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Canberra powerless to break coal seam gas stalemate

The federal government is almost powerless to break the state stalemate over onshore gas development, Canberra's top resources bureaucrat, John Ryan, has admitted.

Getting gas development going in NSW and Victoria, where state government resistance threatens to exacerbate a looming supply shortage, is a key objective of the Abbott government's energy white paper, which is due to be released in early April.

"One of the biggest challenges that we face in all areas of energy markets and energy is the fact that we are a federation and that we have to work with state government and territory governments," said Mr Ryan, an industry department assistant secretary.

"That's one of the big challenges that we have as we try to grapple with issues like improving gas supply, for instance."

When the Coalition won office in the September 2013 election, Industry Minister Ian Macfarlane set a deadline of Christmas that year to resolve the impasse on gas supply in NSW. Little progress has been made.

The prospects for the coal seam gas industry in NSW took another dive last week when state opposition leader Luke Foley proimsed that, under Labor, development would be banned in the Pilliga region and a state-wide moratorium imposed.

The stance undermines investment confidence in Santos's $2 billion Narrabri CSG project in the Pilliga, even if Premier Mike Baird's government wins the March 28 poll as expected.

The federal government's energy green paper, released in September, blamed NSW and Victoria for regulatory bottlenecks stifling the availability of additional gas, as existing supplies are sucked north to feed the $70 billion Queensland LNG export industry.

The white paper, the government's energy policy blueprint, which Mr Ryan said would be released "in the very near future", looks set to renew federal efforts to push forward with coal seam gas.

One gas industry source said on Friday the sector held little hope the white paper would prove a circuit-breaker in the gas crisis.

"The politics of it are that what you do from Canberra is not going to resolve the issue," he said. "Macfarlane has already tried to do this and failed."

Mr Ryan also pointed to the paper's ambitions on deregulation, and on shifting to cost-reflective pricing for electricity, as also providing challenges.

But he said the white paper would "ensure that industry and consumers can have certainty and confidence in government policy" and highlighted a reliance on market measures to achieve cost-effective energy supply.

"The government is sending a clear signal that it wants to drive energy reliability, security and productivity through more market-driven solutions and increase consumer choice without causing unnecessary cost increases," he said. "This will then provide energy consumers with choice to achieve optimal, market-driven energy outcomes."

Mr Ryan said government intervention in energy supply was "likely to be restricted to areas where there is a demonstrated market failure".

"Against this background, the energy white paper can be expected to focus on greater competition to lower energy costs for households and business, energy productivity to support domestic investment and business competitiveness, market-driven outcomes where there is efficient pricing for the supply of energy, easing cost pressures on households and supporting business productivity," he said.

Mr Ryan said it would also seek to improve transparency in pricing and investment signals across all sources of energy and commit to streamlined project approvals, while maintaining strict environmental standards.

The white paper, which was originally expected to be released last September, is now expected in early April. According to some sources, it has been completed and passed to the Prime Minister's office before going to cabinet.

source: http://www.afr.com