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Minister Josh Frydenberg at Parliament House is stepping up the GST threat on gas. Andrew Meares
The Turnbull government has backed a plan to reduce GST payments to states like Victoria and NSW that block coal seam gas extraction in a move designed to help resolve the east coast gas crisis.
But Tim Pallas, Treasurer of Victoria, which has a complete ban on on-shore gas exploration and development, is refusing to back-down.
"Victoria won't be held to ransom or bullied by an inept government that blames everyone else but itself for its own incompetence," Mr Pallas said.
Energy Minister Josh Frydenberg said their government would not let the states off the hook even though it announced a short term deal last week to ensure enough gas was available this summer.
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Victorian Treasurer Tim Pallas says he won't be bullied on gas. Wayne Taylor
"While the Turnbull Government has moved quickly and effectively to ensure no gas shortfall in the east coast market next year, the states and territories are not let off the hook," he told The Australian Financial Review on Sunday.
"For too long they have outsourced their responsibilities to Canberra and failed to develop their abundant gas resources. If they are truly interested in a durable long term solution which sees more jobs, investment and lower energy prices they need to abandon moratoriums and bans and adopt a case by case approach to gas development as recommended by Australia's Chief Scientist," Mr Frydenberg said.
The Commonwealth Grants Commission weighed into the debate last Friday suggesting states which have moratoriums or restrictions on gas could miss out on part of their GST allocation.
"In these circumstances, the Commission could take the view that all states that have CSG have the opportunity to exploit it and whether they do or not solely reflects policy choice," it said in a discussion paper.
Queensland and South Australia currently have few restrictions on onshore oil and gas exploration and development but NSW, Victoria, WA, Tasmania and the Northern Territory have a variety of bans, restriuctions and moratoriums.
Gas consumers welcomed the paper. "Any time one restricts supply when demand is outstripping it, anything that reduces the ability to bring supply into the market, that's a negative," said Louis Vega, head of Dow Chemical in Australia and New Zealand."Consumers of all sizes, shapes and types are feeling this," he said. Ban is black and white
The cost the gas shortage to Victoria was exposed by the Australian Competition and Consumer Commission's report last week, which showed a premium of at least $2 a gigajoule to pipe gas south from Queensland, said Samantha Read, chief executive of chemical industry association Chemistry Australia.
Ms Read said the figures "highlight the importance of the restrictions that some states are putting on gas exploration, because ideally if you don't have to transport the gas you're cutting a couple of dollars off that price which can be a significant impact on an investment decision."
"The moratorium, particularly in Victoria, is just black and white," she said. "It's really important not to blanket ban anything."
Victorian Farmers' Federation president David Jochinke said the federation may not oppose lifting Victoria's moratorium on conventional onshore gas, if all the questions around the risks of the resource are answered satisfactorily. The moratorium lasts until June 30, 2020 pending studies on the risks and benefits.
"As long as everything has been ticked off our list we'd be open to having a conversation [on the potential early lifting of the moratorium], but if it puts any risk or jeopardises any livelihoods that's my biggest concern," Mr Jochinke said.
The federation fully supports the outright ban on unconventional gas development in Victoria, he added.
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