Gas fight in Victoria may get heated 4 Aug 2017

Today, the Energy Resource Information Centre has reported that the situation in the struggling Victorian gas supply market may be on the cusp of turning, with the first company moving to sue the state government.

Australia’s longest operating oil and gas explorer, Lakes Oil, is suing the Victorian Government because of the economic value which has been destroyed by the Government’s irrational ban on onshore development.

It is a big fight for a modest-sized company – a claim for $2.3 billion damages for wasted investment pre-ban and lost future income. It is also an important battle for the State, which is struggling with constrained gas supply and rising energy prices, both of which are threatening businesses and jobs.

Until last week, Lakes had appeared to be pretty much alone in its fight with the Andrews Government, (The Gina Rinehart-backed gas explorer first announced its intention to sue the Victorian government in December 2016) except for one shire council in Western Victoria which had voiced support.

But the worm may be starting to turn.

Last week Lakes appeared to have found a new ally in the form of the Moyne Shire Council – the second shire council to back properly regulated natural gas development, and the most important to the Lakes Oil development proposal, because it is where the main Lakes drilling prospects are located.

And this week, the politics of the issue took an important turn with reported concerns within the decision-making core of the Victorian Government.

The Moyne Shire, centred around Corangamite in western Victoria, declared it wanted the Government to lift its moratorium on exploration and development for conventional onshore gas.

According to rural newspaper, The Weekly Times, the council decided to run against the Government ban after a vigorous internal discussion in which the shire mayor opposed the council resolution.

The council voted to “call on the Andrews State (Victorian) Government to lift the moratorium on conventional gas exploration applicable until 2020”. It went on:

The Moyne Shire also calls on the State Opposition to ensure their energy policy for the 2018 election supports onshore conventional gas exploration.”

The second part of the Council resolution reflects the fact that the issue sparked considerable debate when the Government introduced its development blocking legislation earlier this year.

The Victorian Opposition voted in support of the Government ban on hydraulic fracturing and the moratorium on conventional gas to 2020 in the Lower House. But in the Upper House, Opposition MPs voted against the moratorium.

At the time, Liberal MP for Benambra, Bill Tilley, referred to anyone who supported the Government’s bill as “fake leaders, and green Kool-Aid sippers”.

The Government was solid in its vote. But it is now emerging that there may be differences of opinion within Cabinet, and that rising energy prices and the threat of job losses is starting to accentuate the differences of opinion.

The Victorian Government has been roundly criticised for its obstinate stance, when it has a 100-year safe history of developing natural gas resources, and has the nation’s highest usage of gas in homes, with millions of consumers and tens of thousands of small businesses using gas.

Victoria also has the nation’s biggest manufacturing sector, and it is this which has been crying out loudly for relief from tight gas supply and rising prices, as we have mentioned a number of times.

Industry has warned of this looking gas supply crunch for several years and unions have added their voice of concern. More recently, the Federal Government and the Australian Consumer and Competition Commission have identified the problem.

In this increasingly tense environment, it seems more Victorian politicians are starting to question the wisdom of the gas exploration and development blockers, which may represent the world’s only moratorium on conventional gas development.

This week The Australian reported a wedge developing in the Victorian Cabinet over energy policy settings.

Concerns over rocketing energy prices and the prospect of summer blackouts are driving a wedge through Victoria’s cabinet, with ministers calling for a solution to bring more immediate relief than investment in long-range renewable energy plans,” it said.

The Andrews government is in negotiations with energy giant AGL over a potential gas import jetty and pipeline operating out of a floating jetty at the Port of Hastings near Melbourne.

The $300 million proposal could boost the state’s gas supply by up to a third, with a potential to drive down power prices and safeguard operations in the state’s gas-fired plants.”

The obvious question with this plan is, of course: why pay another country to produce the gas, convert it to Liquified Natural Gas, transport it across the ocean, receive it, then convert it back to gas, when there is ample, readily accessible supply available in your own backyard.

The answer, according to the Andrews Government is that it might not be safe. But this irrational stance flies in the face of a century of safe natural gas development all over Australia, as well as around the world.

It has been dismissed by scientific authorities and slammed by current and former industry and Government leaders. Former Victorian Premier Jeff Kennett called it “criminal”, South Australian Senator Nick Xenophon labelled it “bizarre” and ACCC chairman Rod Sims said it was “strange”.

Perhaps it is time for the Victorian Government to come to its senses, and allow Lakes Oil to do what local councils would like it to do; what it has done safely and successfully for 90 years – and still has a valid operating licence to do right now. That is to help out the Victorian economy and its millions of gas users and get on with some productive drilling.

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