Angus Taylor’s energy projects push
It is a federal government program for which there appears to exist no constitutional or legislative authority, which has no established guidelines for assessing projects and an opaque process for allocating millions of taxpayer dollars.
It’s not sports rorts. It’s something called the Underwriting New Generation Investment (UNGI) program and it’s the baby of the federal Energy minister, Angus Taylor.
And in recent weeks, as the attention of the nation’s media and populace has been focused on the Covid-19 crisis, it moved a couple of steps forward.
One step was the signing of a memorandum of understanding (MOU) between the Commonwealth and New South Wales governments, which encompassed a broad range of energy initiatives, not all of them bad in environmental terms.
But buried in the various attached schedules to the agreement are measures designed to prop up coal-fired electricity generators and weaken environmental protections.
Schedule F is particularly interesting, promising Commonwealth support through UNGI for three power generation projects in the state – one of them the very old, very dirty Vales Point coal power station owned by Delta Energy, whose chairman is Trevor St Baker, one of the country’s most generous political donors, mostly to the Liberals and Nationals.
St Baker, whose net worth is almost $650 million, according to The Australian Financial Review’s 2019 rich list, has endeared himself to the political right not only through his donations, but also through his outspoken criticisms of wind and solar power and his support for more coal.
For a number of reasons, the Vales Point proposal is particularly problematic. First, it is not “new” generation at all but an upgrade of a facility built in the mid-1960s. Second, it is the only coal plant on Taylor’s shortlist of projects – not only in NSW, but in the whole country. Third, any funding for it would come out of a $1 billion pot of money to be administered by the Clean Energy Finance Corporation (CEFC).
And, as Ben Oquist, executive director of The Australia Institute points out, “The Clean Energy Finance Corporation can’t legally fund coal projects.”
Renewables, yes; even gas. But not coal, for the obvious reason that coal is not clean energy.
Indeed, Oquist and The Australia Institute question the validity of the entire UNGI scheme. And senior counsel Fiona McLeod, AO, supports their concerns about the lack of constitutional or legislative foundation for UNGI.
“This has the potential to be a sports rorts kind of fiasco,” says Oquist.
“[UNGI] started way back in 2018, and here we are in the second quarter of 2020 and we still don’t have the guidelines for it. It’s totally secretive and [has] no legislative authority.
“The Clean Energy Finance Corporation [an independent entity that cannot be directed by the minister or department in specific investment decisions] seemingly is in confusion about its role. Many questions have been asked in many rounds of senate estimates hearings, and bureaucrats can offer no clarity.
“Yet the government has already shortlisted projects, made initial agreements and advanced detailed negotiations with proponents, and entered an MOU with the NSW government to support projects.
“I mean, it just seems like a complete shemozzle,” he says.
Two weeks ago, Oquist wrote to Auditor-General Grant Hehir – whose investigation of the government’s allocation of sporting grants precipitated the ongoing sports rorts affair – seeking an investigation.
As yet, it is unknown whether the auditor-general will take any action. At time of writing, The Australia Institute chief had not heard back from Hehir.
While Australia’s attention has been consumed by the coronavirus pandemic, projects and policymaking has continued elsewhere, largely unscrutinised. Indeed, the crisis has provided cover and a convenient excuse for some contentious, alarming or outright dodgy decisions – particularly on the issues of environment, climate and energy. If these are reported at all, they are quickly buried in the avalanche of Covid-19 news.
For example, at the end of March, the NSW government gave approval for United States coalminer Peabody to extend operations under Woronora Reservoir, which supplies drinking water to parts of Sydney and areas south.
The decision, and concerns of environment groups that this could affect water quality, did get media coverage. But it would have got more had state parliament debated a 10,000-signature petition organised by groups, including Greenpeace and the NSW National Parks Association. But in NSW – as federally and in other states – these democratic processes have been frozen, with parliament suspended because of Covid-19 until at least September.
