Coalition Senators' Dissenting Report
1.1
The Varanus gas explosion and its sequelae have been a major
disaster for Western Australia and Coalition Senators wish to make some
comments relating to the overall management of the crisis by the Carpenter
Government and suggest future action to be taken.
1.2
Western Australia has become heavily dependent on gas from the
North West Shelf as a source of energy in the Pilbara, the Perth Metropolitan
area, the Wellington Region (which encompasses the Bunbury Hinterland), and the
Eastern Goldfields. The Varanus gas explosion meant that gas supplies to the south
west were reduced by 350 terajoules a day, or by around one-third of the 1000
terajoules supplied to various consumers around the state.
1.3
This reduction in the supply of gas caused immediate and enormous
disruption to industry around the state particularly in the south west, which
overall, according to the Chamber of Commerce and Industry of Western Australia
(CCIWA), lost an estimated $2.5 billion in income.[1]
1.4
This serious impact on the state economy was confirmed by Mr
Court, from the State Treasury, who said:
...there has been a relatively significant impact on current
economic conditions from the gas disruption, equivalent to around $2 billion in
terms of gross state product over the two year period of 2007-08 and 2008-09.
This translates to half a percentage point reduction in gross state product,
from the 7.5 per cent forecast in 2007-08 to seven per cent.[2]
Government Response to the Crisis
1.5
While the State Government appeared to move quickly to deal with
the gas crisis, setting up both the Gas Supply Coordination Committee and the
Gas Supply Disruption Recovery Group, this either disguises or ignores the fact
that despite two previous incidents where gas supplies were compromised, the
State Government did not have a contingency plan in place to deal with a major
disruption of the supply of gas from Dampier such as the Varanus Explosion caused.
1.6
From the beginning, the State Government’s communication with
community and industry was sporadic at best. Local councils and residents were
given little or no indication as to how the crisis would affect them, nor were
they given direction on how they could contribute to lessen the effects. This
was a reflection of not only the Government’s ignorance to the effects of the
crisis, but their lack of preparation for such a crisis.
1.7
This Committee has heard that the State Government was unprepared
to handle this crisis, despite two similar occurrences, one earlier this year
and one in 2006. There is a strong view that the State Government ignored these
precedents, as well as industry advice, to develop an appropriate contingency
response plan to deal with such a crisis and accordingly deserves strong
criticism.
1.8
The State Government’s failure to keep businesses informed led to
a fall in confidence in their ability to handle the crisis. This was
highlighted by the Government’s decision to leave the distribution of gas to
market forces, the bulletin board system, instead of declaring a state of
emergency which would have enabled the State Government to equitably direct gas
to where it was needed.
1.9
A number of businesses have argued that this decision left their
industry at a disadvantage.
1.10
As Robert Birrell, from the Bunbury Chamber of Commerce and
Industries, said in evidence:
The market was left to operate independently. And, left to its
own devices, the market failed to deliver equity of supply to the business
community.[3]
1.11
In the absence of prior planning and adequate communication from
the State Government, it was difficult for business to have confidence in the
Government’s response. The Government’s initial interactions with stakeholders
did little to reduce business anxiety and arguably left many businesses less
sure of the Government’s ability to handle the crisis. As the mayor of Bunbury,
and former State Cabinet Minister, David Smith said:
When the explosion happened and it became obvious that there
were going to be major impacts locally, I was invited to a meeting of the major
local industries. I expected initially that that would be for a briefing in
relation to an emergency plan that I presumed would have been prepared prior to
the explosion to manage exactly that sort of event. With the sort of energy mix
we have developed in WA and with the fact that we have the one pipeline, with a
few duplications between Dampier and Bunbury, I presumed someone would have
planned for either a problem in the supply to that pipeline or a problem with
the pipeline itself and that we would be quickly given an emergency plan as to
how it was all going to operate. In fact, at the first meeting, it seemed to me
that all the major companies around the table were being asked to address the
state as to what problems were being created for them. That surprised me
because there was not one employer around the table that employed fewer than
200 people, and I would have thought they would have been contacted already by
the state directly to find out what problems they were having.[4]
1.12
The Carpenter Government argued that they had sufficient advisory
groups in place, and that the flow of information to effected businesses was
high. However, most participants in these groups have indicated that they were
ineffective in developing an adequate response, and in informing the public of
their course of action.
