As the Victorian parliament prepares to consider the Petroleum Amendment Bill later this week, the Australian Industry Group has warned that decisions taken this week will shape whether the state faces another gas crunch in coming years, pushing up costs and reducing supply for both community and business users.
Ai Group Victorian Head Tim Piper said: "To avoid that risk we need new supply developed where it makes long term sense. We also need alternative energy development for the longer term; demand reduction through efficiency and well-considered electrification; and reform to markets and safeguards.
"A sound regulatory regime for Victorian onshore conventional gas development is an essential condition for the first pillar of this gas strategy. Regulation needs to earn and sustain community confidence that they will be protected and respected; and provide a workable and predictable environment for gas explorers and producers.
"The Government's Petroleum Amendment Bill proposes important changes to strengthen community consultation and Ministerial oversight of potential gas developments. The Opposition has proposed three additional amendments: scope for the Minister to allow conventional gas activities to resume prior to 1 July 2021; an absolute veto for landholders over gas developments on their land, and a 10% share for landholders of any royalties levied on gas extracted.
"These amendments are unusual, but the significance of this issue and the strength of community feeling about gas development means that a number of the opposition proposals merit consideration. All parties should keep in mind that this regulatory regime will be more credible for underpinning investment decisions if it passes with broad support.
"On balance, commencement of the new regulatory regime before July 2021 would be welcome, provided the implementing regulations can first be finalised in full consultation with industry and community stakeholders. It is worth providing scope for this.
"The concept of awarding a share of any royalties to landholders may be a reasonable step to give landholders a stake in the success of potential developments. There is little evidence from which to judge whether the 10% figure is too high or low, and an approach is needed for allocating royalties among the many landholders whose land may sit above a given gas resource. Both these subjects would benefit from discussion and negotiation in the Parliament.
"An absolute veto for landholders goes too far and risks stopping development entirely – particularly given the likelihood that multiple landholders may be involved in development of a given resource. An obligation for developers to consult with all affected parties, and a transparent Ministerial decision weighing all the factors, strike a better balance.
"Ai Group encourages all members of the Parliament to work together to finalise the Bill and complete this necessary piece in Victoria's energy strategy," Mr Piper said.
Further comment: Tim Piper – 0411 430 301
