Energy policy: the Australian angle

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Natural gas in Australia

How do natural gas-rich countries differ in their energy policies and specific fracking regulations? Let’s look at another emerging player. Like the United States, large unconventional gas deposits have been unveiled in Australia recently. Australia is already a fairly significant player in global energy markets: it holds the 12th largest conventional natural gas reserves in the world and exports about 2/3 of its entire energy production. Much of that “black gold” is offshore. But now add the 396 trillion cubic feet of “technically recoverable shale gas reserves” – or onshore reserves – uncovered in 2009 by the EIA. This is mostly “coal seam gas”, a layer above “shale gas“, but extraction will likely involve hydraulic fracturing too. Strictly speaking, Australia could surpass Qatar in liquid natural gas exports by 2020. This epiphany – not dissimilar to the United States’ – has been matched by competing public, media, corporate, and government responses. Let’s look at how these newfound deposits fit within the context of Australian energy policy.

“Climate policy”

Energy laws between the U.S and Australia display interesting similarities. For instance, Australia has a federalist system of government too, meaning its six states have a considerable degree of autonomy from the federal government in determining policies and regulations for industry. New South Wales (NSW) and Queensland have called for moratoriums on fracking, while the government of Western Australia has so far supported the practice and creation of 700 well stimulations to date.

But Australia’s energy policy writ large is wildly divergent from the United States’. Much of this has to do with the character of its energy reserves. For starters, Aussies refer to it as “climate policy”, not energy policy. By 2020, the government aims to replace at least 20% of national electricity needs with renewable energy resources. They’ve so far initiated a carbon tax in late 2012, are joining the EU’s emissions trading market (where Australian businesses can buy pollution permits in a larger EU pool), and have subsidized the development of natural gas and solar energy. Both sides of the political fence (Liberal and Labour parties) now seem to embrace natural gas as a transition fuel. In fact, the contemporary legislative linchpin to look at is the Energy White Paper of 2012. It’s a more direct (and some have argued, progressive) version of America’s Energy Act of 2005. Essentially, the Ministry of Energy and Resources states that Australia will seek greater reliance on least-cost energy suppliers such as gas but will also subsidize $2.1 billion toward carbon capture and storage technology. As an emerging framework for resource development, the Australian government is conscious of the heavy water use involved in gas extraction techniques and proposes a requirement for companies to buy access/water rights on a water market(1).

Fracking regulatory gaps

Previously, more than half of Australia’s natural gas reserves were converted for export and produced offshore. Indeed, while there are seven large-scale fracking projects proposed for inland reserves that have reached the final stages of investment, there is only one shale gas well that has been successfully commercialized: the Mumbo Gas Field of South Australia. The cost of drilling and fracking inland is about four times as expensive as it is in the U.S; consequently, Australia doesn’t yet have much experience with fracking technology and its complementary concerns. And because most of these well stimulation projects have yet to unfold, there seems to be a dearth of policymaking on the matter. Where there are extensive regulatory regimes for offshore drilling, such as the  Environment Protection and Biodiversity Conservation Act of 1999, even South Australia’s National Gas Law makes no mention of non-coastal drilling operations. And beyond that, it’s hard to find any regulatory framework specific to oil and gas projects on the interior. 

Lack of onshore drilling regulations?

Shutting down every coal plant by 2050 while simultaneously building the sheer infrastructure vital for natural gas extraction (such as export terminals) will not be cheap. In fact,  Dr. Peter Cook from the Australian Council of Learned Academies co-authored a report suggesting that the lack of infrastructure combined with a nonexistent regulatory regime is telling. The boom in Australia may not be so much a boom as it is a modest, gradual move toward developing the industry. Consequently, state governments will be wary – establishing moratoriums until economic, health, and environmental impact assessments are conducted and appropriate regulations follow. These regulations may preclude the considerations wrought in Australia’s energy – er, climate – policy. As Dr. David Bremerton, from the University of Queensland said:

Where you don’t have that broader social license, it’s harder to get regulatory approval…You’re more likely to see restrictions on land access, we’ve already seen that in NSW and Queensland around the quarantining of quite large areas of agricultural land from various forms of resource development.

Ironically, because regulation supercedes a national energy policy that is actually favorable to natural gas (on paper), Australia’s circumstance is interesting to compare to the United States’. In both countries, states currently enjoy more control over regulatory frameworks. But in Australia, its the state governments that are heavily regulating (or fully restricting) the oil & gas industry. Conversely, it’s the federal government that may push to de-regulate. Frustrated,  APPEA’s David Byers described the state of affairs now: “The coal seam gas industry provides a third of Eastern Australia’s natural gas, and is one of the most heavily regulated industries in the country due to existing state government processes.”

What the federal government in Australia decides to do with regards to the competition between its climate policy goals and state moratoriums that prevent the realization of these goals (i.e investing in more natural gas) will be interesting to follow in the coming months.

Other sources:

1. Pittock, J, K. Hussey, & S. McGlennon. (2013). “Australia climate, energy, and water policies: conflict and synergies,” Australian Geographer, 44(1): 3-22.

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