At the second meeting that I attended, we were really no further
advanced in getting any public knowledge which would explain to us exactly what
impact it was having, who was being affected in what way and what the state or
the suppliers were doing. I was also surprised that, when the notion of a
competitive market for that gas was being considered, the issue of whether or
not it should be state managed was raised. The philosophical position of the
chambers seemed to be that they wanted the state to stay out of it, they wanted
it to be an entirely free market that would effectively bid for what gas was
available and they wanted it to be determined privately. That really surprised
me, because there were a number of public interest issues there that I thought
should have meant that there was some public involvement in the scarcity market
that developed, and the companies were not really left to bid.
The second issue that surprised me was how little information
was forthcoming from Alinta in particular, again, in terms of exactly what the
impact was on their supply, distribution and availability*. That information
was not being provided in any way, nor was there any indication of whether they
were simply going through the customers and prioritising them in terms of need
or importance or whether it was purely a market based thing where they were
effectively able to take advantage of the situation by allowing people to bid
up the price of what was available.
All of that to me just seemed, from a public interest viewpoint,
out of character for what I would have expected. I would have expected that
everyone knew there was only one pipeline and in terms of planning the energy
mix for Western Australia generally, and Perth and the south west in
particular, there would have been an enormous amount of preplanning— whether it
was Apache, or Woodside or the pipeline operators themselves who had
problems—and there would have been emergency plans and all those philosophical
issues about how you would develop a market—whether it would be a free market,
who would take control of the situation and what information would become
available—would have been determined in advance, but it was not.[5]
1.13
Given that the Carpenter Government and its advisers must have
been aware of the impact on Victoria from the 1998 Langford Gas Explosion which
led to the Victorian Energy Network Corporation shutting down the State’s
entire gas supply and devastated Victoria’s economy, it is surely not
unreasonable to expect that a contingency plan to deal with a similar situation
in WA would have been put in place.
The Role of Minister Logan
1.14
Following Mr Logan’s opening statement, the chair put the
following proposition to Mr Logan:
...We have had various evidence before us today in relation to the
view of the government response to the crisis. One view is:
“The State government response was poor, inadequate and
uncoordinated. It lacked action and true support. In particular at the
beginning of the incident, information was fragmented and patchy, inconclusive
and meaningless to businesses. At the later stage of the gas crisis the public
was mislead believing that the crisis is over, where in many cases force
majeure with many suppliers is technically still in place.”
Would you like to comment on that perception of the government’s
position, because, whether it is true or not, if that is the perception, there
are obviously some issues you have to deal with.[6]
1.15
Although Mr Logan sought to defend the government’s actions in
his answers to questions on various issues from Coalition Senators, including
Senators Johnston, Bushby, Eggleston, and Adams, the Coalition Senators were
not convinced by his answers.
1.16
During the committee hearings in Perth, the issue of whether or
not the State Government should have had a contingency plan was raised with Mr Logan,
the Minister for Energy at the time of the explosion. Mr Logan made clear that
he was very aware of the unique challenges that Western Australia’s energy
security faced:
...given the nature of the system here in WA, where you have
effectively two 1,500-kilometre pipelines bringing gas, 95 per cent of it from
the north west, it is a strategic issue...[t]herefore it is not like the eastern
states, where there is an integrated state system which primarily comes out of
Moomba, Victoria and Queensland and where, if there is a catastrophe in one
state, it can be supplied from another state or from another hub. We do not
have that luxury here in Western Australia.[7]
1.17
Despite this understanding, when it was put to him that Western
Australia had already experienced interruptions to its gas supply, his
response was that in the history of gas in the state, this was the first
long-term disruption.
