There are no rewards in energy rent-seeking

In a recent speech, Martin Ferguson argued that political complacency over energy policy is putting Australia's prosperity at risk. Current ministers would do well to heed his warning.

Not surprisingly, media attention for Martin Ferguson’s most recent speech was focused on the blast he delivered against New South Wales over the state’s coal seam gas imbroglio. However, this means that much else of what he had to say has been ignored.

Perhaps the most important point Ferguson made in speaking at a Clayton Utz forum was that Australia’s present prosperity comes with the risk of breeding complacency and worse, that it has prompted an outbreak of “opportunism and rent-seeking that we need to see for what it is”.

The former federal energy minister was wearing his hat as chairman of the advisory board of the Australian Petroleum Production & Exploration Association, but those who know him are aware that these are views he holds personally and strongly.

Ferguson called for leaders to “see the world as it is rather than as we would like it to be or through the blurred lens of ideology”.

Not surprisingly, he focused on the oil and gas sector. He said: “Make no mistake. Australia is poised on the brink of a great new resources export boom”.

But, he added that choices need to be made to determine whether the resources sector continues to grow or stagnates.

In LNG, he said, this country is about to take a “quantum leap”.

By 2018, LNG companies will be putting almost $65 billion in to the economy compared with $30bn in 2012-13, and will be paying almost $13bn annually in taxes compared with $8bn.

The problem, Ferguson pointed out, lies in what share the Australian sector can claim of the 200 million tonnes of new global capacity that is expected to be required by 2030 given that the local industry’s costs are rising while its productivity declines.

The sector’s international competitiveness has slipped just as tough new players are entering the game, he said. Each of the US, Canada, Mozambique and Tanzania has cost structures and regulatory environments allowing them to produce LNG 20 to 30 per cent more cheaply than Australian joint ventures.

The priorities here, Ferguson argued, are reform of the industrial relations framework and production of a rational and stable energy policy.

”I have worked hard for the interests of workers over several decades,” he told the forum, claiming that the labor market reforms APPEA is pursuing are “very much in the interest of workers as well as the national interest.”

Unfortunately, he said, a few trade unions are using strong bargaining positions in ways that harm the wider community and their own members’ prospects. “We should focus on keeping people employed by ensuring that we are attractive to investors”.

He was no less harsh with the body politic, declaring “we need leaders who are not just politicians” and adding that there is no better case study of the problem than New South Wales.

The state’s policy approach to natural gas development is a “riddle,” Ferguson said. “I am not alone in struggling to understand it. There has been a terrible lack of political leadership.”

Mike Baird’s move in to the Premier’s seat, he said, has been “positive” and “there are signs now of a genuine desire to progress the issue, but time is not on our side”.

The Baird government, he added, needs to recognise that other states will not curtail their opportunities to cover NSW failings. The consequences of the present situation will see people losing their jobs as businesses close their doors.

This is the point at which Ferguson gave NSW Labor an almighty serve, which, reasonably, caught the attention of the media pack.

His broader point, however, is to ask how Australians will look on the current era in 15 years. Will it be with nostalgia and regret? He asked: “Will they ask how we let our opportunities slip through our fingers?”

Cynics and ideologues will look at Ferguson’s APPEA position and his corporate roles in the energy sector and make rude noises, but I don’t think public debate is improved by the community being excluded from access to his views when, especially via radio and TV, they are deluged with the noisy naysayers’ opinions.

The issue is not a shortage of gas.

New South Wales alone seems to have enough gas under its feet to meet state needs for half a millennium.

It is a shortage of will by politicians to provide a route to production of the gas and to overcoming the wall of opposition created, as Ferguson puts it, by activists who campaign on fears and lies.

A big step in putting some spine in to the politicians would be for business customers (mainly manufacturers), gas retailers, pipeliners and producers to find a way to sing from the same hymn sheet after four years of dissonance.

Perhaps the catalyst here needs to be Ferguson’s ministerial successor, Ian Macfarlane, herding them all towards agreement. Then he can get to work on the struggling states governed by the Coalition.

However, unless Labor (from Bill Shorten down) can also get a spine transplant, it is hard to see how the ‘time bind’ that Ferguson flags can be overcome.

Keith Orchison, director of consultancy Coolibah Pty Ltd, publisher of the This is Power blog and editor of OnPower newsletter, was chief executive of two national energy associations from 1980 to 2003. He was made a member of the Order of Australia in 2004 for services to the energy industry.

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