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publiucly available at:
http://www.theaustralian.com.au/national-affairs/state-politics/federal-liberals-turn-on-barry-ofarrell-fix-the-gas-crisis/story-e6frgczx-1226651734288


Federal Liberals turn on Barry O'Farrell: fix the gas crisis

by:David Crowe, National affairs editor
From:The Australian
May 28, 201312:00AM


THE federal Coalition has blasted NSW Liberal Premier Barry O'Farrell for leading the nation's biggest state into an energy crisis that could add 30 per cent to household bills, opening a new flashpoint in relations after a bruising fight on education.

The dispute broke out in public yesterday after months of frustration as federal Coalition leaders, backed by Tony Abbott, urged their state allies to unlock huge gas reserves to create thousands of resource jobs and cut costs for manufacturers.

As industry executives warned that policy mistakes made a gas shortage inevitable, Coalition resources spokesman Ian Macfarlane urged Mr O'Farrell and his ministers to act urgently to keep the damage to a minimum. "They better get busy. They're facing an enormous crisis," Mr Macfarlane said.

Former deputy prime minister and gas company director John Anderson backed the warning and said Mr O'Farrell needed to use his strong electoral position to make the "tough calls" needed to increase economic growth.








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Mr O'Farrell's policy reversals have been blamed for freezing investment after his government imposed an "exclusion zone" around coal-seam gas projects, startling investors.

The decision has been blamed for forcing two companies, Metgasco and Dart Energy, out of the state while creating uncertainty at Santos about whether to commercialise its deposit in the Pilliga region near Narrabri in the state's northeast.

Mr Abbott is already at odds with Mr O'Farrell on education policy as the NSW Premier backs federal Labor's school funding boost, incurring sharp criticism from opposition education spokesman Christopher Pyne.

Energy policy emerged as another public dispute yesterday when Mr Macfarlane warned that current NSW policies meant that Mr O'Farrell would be in power when Sydney ran out of gas.

"Gas is either going to get so expensive that some users will stop using it or there won't be enough around or the price will not be economical," Mr Macfarlane said.

"Our message to NSW - and Tony's aware of the problem - is that they must find a solution. They must get this gas developed in the Pilliga, they must have the political courage to build the pipeline and get it into the network."

The NSW Premier stood by the state policies last night, saying the government had declared country towns and suburbs across NSW to be "no-go zones" for CSG as well as establishing a "cop on the beat" to enforce environmental and health regulations.

"The NSW government makes no apologies for listening to the community on coal-seam gas by putting in place the strongest regulatory regime in the nation," said a spokesman for Mr O'Farrell.

But Santos vice-president for eastern Australia James Baulderstone said the government decisions had increased uncertainty as gas supplies were running out. Mr Baulderstone said it would take four to five years for the Santos gas to be brought to market even if approval was given immediately.

The Pilliga reservoirs, located near Narrabri, hold 2500 petajoules of recoverable gas. NSW currently needs 160 petajoules each year. Mr Baulderstone said wholesale gas prices were about $5.50 a gigajoule but said it was "not out of the question" for this to rise to $12 as supplies shrank.

Mr Baulderstone said that increase would lead to a 30 per cent price hike in household bills. "What happens is that people who can least afford to pay for the gas stop taking gas, so it's not so much running out as demand destruction," he told The Australian.

"What that means is that you have manufacturers who cannot afford to pay the price and job losses occur. So I never like to say it's running out of gas because that's not how it works. You run out of jobs and you run out of people who can afford to pay for your product."

Mr Baulderstone said the Pilliga work could be turned from $100 million in annual exploration spending to real production but that it would take active support from government. "You really need to have not just the regulations there but a very supportive framework in place."

Mr Anderson said the state government had to stand up to the influence of the Greens and others.

"(The state Coalition was) elected to govern and govern they must, with a huge majority because the people recognised how inappropriately the state was led before," Mr Anderson said.

"That sometimes means you've got to make tough calls."

While Queensland had 30,000 workers on gas projects, there were a fraction of that number in NSW, he said.

Mr Anderson, a director of Eastern Star Gas before it was acquired by Santos, said NSW needed to "crystallise" the rules applying to gas projects. "They may believe they've already achieved that, but I don't meet anybody in industry who, frankly, doesn't scoff at that."

Mr Anderson said there was a role for a federal Coalition government to help remove the uncertainty. "The federal government needs to recognise that serious increases in energy costs in the biggest state in the commonwealth will be a very big problem for manufacturing and for farming," Mr Anderson said.

The former deputy prime minister said that the surge in development of US shale gas had driven down energy prices for farmers and manufacturers and given them a competitive advantage over their Australian competitors.