Food production worries over government gas industry policies

Posted by AFN Staff Writers on 24th January 2013

The Australian farming and manufacturing sectors have expressed growing concerns about Australia’s booming gas export industry.

While the energy and mining sector is generating billions of dollars that are underpinning the strength of the Australian dollar, this has led to the so-called “2-tier economy” with economic dislocation or slowdown for other parts of the Australian economy outside the energy and minerals export industry.

Difficulties for local food producers and manufacturers have been compounded by some environmental consequences of gas exploration and extraction. In addition, concerns by industry leaders have heightened with government energy policies at Federal and State levels that will retard Australian producers and manufacturers. One exception is Western Australia, where a more pragmatic and practical policy has been conceived by the WA government.

Farming concerns

On the farming front, growers and producers in Queensland and New South Wales appear to have realistic concerns that some coal and shale seam gas explorers with fracking technologies have caused seismic shifting and chemical contamination of groundwater aquifers and rivers. These could possibly threaten the continuing environmental viability of farmed food production in several geographical areas.

In New South Wales, the rich food-growing agricultured area of the Liverpool Plains has been a focal point for farmer discontent against coal seam gas exploration and extraction for over 2 years.

New farming concerns with gas exploration and production have surfaced in Queensland. The Queensland State government recently admitted it has been investigating a 70 kilometre stretch of the Condamine River near Chinchilla since May 2012 after farmers produced evidence of gas bubbling to the river surface. The Queensland government is denying that the gas is harmful to human and animal health, but the Queensland government is in a bind since it stands to reap substantial mining royalties from gas production in the area.

Farming environmental group ‘Lock the Gate’ this week questioned the Queensland Government’s findings that the bubbles in the Condamine River posed no risk.

Sarah Moles from ‘Lock the Gate’ told ABC Radio that the government findings were flawed.

“It seems inconsistent to be able to say there is no proof. I’d further add that absence of evidence is not evidence of absence and if they continue to test which is a good thing then it seems premature to say the least for them to claim, that there are no risks,” she told the ABC.

Domestic industry concerns

On a completely separate front, government energy export policies at Federal and State levels are facing a barrage of criticism for failure to create sufficient national gas reserves for the needs of Australian industry outside the minerals and energy sector. Presently, only the state of Western Australia requires at least 15% of new gas discoveries to be reserved for use within Australia.

Australia’s large gas export companies such as Woodside have already signed very long-term supply contracts with international buyers in China and elsewhere. For example the export agreement signed by Woodside (with considerable government fanfare just before the 2007 Federal election) to supply China’s largest energy company with liquefied natural gas (LNG) was the largest export deal by an Australian company. This agreement with PetroChina Co was for the potential sale of 2 to 3 million tonnes of LNG a year from the Browse project, off Western Australia, which Woodside operates. The agreement facilitated the sale by Woodside of LNG to PetroChina over 15 to 20 years and was said to be worth AU $45 billion of future revenue for Woodside.

However, Australia farming and manufacturing industry sector leaders are expressing concerns with predictions of a gas shortfall and spiralling prices for Australia’s domestic manufacturing and farming sectors.

It may be a sad irony but Australia is a world-leading gas exporter while its own population may be destined to experience gas shortages and economically unviable energy costs that will shut down its industries. Some manufacturers, such as a major brickworks, have already attributed uneconomic energy costs for recently announced plant closures.

Energy White Paper

The Australian Government released an Energy White Paper in November 2012, but manufacturers from across Australian industry have called for a fresh independent inquiry to resolve serious questions about domestic gas supply and prices, in light of projected massive increases in Australian gas exports.

The Australian Aluminium Council (AAC), the Australian Food and Grocery Council (AFGC), the Australian Industry Group (Ai Group), the Plastics and Chemicals Industries Association (PACIA) and The Australian Steel Institute in a joint statement on 9 November 2012 expressed their concerns that the Energy White Paper had not adequately addressed the risk of a ‘gas gap’.

Ai Group Chief Executive, Innes Willox, said: “Natural gas is an efficient and clean-burning fuel for manufacturing industries and is an essential feedstock at the foundation of many chemicals industry value chains. Gas is also increasingly crucial to our broader economy, especially in providing peaking power and cleaner baseload supply in the electricity system”.

“Any threat to the supply and affordability of gas is therefore a serious matter. The Government proposes sensible measures to boost gas production and increase transparency; these steps are necessary – but  may not be sufficient to solve the problems facing domestic gas users,” Willox said.

Federal Energy Minister Martin Ferguson has emphasised the importance of a free market in natural gas but industry critics say the Energy White Paper was merely an expression of “government wishful thinking” rather than an appropriate policy strategy for the Australian economy.

The CEO of the Australian Food and Grocery Council, Gary Dawson, says, “For businesses already squeezed by rising  input costs and retail price deflation, the potential for higher gas  prices could damage the viability of Australian manufacturers and runs  the risk of driving more production and jobs offshore.”