For a long-term displacement, such as the one we face from Varanus
Island, this is the first time this has ever occurred in Western Australia
since the exploration and delivery of gas in Western Australia. Nothing like this
has ever happened before.[8]
1.18
Coalition Senators are of the view that Mr Logan, as Energy Minister,
should have been aware of the 1998 ESSO Longford Gas Explosion and its
consequences. He should also have been aware that NSW has a contingent
emergency response plan in readiness for any possible disruptions to its supply
of gas.
1.19
The view that a plan should have been in place before the Varanus
explosion was also shared by witnesses such as Robert Birrell from the Bunbury
Chamber of Commerce and Industries:
Senator BUSHBY – “Given the Longford explosion, which you
mentioned, and the two interruptions to gas supply in WA that we have seen in
the last three or four years, do you think that something like this—not
necessarily to the same extent but another disruption—was foreseeable and that
a crisis management plan should have been put in place prior to this
occurring?”
Mr Birrell (Bunbury CCI) – “Without doubt.”[9]
1.20
Following questioning from Senator Eggleston, Mr Logan also
stated that he had raised the issue of energy security with the Federal
Minister for Energy, Martin Ferguson, and showed that not only was he aware of
the issues surrounding the State’s energy security but also that he knew where
the impacts of any disruptions to supply would be most felt:
Senator EGGLESTON - “Would you like to comment on that and say
whether or not you feel, as a general issue as much as a particular issue, we
should have a plan dealing with emergencies and also a broader plan for energy
security.”
Mr Logan - (Former Energy Minister) “...When I was minister for
energy I raised that with the minister for energy Martin Ferguson and suggested
that the issue of security of domestic gas in Western Australia...[i]t is a
strategic issue. It is also an economic issue for industry, which is
primarily in the south west. [emphasis added].[10]
1.21
Coalition Senators believe this quotation demonstrates Minister
Logan understood the potential economic impact on industry in the south west
from any disruption to gas flow through the Dampier to Bunbury pipeline, and
accordingly hold the view that his failure to put in place a contingency plan
to manage such an event amounts to gross incompetence on his part for failing
as Minister to ensure that such a plan was established.
Energy Security
1.22
Coalition Senators are concerned that insufficient attention
appears to have been addressed at Government level to the potential danger of
Western Australia’s heavy dependence on gas from the North West Shelf and
believe that if there is a lesson to be learned from the Varanus Incident it is
that there is a need to diversify the sources of energy available to supply the
south west grid.
1.23
Interesting evidence was given regarding possible renewable
energy sources but while further research is needed before such sources as
wind, wave and solar power can deliver base load levels of energy, it is felt
that the State would be wise to maintain diesel and coal powered electricity
stations in a state of operational readiness as a backup to the gas supply from
the north west. This is already done in the Pilbara with the Red Bank Power
Station in Port Hedland on stand by, as is that at Cape Lambert, ready to run
on diesel should the gas supply be interrupted.
1.24
Evidence that the development of smaller on-shore gas fields
closer to Perth producing only for the domestic market (rather LNG for export)
feeding into the southern end of the Dampier pipeline so lessening the
dependence on the North West Shelf as a source for domestic gas was regarded as
a matter which should be given priority.
1.25
Coalition Senators are of the view that addressing the issues of
energy security and the energy market makeup of Western Australia requires
constructive cooperation between Government and key stakeholders. This view was
reflected by the Chamber of Commerce and Energy’s willingness to participate in
a roundtable on Energy Security and their ongoing concern about the State’s
future.
Senator EGGLESTON— “We just heard about the issue of
diversification of power sources. It seems to me that there would be some value
in the state government calling a roundtable conference with parties like your
organisation, the Chamber of Commerce and Industry, people like the food group
who have appeared before us today who were very critical of the state
government’s response, to come up with an overall contingency plan to deal with
crises such as this, and also to talk about the overall energy and power needs
and sources of power and energy for Western Australia. Would your organisation
support that sort of concept?”
Mr Howard-Smith (CME) - “Yes. There are a number of issues. One
is the immediate response to the issue and, quite honestly, I do not know what
else the government could have done. That does not escape the consideration of
much broader strategic issues—that is, diversity of supply of gas, perhaps
alternative forms of energy.
