‘Tasmanian Gas Price Crisis’

Adjournment Speech

I’ve recently received a briefing from one of Tasmania’s most respected and senior Businessmen, Wayne Bould of the Mineral’s Council – who has warned me about a looming crisis in natural gas prices for our residential and business customers.

Mr Bould indicated to me that if the Liberal state government of Tasmania, assisted by this Federal government didn’t take steps to purchase or take control of the privately owned pipeline from the company Palisades – which delivers gas from mainland Australia to Tasmania…

… increases of up to 40% – perhaps more – could occur for all commercial users of gas.

This would mean that Tasmanian pensioners, families, small business, unemployed, single parents, schools, hospitals, bakers, supermarkets, retirement villages, mineral value adding operations and our heavy manufacturing –

… all will be looking at significant rises in their gas bills – perhaps up to 40% – toward the end of 2017.

Mr Speaker,

Mr Bould explained to me the reason for the gas price increase is that:

(and I quote)

At the moment there is a contract between Hydro Tasmania and Palisades, (this is a private company who own the gas pipeline) where around about 50 per cent of the pipeline transmission cost is paid by Hydro to Palisades, on the basis that it was going to feed the Bell Bay power station.

(obviously it’s a gas powered station)

Now because we have a surplus of electricity, to the extent we can actually sell it up Bass Link – Bell Bay power station is no longer a viable option.

It isn’t an income generator – and isn’t required strategically because there is enough electricity generated in the system and there is enough water in the dams to the extent it’s no longer required.

So their contract as we understand it ends somewhere around 2017.

At which time their subsidy (Bell Bay Power Station) effectively, of the transmission pipeline, ends at that time.

And that means, Palisades, in order get its recovery of the return it wants on the pipeline will need effectively to double its transmission costs that it charges to all the users of the pipeline.

So that means everyone in the system is going to receive an increase in the cost of the transmission cost.

The transmission cost isn’t the ultimate cost, it could be 10 per cent or 20 per cent of the total cost of gas.

And that is some of the numbers. I am asking people to provide me with at the moment.

But let’s say it’s 20 per cent the cost of gas – then what we will see is Hydro dropping out with its subsidy and that will give a 10 per cent or better increase of cost to users.

I think the transmission cost is much higher than the numbers I have used, because people are talking 30 to 40 per cent increases at a commercial level.

That will flow through to the mum and dads. You have got to recover your costs.

(End of quote)

Mr President,

Its clear from Mr Bould’s warnings – that a Gas price crisis for Tasmania will occur if measures are not put in place by both the State and Federal Liberal governments to prevent the private company Pallasides – who owns Tasmanian’s gas pipeline from passing the full costs of gas transmission once the Gas fired power station at bell bay is decommissioned.

Mr President,

I understand that one of the reasons that Pallasides is forced to seek a very high return in their gas pipeline transmission charges, is because they are looking for a return on a $200M investment.

Now some in the Tasmanian business community are suggesting that the price of $200M was inflated and that it should have been between $100M and $150 M.

Mr President,

I’ve also been reliably informed that liberal party both state and federal have known about this looming Gas price crisis for a number of year – at least before the last election – and it appears they are up to their old tricks of putting this in the too hard basket.

I’m disappointed, that once again – just like the Bass Strait Freight cost crisis – and the RET crisis – and coastal Shipping cost crisis – which threaten to shut down some of our major businesses –

… it will take an independent Tasmania Senator to force the major parties to fix problems which have strangled economic growth and job creation opportunities for decades.

Mr President,

Wayne Bould strongly suggests is that the best way to avoid this gas price crisis is for the Federal Government to put some money – approximately $40M into a joint fund with the Tasmanian State government with a view to purchase our gas pipeline.

That way the government takes control of a situation and can guarantee the delivery of competitively priced gas to all Tasmanians for the foreseeable future.

Unlike the majority of politicians in this Parliament who’s focus is on clean energy at any cost – Mr. Bold and Tasmanian captains of industry understand that in order for Tasmania – in deed Australia to thrive, prosper and protect workers – when compeating on unfair overseas markets – we must deliver and guarantee cheap energy to our communities.

When compared to our overseas competitors in America our industries are paying aproximatly 3 times the cost for energy.

That mean for our businesses to compete they must cut wages and conditions of Australian workers or just go broke… and we don’t want either so we must guarantee our business cheaper energy.

In describing his solution to the gas price crisis – Mr Bould says:

Federal government can subsidize the transmission costs, but the other thing I put to you guys the other day is that when you look at the large pledges of money .. that normally occurs when you move to election mode in this crazy three year cycle,

… people start to wave their arms around and say we will put $20M for this and $30M for that, its going to generate some jobs.

The first rule for dealing with politics is the jobs never arrive and the money gets spent and predominantly gets wasted.

So if you look at sensibly applying money to infrastructure in Tasmania, and one of the big issues Tasmania has right now is replacement of infrastructure, then you would be better off saying to the government put some money towards a loan for us to buy out Palisades so that the Tasmanian government could own the pipeline forever and a day.

Several ways to do it one of the examples is the government stumps up $40M and between the state government’s triple A borrowing rating and the federal government’s triple A rating we go to an investment bank or an investor of the Toll Road scenario and say to them,

… you fund the rest of it and you get a return on it for the next four or five years but at the end of the four or five years or ten years, the loan is repaid and the Tasmanian government owns the pipeline…

… or alternatively you have a toll on the pipeline for thios period of time, but it resumes to the tas gov and that way ultimately we get to own it.

The trick isn’t so much in looking after what comes down the pipeline now, but using it strategically to say if you want to build on the North west and north east coast or in the midlands and oatlands …

… your wanting to build downstream processing or value adding processing for niche businesses that take our resources and add value to them, either in the forest or from minerals, or even from agriculture.

Just about every downstreaming processing plant requires energy and one of the best forms of energy, one of the most efficient forms of energy, the least pollution energy is gas,

… so if you want to say lets take a hardwood woodchip that is currently been exported to Japan and make into pellets that can be used for power generation or house frames, or technologically advanced

… such as they are making in Scandinavia, you can do that, they are not big businesses, but you can have a lot of small businesses, but they are all energy dependent so the conversion process from wood chip to whatever your end result output is … always dependent on energy.

SO the energy that comes from that gas pipeline can be redeployed to add benefit that will ultimately add downstream jobs and downstream processing.

I call on the Government both state and federal to listen to respected business people like Mr Bould, and act to protect us from this looming Tasmanian Gas Price crisis.