Subjects: gas supply, returns to landholders

E&OE

CHARLIE MCKILLOP:

The Minister for Northern Australia and Resources, Matt Canavan, has been meeting with members of the gas extraction industry today. Minister, what are you hoping to achieve from your discussions?

MINISTER CANAVAN:

Well we need to find solutions. We must, as a country, maintain our domestic energy security; it is so important for many people to heat their homes, and also for thousands of Australians to keep their jobs. Many manufacturing processes can only use gas, they can't electrify it, and that's why it's so important to maintain our domestic security. We can, no doubt we do have enough gas in this country to be a strong exporter of gas and maintain our domestic energy security. Now, what I'm hoping to see from the industry is their plans to bring more gas to the domestic market. There has been increases in prices over the past year – indeed, they've doubled – and that should encourage more domestic gas to be provided. I understand the contracts in those situations, but contracts are negotiated between men and women and they can be changed by men and women, and that's what we need to see from industry.

CHARLIE MCKILLOP:

So what role specifically, Minister, do you see Queensland playing in easing the gas shortage situation that's being felt so acutely, particularly in the southern states?

MINISTER CANAVAN:

Well Queensland now does account for the lion's share of gas production in Australia, and therefore it's now an essential ingredient in maintaining our domestic energy security. It is unfortunate that states like Victoria have banned all gas development – not just unconventional or fracking, they've also banned conventional gas which has been safely used for more than 100 years. That is extremely unfortunate; it's not something the Federal Government supports, but we have now got to find solutions. Unfortunately, the consequence of those decisions by Victoria will mean that prices in Australia will be higher than they otherwise would be. Bringing gas from Queensland down to Victoria is not a cheap exercise and will mean prices in Victoria will be higher. But given those higher prices there's economic incentives for Queensland producers to sell gas into southern markets as well.

CHARLIE MCKILLOP:

Well it does beg the question, why should Queensland be expected to bear the burden of the country's energy needs when those other states have actively discouraged or even prevented their own gas reserves from being exploited?

MINISTER CANAVAN:

Well as I say, it's actually an economic opportunity for Queensland as well because the prices are higher in southern states, so there's money to be made doing that. So, for example, last year gas prices in Japan were around $8 to $10 a gigajoule at different times, and in Australia we've seen prices as high as $14 a gigajoule. So there's an economic opportunity for Queensland producers as well. What we need to see is the market working to maintain our domestic security, and of course the Federal Government maintains the right to secure our energy supplies as a nation.

CHARLIE MCKILLOP:

And would you like to see, as the Resources Minister, an expansion of what Queensland has been doing on a relatively small scale trial with I think about a 57 hectare plot in the Surat Basin, where those grounds are specifically being quarantined for domestic development?

MINISTER CANAVAN:

Look, I don't think that's a long-term or widespread solution to the problem. As you say, the Queensland reservation is quite small and won't make a significant difference to domestic gas. It's also the case that, to the extent you do it on a wider scale, it can only hurt the incentive to develop gas, and we need to develop more gas. If you restrict the market to which you can sell that gas, obviously an investor is going to see there's higher risk and potentially not invest in it. I mean, I make the point today that we export 90 per cent of our coal. 90 per cent of our coal. We have no problems at all maintaining the security of coal supplies to our electricity coal-fired power stations. We can have strong incentives for investment and export gas and other natural resources, but we need to make sure the market works and we need to make sure the industry is responding to those prices. And over time, of course, we need to allow people to responsibly develop gas and not put in place blanket-wide moratoria and bans like Victoria has done.

CHARLIE MCKILLOP:

You're hearing from Queensland Senator, Matt Canavan, who is the Minister for Northern Australia and Resources. Minister, you'd be aware that there are already nearly 9,000 coal seam gas wells in Queensland, with about 5,000 land access agreements around that. How will the Government manage the inherent conflict that exists between landholders and gas producers if it expects more wells to come online?

MINISTER CANAVAN:

Well I've just spoken at an industry conference this morning and said very clearly that we need to better share the wealth that's generated from gas among the supply chain. I think we're in this position at the moment because there has been a failure to build political support for gas development. While I disagree with the Victorian Government on their decision, they are making it because in many areas of regional Australia there's not a lot of support for gas development, and that is a consequence of the fact they don't see they get much out of it. And so the industry and state governments have to do more to provide real benefits to communities – not more selling, not more advertising – but actually provide real benefits back to communities, and that may see more support build for it.

So the South Australian Government yesterday announced that 10 per cent of royalties now would be reserved for landholders. I think that's a positive step forward. In America, the average farmer in North Dakota gets $157,000 a year from shale gas on their properties. Now, we may not have the kind of wealth to provide that level of support, but if you had some cheques like that going out to farmers you might have a different view in areas of regional Australia.

CHARLIE MCKILLOP:

You may well, but it's not all about money is it Minister? I mean, we hear from landholders who are very concerned about the risks for their groundwater quality. How confident can they be that that will be protected if Queensland experiences a spike in gas development?

MINISTER CANAVAN:

Well that obviously is paramount, and we have very strict environmental laws and regulations to protect water tables. We cannot allow gas development to occur if it damages water quality or water accessibility. Now, we've had an industry in Queensland for more than 20 years and I would say overall it has been developed in a responsible way. There are always risks with any development, but we have strong environmental laws for that reason. It's also important to note that some of the other areas of development, like in Victoria, are different; they are not coal seam gas, they are shale or tight gas, they do not produce as much water as coal seam gas does. They have different environmental challenges but, again, in America they've been operating for a long period of time and generally – not in all states, but generally – where there is strong regulations they've been done in a safe way.

CHARLIE MCKILLOP:

Senator Matt Canavan, on a day when you have been addressing the gas industry at its outlook conference, we thank you for taking the time to speak to us here on the Queensland Country Hour.

MINISTER CANAVAN:

Thanks so much.