It is a clear vision for the state in terms of key
infrastructure; not just the supply of energy, but I would also argue for
things like water and the people issues, and infrastructure. That does not just
involve the state government, I would suggest, it also involves the federal
government. These are major issues of infrastructure. That is a broadsheet
issue, and on that we would be more than happy to engage. I think that is where
we should be focusing.”[11]
1.26
Coalition Senators accordingly support the recommendation that
such a planning conference be held.
Impact on Business
1.27
The Chamber of Commerce has suggested that the crisis cost
individual businesses, on average, in excess of $1.1 million. This is
significantly higher than the State Governments estimates, which only
highlights the Carpenter Government’s lack of understanding and control over
the effects of the crisis.
1.28
It has been submitted to this Committee that amongst the
confusion and lack of information during this crisis, local businesses,
particularly smaller ones, were left to fend for themselves. According to James
Pearson from the Chamber of Commerce and Industries:
Of the 250 businesses which responded to that question (on the
gas crisis), around 40 per cent told us they had been affected in some way by
the shortages of gas and the consequences there from. On average, our
membership told us the gas crisis cost affected businesses in excess of $1.1
million...[a]bout a third of affected businesses found it difficult to obtain
inputs and supplies for production. There was reduced demand and higher energy
costs.[12]
1.29
In addition, Paul Brockschlager from the Australian Hotels
Association said:
There was a lack of recognition in regard to the potential for
fundamental damage to the business reputation of individual accommodation
providers through no fault of their own. Increased costs for CO2
supplies impacted on the availability and cost of tapped beer lines and gas
supply rationing resulted in reduced hotel food and beverage services, the
closure of hotel facilities such as pools and saunas, and reduced linen supplies
and laundry services.[13]
Impact on the South West
1.30
While businesses across Western Australia have felt the impact of
the Varanus Explosion, Coalition Senators would like to make a special
acknowledgement of the south west region of the state which suffered severely
from the crisis.
1.31
During the hearings in Bunbury, members of the committee heard
first hand what impact the loss of gas was having.
1.32
It was made known during the Bunbury hearing that various
businesses in the south west operated with equipment which required a
consistent and predictable supply of gas. The operations of such businesses
were compromised by the intermittent nature of the supply of gas provided.
1.33
Mr Birrell made this clear in response to questioning from Senator
Pratt:
...One of the issues was that businesses would be told at five o’clock in the afternoon that they would get so many gigalitres of gas tomorrow for
so many hours. In a lot of cases it took them perhaps two days to ramp the
plant up to the temperature or the operating level they needed to actually
start. The point was made a number of times that a lot of industries would
prefer to get less gas more often, rather than a lot of gas in very short
bursts.[14]
1.34
One of the reasons the impact on business was felt more in the south
west than the Perth metropolitan area is that the south west labour market was
relatively tighter even before the explosion at Varanus Island. South west
businesses were acutely aware that if they were to lose workers through the
crisis, there was a high likelihood that those workers would find work outside
the region making recovery from the crisis all the harder.
1.35
According to David Smith from the City of Bunbury:
One of the major concerns when this explosion took place was
businesses securing their workforce. They were very frightened that, if they
allowed annual leave or put off any of their workforce because of the problems
caused by the explosion, those people would quickly move off to either another
industry in the south west or, more likely, to the north west and become one of
the fly-in fly-out population. Bunbury already has a reasonably large fly-out
population because of our proximity to Perth. We have a local airport and an
airport at Busselton that is used for fly-in fly-out.[15]
1.36
Preston Gardiner, Managing Director of Premin Holdings, put
forward to the committee his personal experiences of the crisis:
My driver has been doing probably only 40 hours a week.
Yesterday he gave me his notice. He is going north because he cannot afford to
even pay his mortgage on 40 hours a week—and we pay exceptionally good wages.