A few days before the Woronora decision in NSW, the Victorian government announced it will end a five-year moratorium restricting onshore gas exploration. To the Andrews government’s credit, this related only to conventional gas mining, and the vastly more destructive practice of fracking remains banned. But it is estimated this decision could still unlock vast reserves – 128 to 830 petajoules of gas.
Victoria was also under heavy financial pressure from the federal government to do this. Angus Taylor made it a prerequisite for federal funding for other energy development in the state.
The Victorian government maintains the increased gas mining will increase the state’s greenhouse gas emissions by only 0.1 to 0.3 per cent. But as an analysis by The Australia Institute points out, this includes only the emissions from the extraction process, not those from the actual burning of the gas. Thus, the state’s figures are understated by almost 90 per cent.
State governments in South Australia and Western Australia have given big financial breaks to minerals and petroleum companies in recent weeks – exempting them temporarily from having to meet various fees and expenditure requirements. The reason cited: the need to stimulate industry to mitigate the economic impacts of coronavirus.
As Greenpeace notes in an extensive list of exemptions, benefits and special deals done for the resources sector under the cover of Covid-19, fossil fuel extraction has been deemed a “critical industry”, even as workers in other sectors of the economy have been instructed to stay home to limit the spread of the disease.
It is somewhat unsurprising, given the huge decline in other sectors of the economy that previously earned Australia foreign money, including tourism and education, that the fossil fuel advocates in government would seize the opportunity to advocate more mining.
Federal Resources Minister Keith Pitt, a strong advocate of more fossil fuel mining and more coal-fired domestic power generation, told a “virtual roundtable” gathering of mining executives two weeks ago their industry would be “key to Australia’s economic recovery once the global Covid-19 pandemic has passed”.
There are problems with the concept of a fossil fuel-led recovery, though.
The first is that it might not happen: the global appetite for fossil fuel may not be there to buy Australia’s exports. The second is that government measures to encourage it – by fast-tracking approvals and cutting so-called red and green tape – might become permanent rather than temporary.
Regarding the first problem: on Wednesday, the international ratings agency Standard and Poor’s downgraded Australia’s credit rating, citing among its reasons our “vulnerability to weak commodity export demand”.
Tim Buckley, director of energy finance studies at the Institute for Energy Economics and Financial Analysis, says that vulnerability already is becoming blindingly obvious.
“We have seen the global oil and gas majors cut capital expenditure programs for 2020 by 20 to 25 per cent just in the last month,” he says.
“Woodside last Thursday put out a statement announcing it was shelving $53 billion of investment on North West Shelf LNG [liquefied natural gas] developments. The next day Origin put on hold their fracking of the Northern Territory. The next day Santos put on hold the fracking of the Northern Territory. You’ve had massive, massive cutbacks.”
The spectacular crash in world prices for oil and gas – Australia now is the world’s second-largest exporter of gas – is a consequence of two factors: reduced demand as most of the world has gone into lockdown and stopped travelling, and a price war between producer nations.
“Australia spent $US80 billion in Gladstone building six LNG trains. They were all modelled on an LNG price more than three times what it now is,” says Buckley.
They risk becoming stranded assets, he says.
Coal, which is used for electricity generation rather than transport, is less affected, but the future still is looking dubious. Chinese industry is still ramping up after its Covid shutdown, and power generation in India is down 25 per cent overall, and more than a third for coal-fired power. That country relies more heavily on renewables.
“I don’t think increased export revenues [from fossil fuels] is going to be the outcome of this global pandemic,” says Buckley.
Instead, he suggests, record low interest rates will further encourage investment in alternatives.
“The cost of renewable energy infrastructures just dropped by 20 or 30 per cent in the last month,” he says. “Recent events highlight to me that the world is going to look for a green stimulus to investing in ever cheaper renewables.”
That is not the direction Australia’s federal government is looking to go, however, even if the states are, as evidenced by its refusal to adopt a net zero target for carbon emissions by 2050.
As noted already, Taylor put the financial screws on Victoria to open up more gas supply. He did the same via the MOU with the NSW government.
