Strategies in Action
South Australian NMBI talking points
The talking points below delve into some of the implications of banning new climate-damaging projects in South Australia. A short Powerpoint presentation can be downloaded here.
These talking points may be helpful when you are encouraging SA state MPs to support adoption of the No More Bad Investments (NMBI) model legislation. These talking points assume that the person you are talking with accepts that at least some action is necessary to tackle the climate emergency.
Note: This page has not been updated in a while so a few details might have changed in the last few years, but the key points remain valid.
1. The South Australian government can control the types of projects it approves within SA regardless of federal policies. By banning new climate-damaging projects SA would be demonstrating climate-related ‘duty of care’, making it easier for other states and territories to do the same.more...
Climate impacts are already killing people and destroying ecosystems, so any government that allows new projects that increase carbon emissions is failing in its duty of care to its citizens.
Federal climate-related policies are far from adequate. However, if enough states and territories enact No More Bad Investments (NMBI) legislation as a first step in taking climate emergency action it will normalise the practice of governments passing legislation based on climate ethics and restoration of a safe climate.
2. Banning new climate-damaging projects before they start is relatively easy compared with phasing out existing sources of carbon emissions.more...
While equally necessary, closing existing fossil fuel activity would be much harder and take longer, involving transition programs for workers and possible compensation claims from affected corporations, and requiring rapid roll-out of replacement renewable energy infrastructure.
Adopting NMBI legislation is a logical and significant first step in taking climate emergency action even though much more is required.
3. South Australia doesn’t need any new gas projects to ‘keep the lights on’.more...
Renewable energy generation in SA is already at 58%, and a handful of new wind, solar, and storage projects will be coming online over the next few years. Gas-fired electricity generation is indeed very useful for filling in the gaps on days of low solar and wind generation, but we already have enough gas-fired generation to fill the current gaps, and the gaps will be smaller in future as a more diversified mix of new wind, solar, and grid-level storage projects are completed.
New gas extraction projects in the south-east of SA (Otway Basin) and near Moomba (Cooper Basin) should not be necessary to meet demand. Gas-fired eletricity generation will be declining, and all-electric households with solar panels are on the rise.
So why is the SA government subsidising new gas projects in the south-east and in the Cooper Basin? See the points below if you are thinking it is for the jobs or the royalties or for the sake of foreign investment.
From Dept of Energy, Innovation and Science (2017) (energy-update-report-2017): Australia’s domestic consumption of coal and gas has risen only slightly over the last 40 years. We now extract almost three times as much ‘energy’ as we need.
80% of the coal we dig up is exported. A 27% increase in gas extraction in 2015-16 resulted mainly from new CSG wells drilled in Queensland to support the expansion of LNG exports from Gladstone. We certainly don’t need any new coal mines or gas wells to have sufficient fossil fuel supply to keep existing power generators running while we transition to renewable electricity generation.
4. It will give market certainty to assist the rapid roll-out of climate-safe alternatives if new climate-damaging projects are banned in spheres where climate-safe alternatives already exist, and timelines for future bans are set in other cases.more...
Investment in new renewable energy generation and storage will flow in if new fossil fuel projects are banned. Electric vehicles and charging stations will expand if a timeline is set for banning new fossil fuelled vehicles.
When stringent new lighting efficiency standards were adopted, in effect banning sale of incandescent lamps, they were quickly replaced by a range of compact fluorescent lamps. This soon led to the development of even more efficient LED lamps. This transition was accomplished with minimal disruption and very little opposition from the general public simply because better alternatives quickly became available as a result of the tighter efficiency standards.
5. The SA government has adopted a target of net zero carbon emissions by 2050. Continuing to allow new climate-damaging projects is a bit like frantically trying to bail water out quickly enough to stop a boat sinking without doing anything to stop a person at the other end of the boat who is merrily tipping more water in.more...
In practice, climate impacts are already threatening lives and our well-being, so a more realistic target would be to reach net zero emissions absolutely as quickly as possible and to go beyond net zero emissions by drawing down the excess carbon already in the atmosphere.
It makes no sense to continue to allow new climate-damaging projects that will make achieving climate targets harder, particularly in cases where climate-safe alternatives are already available.
However, the SA government is subsidising new gas drilling in the South East and in the Cooper Basin, and also appears to be ignoring the potential climate impacts of burning the oil potentially to be extracted from the Bight. If that oil is exported it won’t count against SA reaching its renewable energy target. Even if SA meets its net zero emissions target, the actual climate benefit of doing so could be completely(?) wiped out by the climate harm caused by allowing NEW oil or gas exports.
6. Extracting oil from the Bight will negate the climate benefits of SA’s renewable electricity success story, currently at 58% with even more coming online over the next few years. If drilling for oil in the Bight goes ahead, burning that oil will potentially wipe out any climate benefit of SA’s wonderful renewable electricity achievements.more...