We cannot find MC truck drivers or mechanics. I even have mechanics now wanting
to go up north. If this continues into February, I do not know what we will
get, but I am seriously considering putting our business on the market and
shutting the doors...[16]
...I have to make my repayments and pay my drivers. I have had to
pay my drivers for days that they do not work so that they get enough money to
make their repayments on their houses so that they do not lose their houses. It
is not just myself that I am concerned about here, I am concerned about (1) my
fellow associates and (2) my employees. My employees are more important to me
than the assets that I own; they have young families too.[17]
1.37
Having had much involvement with local industry during the
crisis, Nola Marino, the Federal Member representing the south west seat of
Forrest, also put to the committee the important issue of staffing to industry
in her electorate:
As you have heard, we have a skill shortage in this region...some
of the operators in two businesses I spoke to take five to six months to train...
They literally could not afford to lose these people, plus they have such a
significant attachment to very good staff—and they are good staff. They wanted
to keep them and they were prepared to absorb the cost of keeping those staff
on at very low, if any, production levels.[18]
1.38
Louise Kingston and Rose Moyle, from the Manjimup Chamber of
Commerce and Industry, gave one example of the complete halting of one
business, showing also their frustration at the lack of attention given to
their area:
...a full-time contractor who ran two trucks...[h]is business
stopped overnight and has not resumed...[19]
...Out of sight of the metropolitan area, you get the feeling that
you do not exist. I think that is a frustration you feel at times...[20]
1.39
Robert Birrell, from the Bunbury Chamber of Commerce and
Industry, raised the issue of the heavy impact to contractors in the south west
and the additional capital costs faced by businesses as they attempted to adapt
to the loss of gas:
We know that there have been a lot of contractors, especially in
the timber industry, who have been very badly affected. The business community
and industry in the south west was hit on two fronts: first, loss of production
and, secondly, fairly significant capital cost as they struggled to change the
structure of their operations to take alternate fuels.[21]
1.40
Coalition Senators would like to note that when businesses in the
south west were forced to lay off staff, there was no specific social security
support established for those workers despite the rhetoric put forward by both
the State and Federal Governments. Mr Logan’s submission to the inquiry states
that an offer of assistance had been made by the Federal Government:
The Federal Government also offered assistance after discussions
between the Premier and the Prime Minister, particularly in the area of
targeted social security and unemployment benefits to those impacted by the gas
shortage.[22]
1.41
A statement from the Federal Resources Minister, Martin Ferguson,
in the Sunday Times, indicated that not only was support available, but
that the Federal Government was keen to provide such support if it were so
requested:
In terms of whatever requests the WA Government makes, we will
be going out of our way to try to meet them...I can assure you that relationships
like Centrelink – any assistance required – will be made available.[23]
1.42
When the issue of such assistance was put to the then Premier, Alan
Carpenter, he made clear that discussion was had with the Prime Minister
regarding the crisis and that the issue of targeted Centrelink support had been
raised:
We discussed the issues, including the possibility of ex-gratia
payments to affected people, as well as the possibility of waiving Centrelink
eligibility requirements and asset tests that would normally apply, so that we
can respond quickly and supportively to people in need because they have lost
their employment, albeit temporarily[24]
1.43
However Centrelink later confirmed that NO allowances had been
made, to which the then Premier responded that support specifically for people
affected for the crisis was being covered in ongoing negotiations, referring to
his statement in parliament that such support was then referred to as a
“possibility”.
1.44
While arguing that the impact of the crisis would be felt
throughout the economy, the government’s actions in providing targeted support
were limited to rhetoric only, despite the Premier’s statement that such
support would allow them to “respond quickly and supportively”.
1.45
Clearly both the then WA State Government and the Federal
Government deserve strong criticism for failing to respond the needs of
employees who were stood down as a consequence of the gas supply crisis
particularly in the south west.
Operation of the Bulletin Board
1.46
Coalition Senators are of the view that the Bulletin Board which
was established as a secondary gas market during the crisis was severely flawed
in at least two areas. Firstly, it failed to ensure the provision of gas to
essential services including the food industry, and secondly, it left small
businesses at a disadvantage. Furthermore it has also been submitted that, as a
result of the failure of the State Government to intervene, the Bulletin Board
allowed price gouging tactics by energy suppliers.
