Finance Finance News Allowing fracking will ensure cheaper gas for Aussie households: ACCC

Allowing fracking will ensure cheaper gas for Aussie households: ACCC

Gas would be cheaper if southern states produced more gas – including by fracking.
Gas would be cheaper if southern states produced more gas – including by fracking. Photo: Getty
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The Australian Competition and Consumer Commission has advocated the lifting of bans on gas exploration, including fracking, saying it would help reduce the price of gas.

In particular, the competition watchdog urged the Victorian government to lift its unconditional ban on onshore gas exploration.

It also praised the Northern Territory government for scrapping a ban on fracking.

The ACCC launched a report on Thursday in which it delivered better-than-expected news about the cost and supply of natural gas.

After last year warning there could be an undersupply of gas this year, the ACCC revealed supply looked set to exceed demand in 2018 and 2019.

It put this in part down to the Turnbull government’s successful efforts in 2017 to get gas suppliers to commit to meeting the domestic demand before selling gas on international spot markets.

But ACCC chair Rod Sims warned that, while supply may no longer be a serious issue, prices remained two or three times higher than historic levels.

“While gas market conditions have improved, these market conditions can change and the reality is that more gas is required to lower prices to users,” Mr Sims said.

“Prices, and the market generally, are very challenging for gas users, who must constantly consider their investment plans, employment levels and even in some cases their continued operation.

“To improve market conditions, the east coast gas market requires a greater level and diversity of supply, a more efficient transportation network, and greater transparency. To lower prices in the southern states, lower-cost gas must be produced in the southern states,” Mr Sims said.

Victoria alone in its blanket ban

‘Fracking’ is a technique used to extract ‘unconventional’ gas from the ground. It cannot be extracted using conventional methods.

In Australia, most ‘unconventional gas’ is stored in coal seams. Fracking involves the pumping of chemicals into the ground to break up the coal and release the gas.

There are concerns this process can contaminate the water supply of the local area, and is widely opposed by environmentalists and farmers.

Of the east coast states, Queensland is the least restrictive of fracking, while New South Wales has selectively allowed fracking.

Victoria, however, has a blanket ban on all onshore gas exploration. The Northern Territory had banned fracking, but lifted the ban in April.

The ACCC was clear that it considered the Northern Territory’s decision to lift the ban was a good thing.

“Removing the ban on fracking is a positive development that will allow gas explorers to resume drilling of onshore areas with high potential for gas, whilst taking into account environmental considerations,” the report stated.

If the Victorian government wants to reduce the price of gas, the report said, the most efficient way to do that was to allow onshore exploration.

“[We] urge state governments to adopt policies that consider and manage the risks of individual gas development projects, rather than implementing blanket moratoria and regulatory restrictions,” it stated.

Why this would push prices down

Tony Wood, energy program director at the Grattan Institute, said gas produced in Victoria would be cheap for Victorians because it would save on transports costs.

“If the gas comes out of the ground in Victoria at $4 a gigajoule, and it comes out the ground in Queensland at $4 a gigajoule, and it costs $2 to transport it from Queensland to Victoria, then the Victorian gas is $2 cheaper,” he said.

He said Rod Simms, as ACCC chair, was “primarily concerned about prices and consumers” rather than the environment.

But Mr Wood pointed out that the Victorian government’s ban was indiscriminate, and even exploration for conventional gas was banned.

He also said unconventional gas could be extracted without resorting to fracking, meaning lifting the Andrews government’s moratorium would not necessarily equate to allowing fracking.

“But some environmentalists would argue that all gas is bad because it’s a fossil fuel. So it has become a very difficult issue for the Labor government,” he said.

Among the supporters of the ban are the Victorian Farmers Federation.

“Victoria has precious groundwater reserves, and without hard scientific evidence that show the risks of onshore gas development can be properly managed, those reserves shouldn’t be put at risk,” VFF president David Jochinke stated when the ban was introduced last year.

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