative Council, where it is in a minority, launches an inquiry.

The broader issue of competence relates to resolving the overall issue of gas supply security for the state. This means not only physical supply but also the cost of the gas.

Ninety per cent of the gas consumed in NSW is used by 500 large industrial businesses and 30,000 smaller businesses. They employ more than 300,000 people.

APPEA characterises the Metgasco licence suspension as “raising serious concerns for any resource project” in the state. However, the wider issue of gas supply goes well beyond this: it casts a shadow over the future of manufacturing in NSW.

A month ago the Australian Energy Market Operator produced a new east coast gas supply review declaring that the threat of winter shortfalls in NSW, which it had foreshadowed a year earlier, had gone away.

Both the supply sector and manufacturing lobby groups have seized on the fact that a core reason for this surprise turnaround is the AEMO’s expectation of demand destruction resulting from businesses not being able to cope with high prices.

Santos, which wants to develop a much larger project at Narrabri, has also added its voice to the mix. Senior executive James Baulderstone said at a forum of the Committee for the Economic Development of Australia in Sydney that AEMO’s forecast assumptions are “uncertain”. It asserts that the market operator’s belief that Moomba gas storage may be available after 2016 may be poorly founded and warns that “over-reliance on this forecast risks NSW economic prosperity”.

Martin Ferguson, the keynote speaker at the CEDA forum wearing his APPEA advisory board hat, contributed the view that the Baird government has a mandate after the election to implement its “gas plan” and should get on with the job.

ANZACs of yesteryear were only too well aware of that Australian dictum that, if you are in a hole, you should stop digging. This may well be the best advice Mike Baird could be given, too.

One of the first things the recently-elected O’Farrell Government did in 2011 was to convene a private meeting involving three ministers, senior public servants, manufacturing representatives, the petroleum industry and farmers to consider the gas supply problem.

In September 2013 it ran a public “energy security summit” focusing mainly on the same topic.

Twenty months later it is still in the same hole, just a lot deeper down and wearing Judge Button’s judgement as well as the “palpable frustration”, to quote a senior journalist who covered the Australian Domestic Gas Outlook conference, of suppliers and manufacturers.

What’s its next move?
Keith Orchison, director of consultancy Coolibah Pty Ltd and editor of OnPower, was chief executive of two national energy associations from 1980 to 2003. He was made a Member of the Order of Australia for services to the energy industry in 2004.

http://www.businessspectator.com.au...content=1313307&utm_campaign=cs_daily&modapt=