1.47
Not only were businesses left fighting for the remaining gas,
they were forced to pay, in some case, up to three times the cost. It has been
alleged that this occurred because suppliers used “force majeure” clauses to
cancel contracts on the grounds of having no gas, then after sourcing
additional supplies of gas sought to establish new 2 to 3 year contracts at
much higher prices.
1.48
Despite early indications that this could be the case during the
crisis, the Carpenter Government refused to intervene, allowing energy
suppliers to take advantage of this crisis, at the expense of Western
Australian business.
Senator JOHNSTON - “Were they happy with the bulletin board
function?”
Mr Brockschlager (AHA) -“From my discussions with them, no.”
Senator JOHNSTON - “Why would you say that?”
Mr Brockschlager (AHA) -“I would say that because my
understanding is that the bulletin board cost them up to three times their
normal cost, and it should be noted that that normal cost was to make no
profit. That was just to keep the business afloat and to service our industry.”[25]
...
Senator EGGLESTON—“So what we needed was a different model which
could have more specifically catered to the different needs of different industries,
and the market model which was adopted really did not do that.”
Mr Lock (FIA) – “Correct. The market model did not give any
power to those industries that were very significant, which were essential
services. There was no mechanism to ensure that those essential services got
gas.”[26]
“The secondary market that was developed a month or so after the
explosion occurred was used only minimally and there was a minimal amount of
gas available. Obviously it was the bidding or Alinta’s own decisions that were
being made, and you could not get any information as to the basis upon which
those allocations were being made.”[27]
Price Rises
1.49
A most concerning feature of the aftermath of the Varanus
explosion has been that as the gas supply has been re-established, prices for
gas, and more importantly electricity, have reportedly been substantially
raised.
1.50
Coalition Senators are concerned about allegations made to them
that “force majeure” clauses in contracts for the supply of gas were being used
to terminate contracts and then replace them with new contracts at considerably
higher rates for periods of 2 to 3 years. It has been suggested to Coalition
Senators that electricity rates to industry were raised considerably.
1.51
Coalition Senators are strongly of the opinion that these
matters require further investigation.
1.52
It has been suggested to members of the committee that gas
suppliers are seeking to increase Western Australia’s domestic gas prices to so
called “international parity pricing”; a benchmark which has been described as
fictional to members of the committee.
Senator Cameron (Chair) –“That market failure is, you say in
your submission, complicated by this theory that we should pay international
gas prices within Australia, when you say that there is no real international
benchmark. Is that an issue?”
Mr Hohnen (DomGas Alliance) – “That is an issue, yes. We do not
believe that there is any real nexus between a market for gas in Western
Australia and an international gas price so-called. Gas is sold in various
parts of the world in competitive markets, and reaches very different price
levels in those markets, so there is no particular magic between a price that
might prevail in the United States, the Henry Hub gas price, or a price that
might prevail for LNG in a particular market, or a price that might prevail in
North Africa or Nigeria.”[28]
1.53
A reasonable conclusion to be drawn from this is that the energy
companies may be seeking to exploit the situation to unreasonably increase
prices to Western Australian consumers. Such a scenario could only be regarded
as reprehensible and should be subject to further investigation by the State
Government.
1.54
Coalition Senators believe this emphasises the need to develop
more on-shore gas fields closer to Perth, designated to supply the domestic
market rather than produce LNG for international sale. In addition such
developments would inject much needed competition into the Western Australian
gas market.
Why Did Gas Supply Problems Continue Past August?
1.55
Coalition Senators are concerned about suggestions put to them
that the gas crisis was unnecessarily prolonged.
1.56
As is well known the Dampier to Bunbury Gas Pipeline carries about
1000 terajoules/day; the Varanus Island explosion removed about one-third or
350 terajoules/day.
1.57
As stated in the submission by Mr Logan, Woodside, operator of
the North West Shelf, quickly increased its supply by more than 100 terajoules/day,
and with some extra gas from the smaller suppliers in the mid west, supply had
increased by around 150 terajoules/day.
1.58
In early July, the Office of Energy released an update on the
crisis which explained that with the extra 150 terajoules/day from other
sources, and Apache expected to restore partial supply from Veranus Island at
around 200 terajoules/day, WA’s domestic gas supply would be returned to
pre-crisis levels. Therefore, by end of August, it would seem in the face of
this information that the gas supply crisis should have been over and all gas
consumers returned to pre-crisis reliability and prices.
