Chapter 6 - Conclusions and Recommendations
Impact of the Varanus Island Gas
There is no doubt that the Western Australian community faced
significant problems as a result of the gas explosion. Business and industry
experienced significant loss and industry failed to meet production targets due
to the lack of gas supplies.
However the committee found there was no evidence as to a large
impact on employment in Western Australia. This is consistent with the view
expressed by business to the committee. However, while few workers have lost
their jobs, it was reported that some have been stood down or required to take
annual leave at times not to their convenience.
It is the committee's view that due to reliance of the community
and industry in the south west of Western Australia on the Varanus Island gas
facility that there was a disproportionate disruption to that part of Western
Australia. Evidence was received from individuals who experienced significant
dislocation to the extent that their businesses were faced with closure.
Contractual Arrangements and Supply
Based on the evidence received by the committee, no definitive
conclusion can be reached in relation to the nature of contractual arrangements
forced on business and industry during the gas crisis, or their status since
the resumption of gas supplies from Varanus Island. A definitive conclusion was
not possible due to the decision by Alinta not to appear and provide evidence
to the committee. Notwithstanding this, the committee has no evidence that
price gouging or unfair contracts were a feature of the market during the
crisis. There is no doubt that some witnesses have a strong perception of
market abuse and unconscionable conduct by market participants.
The committee believes that the former Western Australian
government responded in an adequate manner to the crisis and their management
of the crisis was professional and effective. There was no evidence that the
former state government acted in an improper manner or refused to release
relevant facts and documents.
Energy supplies in Western Australia are prone to serious
dislocation due to the lack of a mature, diverse and competitive market. This
situation, coupled with limited supply capabilities, leaves the Western
Australian community and industry prone to severe dislocation as a result of
plant or pipeline failure.
The reliance on limited sources of gas production and supply for
the domestic market is a significant impediment to the continuity of supply of
energy for Western Australian consumers and industry.
There is no short-term capacity to provide significant amounts of
reliable and affordable supplies of alternative energy sufficient to mitigate
against a similar crisis if another major gas failure is experienced.
The feasibility of developing emergency storage facilities of gas
in depleted reservoirs or other repositories is limited and would not result in
continuity of supply during a similar crisis.
The committee provides the following recommendations:
State Government crisis coordination
The Western Australian Government should convene a forum
comprised of gas producers, suppliers, power companies, industry groups, media
outlets and community representatives to discuss and develop a range of
standardised emergency response measures in the event that another gas crisis
is experienced in Western Australia.
The forum should examine initiatives, including but not limited
to, providing increased transparency and improved communication during periods
of disruption to gas supply. Improved communication from government to the
community and industry groups to their members would assist in the
dissemination of timely and relevant information to the public and industry
throughout Western Australia. In addition an analysis of the feasibility of
improved contingency planning by government and the market should be
The forum should also discuss the operation of the Gas Supply
Coordination Committee and the Gas Supply Disruption Recovery Committee and
whether there are improvements that can be made to the operation of these
committees if another gas crisis eventuates. An assessment should be made of
the Office of Energy priority schedule for gas supply and, whether, in
hindsight, any improvements or modifications should be made to the schedule.
Emergency powers and the market
The Western Australian Government should conduct an internal
analysis of the effectiveness and appropriateness of the legislative framework
to deal with periods of energy crisis in Western Australia. Issues such as the
government's capacity to invoke emergency powers in the public interest and the
effectiveness of government intervention in a market-based industry should be
analysed. In particular the response to emergencies under the Energy
Coordination Act 1994 (WA) and the emergencies under the Emergency Management
Act 2005 (WA) legislation should be assessed for their appropriateness
following the experience of the Varanus Island gas explosion crisis.
Energy security plan
The Western Australian Government should conduct, as soon as
practicable, the review of gas security announced on 6 August 2008. The review should be conducted in coordination with the Commonwealth's National Energy
Security Assessment currently being conducted by the Commonwealth Department of
Resources, Energy and Tourism.
Increasing competition in the Western Australian
To support increased competition and provide the community with
improved information the Western Australian Government should establish a
permanent gas bulletin board. Any permanent gas bulletin board should include
the provision of information on pipeline capacity and flows to increase the
transparency of the gas market in Western Australia. The committee also
recommends that the state government explore options to provide the Office of
Energy with powers to examine and publish transportation figures from the Dampier
Bunbury Natural Gas Pipeline and the Goldfields Gas Pipeline.
The Western Australian Government should actively engage with the
alternative energy industry in Western Australia in order to progress energy
diversification through increased alternative energy capacity.
The Western Australian Government should also examine whether the
current market-based approach to energy supply is providing sufficient
information, openness and competition to Western Australian consumers.
Short-term contractual arrangements during a period of
The Western Australian Government should commence discussions
with energy suppliers on the need to balance the market approach with community
and industry needs during a period of gas shortage. In particular, the need for
improved transparency and accountability from the gas and energy industry
during periods of crisis should be addressed. Given the perception of
"price gouging" and unfair contracts it is in the interest of the
industry and the government to examine increased transparency and
accountability during periods of energy supply crisis.
The committee received evidence from several contractors in the
south west who were severely affected by the gas shortage. It was reported
that Centrelink are limited in the assistance they can provide to independent
contractors. The Department of Human Services should undertake an investigation
of these concerns.
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