Under the terms of the document, NSW undertook to ensure that the state was “the easiest jurisdiction to develop new electricity infrastructure in the OECD”, while the Commonwealth established a “deregulation Task Force … to examine and address regulatory barriers to investment”.
This is code for winding back scrutiny of new development proposals – so-called red and green tape.
The fear is we will see the economic impacts of Covid-19 used as an excuse to permanently weaken environmental protections.
Says Nikola Casule, head of research and investigations for Greenpeace:
“We are in an unprecedented period of change, with an opportunity to reshape society for the better: clean air, clean water, cheap energy, a healthy planet and an economy rebuilt on modern technology, not dangerous and dirty fossil fuels.
“Governments must not use this global health crisis as an excuse to give public money to climate-destroying corporations and wave through unsustainable projects that threaten the health of Australians even further.”
The anti-regulation forces are certainly encouraged by the opportunity the crisis presents, says Daniel Gocher, director of climate and environment at the Australasian Centre for Corporate Responsibility.
“These ‘asks’ of government – cutting red tape and green tape, fast-tracking mining approvals, weakening industrial relations and regulation – have always been there. They’re engaged in relentless pursuit to remove any kind of barrier to maximising profitability,” he says.
And they see opportunity in the current circumstances.
He points to various statements from industry bodies such as the Minerals Council of Australia and the Business Council of Australia and conservative media commentators making the case that the economic response to coronavirus should include more fossil fuels and less regulation.
We’ve seen the headlines before: “Resources-led recovery”, and we’re seeing it again now. Gocher notes another development that went somewhat under the radar while the media were full of Covid-19 stories: the recent release of a draft report by the Productivity Commission on resource sector regulation.
“It’s a bit of a red flag,” says Gocher. “If you look at the media releases from the likes of the Minerals Council, the petroleum lobby, on the day after that report was released, they were all saying, essentially, ‘This is the perfect opportunity for us to just cut all of these regulations in order to, you know, get new projects up.’ ”
Bottom line, the coming recession will be marked by a conflict between those who would protect the environment and those who advocate letting development rip.
The pro-development, pro-fossil-fuel side will be relying on a quirk of human psychology: that we react more strongly to an imminent threat than to a distant one. The fear of coronavirus will distract from the even greater but far more slow-moving threat of climate change and environmental pollution.
Not to downplay the current crisis, but it is worth remembering that Covid-19 has killed but a tiny fraction of the number of people who die each year from environmental causes. Some seven million die each year, globally, according to the World Health Organization, as a result of air pollution.
The Australian Institute of Health and Welfare has estimated that about 3000 deaths are attributable to urban air pollution in Australia each year. The health costs from mortality alone are estimated to be in the order of $11 billion to $24 billion a year.
According to the latest figures from the National Pollutant Inventory, for 2018-19, released this week, the Vales Point power station emitted some 21,000 tonnes of sulphur dioxide, a similar amount of nitrogen oxides, and 130 tonnes of fine particulate matter into the atmosphere.
The Nature Conservation Council of NSW expressed particular concern about the potentially deadly fine particulates, which had increased almost threefold over those from the previous year. It called on the NSW Environment Protection Authority to investigate.
A spokesman for Delta Energy told The Saturday Paper the cause was that filters were old when the measurements were taken.
But Vales Point was just one of 4000 industrial facilities that emit 93 toxic substances into the environment. Emissions, particularly from coal-fired power stations, are increasing every year.
The public money being invested in these antiquated projects may pale in comparison with the $200 billion in Covid-19 stimulus spending, but it stands as a warning that there are powerful forces at work already, pleased to use one crisis as cover and as an excuse to not address another.
This article was first published in the print edition of The Saturday Paper on Apr 11, 2020 as "Focus pulling".
A free press is one you pay for. In the short term, the economic fallout from coronavirus has taken about a third of our revenue. We will survive this crisis, but we need the support of readers. Now is the time to subscribe.