1.59
Mr Logan’s submission also states that in addition to the extra
gas supplied, which restored gas supply to pre-crisis levels before the end of
August, even more gas became available upon Verve returning coal capacity to
production. This involved generation from Muja &, Collie A and Kwinana B units
freeing up a further 100 terajoules/day into the domestic supply.
1.60
There was a further source of easing of the crisis by September
which was the passing of the winter peak gas demand by households and business
for heating purposes.
1.61
The result of these factors is that in September, with 350
terajoules/day of gas supply restored, Verve releasing a further 100 terajoules/day
and the winter peak having passed, WA’s domestic gas industry had more gas
available for supply than when the crisis occurred.
1.62
Under such circumstances, it seems irreconcilable with the facts
that some small business gas users were still being denied reliable gas supply
at normal prices even in late October when the Committee held its hearings.
1.63
Coalition Senators are of the opinion that with the failure of
the previous State Government to publicly disclose critical information, an
inquiry must ascertain the facts so the community can see if the gas crisis was
unnecessarily prolonged and if so, to what purpose and to whose benefit.
Conclusion
1.64
The Varanus gas explosion was a major disaster which has cost
Western Australian businesses at least $2.4 billion according to the CCIWA and
has cut the forward growth of the State’s economy by 0.5% according to State
Treasury.
1.65
Coalition Senators are deeply concerned about the manner in which
the Western Australian Government managed this major crisis and believe that Minister
Logan displayed gross incompetence as the responsible Minister and that
overall the deficiencies in the management of this crisis by the WA State
Government amount to negligence.
1.66
Specifically, as a result of this inquiry, Coalition Senators
believe that in the public interest there is an imperative requirement that the
following matters be the subject of further investigation to determine whether
the management of the crisis by the Western Australian State government was
negligent and that the question of compensation to injured parties should be
considered;
1. The
absence of a Contingency Plan: Given that the consequences of the interruption
of the gas supply to the south west were predictably severe, the failure of the
State Government to have a contingency plan in place to deal with such an event
and whether this amounts to negligence.
2. Minister
Logan: Minister Logan’s failure to develop a contingency
plan in spite of his recognition of the desirability of having such a plan in
place and whether this amounts to gross incompetence.
3. Competency
of the Crisis Management: Coalition Senators believe the following three
questions must be addressed:
Whether the actual management of the
crisis and the process under which gas was allocated to industry was competent
and met the needs of consumers both industrial and domestic.
Whether the reliance on a market
forces model was in the public interest.
Whether the State Government should
have become more involved by the formal declaration of a state of emergency as
is possible under state law.
4. Small
to Medium Sized Enterprises: The apparent lack of concern for small to
medium businesses who were forced to bid for gas through the Bulletin Board
with no regard for their individual circumstances nor their importance to the
wellbeing of local communities all of whom were thereby disadvantaged.
5. Use
of Force Majeure: The termination of contracts under ‘force majeure’
clauses because of a lack of gas allegedly followed by energy suppliers seeking
to re-negotiate contracts with clients at higher prices for periods of up to 3
years.
6. Increase
Gas and Electricity Prices: The reasons for the general increases in gas
and electricity prices which have occurred following the progressive
restoration of the supply of gas.
7. Energy
Security: The need for Western Australia to reduce dependency for energy on
the North West Shelf gas fields and the Dampier to Bunbury pipeline (which
supplies the Perth metropolitan area and the Bunbury Wellington region), in
particular by diversifying sources of energy.
Recommendation
1.67
Coalition Senators believe the implications of these conclusions
are of such gravity that the State Government be called upon to establish a
Judiciary or other major independent Inquiry to investigate the aforementioned
matters.
Senator Alan Eggleston
Deputy Chair |
Senator Judith Adams |
| |
|
| Senator David Bushby |
Senator the Hon David Johnston |
| |
|
| Senator Barnaby Joyce |
|
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