Opinion: Gas customers lose as Government shuts the state to exploration

November 24th, 2016

The Victorian Government shut out of natural gas development defies logic, history, and legal process.  It prompts nervousness about gas supply for industry and manufacturing and it significantly increases the likelihood of higher energy prices for thousands of  businesses and millions of consumers.

It also flies in the face of the advice from its own Environment Department. So why do it?  The answer is politics, as we have explained before.

But the Andrews  Government has gone further than simply implementing a ban on hydraulic fracturing – despite the fact there is no evidence to support its primary rationale that it is saving the state from an environmental calamity.

The Government is also blocking the simple gas drilling which has been carried out across Australia for as many as 100 years – including onshore and offshore Victoria.  And it intends to pull all licences and pay a token compensation – an act which is a rude and costly imposition on Victoria’s longest-standing oil and gas driller, Lakes Oil.

Lakes Oil has been stymied on its planned conventional developments in recent years as the ‘anti-fracking’ campaign waged by politico-environmentalists has raged around them.

The company has been explaining its plans, and the support it has from local communities, industry and local authorities in Victoria’s west – an area familiar with resources projects over many decades and less influenced by activist campaigns from afar.

Lakes Oil is now gobsmacked at the latest move by the Government – as reported by the Australian Financial Review commentator Matthew Stevens this week.

Stevens himself called it robbery by the government.  Here are the key points of what Lakes Oil Chief Executive Richard Sleeman said:

  • The Government is introducing new legislation to enforce the ban and rescind licences because it knows it had no power to do so under existing law.
  • The legislation is intended to thwart the Judicial Review Lakes Oil has initiated to test the validity of the ban, which if upheld could lead to significant damages against the Government.
  • The move amounts to retrospective legislation – which will significantly compromise Australia’s international reputation as a reliable political environment in which to invest.

To quote Mr Sleeman directly:

Lakes Oil has in good faith spent many tens of millions of dollars exploring onshore Victoria and is ready to commercialise its acreage, beginning with but not limited to the Wombat gas field [in respect of which letters of intent were in place for sale of gas]. The resource potential, the gas production potential and the value of the Wombat project have all been subject to independent scrutiny.

“Lakes Oil has suffered huge damage as a consequence of the government’s invalid decisions. We will continue to monitor developments and will take actions as appropriate to protect the interests of not only our shareholders, but also Victorians generally

“Premier Andrews’ pandering to lobby groups and shutting down all exploration, ‘conventional’ included, does nothing for farmers. Our activities don’t compromise what farmers do. On the contrary, payments made for access to farmers’ land represent drought-proof income that provides security for them.

“By shutting down the petroleum industry in Victoria, Andrews is setting the state up for problems with increasing gas and electricity prices, shortages of gas supply, loss of manufacturing industry, loss of employment and [by the way] loss of royalty revenue that would otherwise be earned.

“Andrews has either been totally misguided by his advisers or, more likely, he is simply selling out the state under the pretext of clean green farming in a move that he thinks might help retain power.”

In his incisive commentary, Matthew Stevens then adds:

“To be clear on this point, the government has confirmed to The Australian Financial Review that it did not seek independent scientific analysis of the risks of onshore oil and gas drilling and production before its unique ban on the industry’s operation in the state. Doubtless that is because those few who knew anything at all about the drilling technologies in question are aware that independent scientific studies have consistently identified that what risk exists is known and very manageable.

“This, for example, was the conclusion of the most recent Australian study conducted by the chief scientist of NSW, Mary O’Kane. Her conclusions stand consistent with the assessments of a host of US state and federal environmental agencies that have concluded that unconventional technologies are geologically uncontroversial though they require firm regulatory oversight for the management of waste waters that are returned to the surface.

“It is telling, surely, that Victoria’s own chief scientist was not asked to validate the state government’s technologically irrational bias. Why seek to make informed, fact-based judgments when the demands of urban and rural voters are more easily stated by collective delusion and stupid law?”

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