Since the proposed drilling sites in the Bight are in Commonwealth waters, NOPSEMA approval is required for drilling to go ahead. However, the SA government can use its powers over related works approvals and its lobbying power with NOPSEMA to stop drilling in the Bight on climate grounds.
The Statoil website does not say what it plans to do with the oil it hopes to extract from the Bight. Will it be refined, perhaps at Geelong, and used within Australia, or will it be exported? According to the Dept of Energy, Innovation and Science energy-update-report-2017, in 2015-2016 75% of Australia’s crude oil production was exported, and over recent years some of Australia’s refineries have closed, it seems likely that oil from the Bight would be exported.
According to IPCC carbon accounting conventions, the carbon emissions from burning exported fossil fuels are assigned to the country where they are burned. So, if Statoil exports that oil, it won’t make it harder for SA to achieve its carbon reduction targets…despite the fact that extracting and burning that oil puts everyone at greater climate risk regardless of where it is burned.
7. Will SA become rich from gas and oil royalties?. The short answer is no, although even if allowing new gas and oil projects were to earn a lot in royalties, for climate reasons it would be very shortsighted to allow them.more...
It seems neither the SA state coffers nor the federal government coffers stands to reap much in the way of financial benefit from allowing oil to be extracted from the Bight.
The federal Petroleum Resource Rent Tax (PRRT) has replaced state royalties for new offshore oil and gas, so SA would not receive any royalty income from oil extracted from the Bight. What’s more, the PRRT is set up as a tax on profits after all the exploration and extraction costs have been recouped, so it is usually many years before there is any benefit to Australia from the PRRT.
To add insult to injury, if an oil spill were to occur, the cleanup expense (like all other expenses) would be deducted from the amount of PRRT to be paid, or if no PRRT is yet being paid, would be added to the PRRT ‘credits’ that reduce any future PRRT payments. In effect, the Australian taxpaper would foot the cleanup bill.
According to this article in The Conversation, “Five new offshore gas projects are coming online: Gorgon, Wheatstone, Ichthys, Pluto and Prelude. When these are running at full production capacity they are unlikely to pay any PRRT for many years to come – the companies themselves concede it will be 2029 – and no royalties apply.”
“Unless prices spike higher, however, these five monster projects may never pay a cent in royalties or Petroleum Resource Rent Tax (PRRT). Unless the aggressive tax structuring of the oil majors is met with equally aggressive enforcement by government, the world’s biggest oil companies – Chevron, Exxon, BP and Shell – will pay very little in income tax too.” That is because current rules allow the companies to offset enormous amounts in PRRT ‘credits’ against their income tax liability.
What about royalties from the new onshore gas wells recently started in the south-east? 2014-15 gas and oil sales value totalled around $1.56 billion, but SA received just $105.3 million in oil and gas royalties. Separate figures are not given for the gas royalties, but gas sales amounted to only about 20% of the total oil and gas value, so the share of royalties received from the gas industry might have been as low as $20-25 million.
Yet in 2017 the SA government gave $48 million across two rounds of subsidies for new gas projects in the Otway Basin in the state’s south-east and the Cooper Basin. For the Otway Basin this included $6m to Beach Energy and $5.26m to a Beach Energy and Cooper Energy joint venture. The Cooper Basin subsidies included a total of $16.85m for several new joint ventures between Santos and Beach Energy.
One condition of these new subsidies is that the gas from these projects be offered to SA first, which might seem like a wise move from a government that is determined to avoid any future blackouts. But will SA actually need more gas to keep the lights on when it already has many new renewable energy and storage projects coming online over the next few years?
In a Santos media release about the subsidy for a new gas efficiency project in the Cooper Basin, Santos CEO Gallagher said, “If we can make even half that gas available to the market by capturing energy efficiency opportunities, it would be an excellent outcome for both Australian domestic customers and our LNG exports.” That (and other) gas from the subsidised new Cooper Basin projects could just as easily flow via the pipeline from the Cooper Basin to Gladstone on the Queensland coast and be exported from the Santos LNG facility.
8. Expansion of distributed renewable energy infrastructure will create jobs. Fossil fuel companies like to stress that their projects create local direct and indirect jobs and follow-on economic activity. True! But new renewable energy projects and other climate-safe projects do the same, possibly in even greater numbers.more...
Perhaps the most relevant difference is that fossil fuel companies are asking the state government to approve new projects. All the government has to do is say yes to the proposed project and the jobs and benefits of the increased economic activity will happen. In contrast, the state government may have to put some effort into strategies to encourage new clean-tech or other climate-safe projects. However, if there were a legislated ban on new climate-damaging projects, that in itself would give market certainty and encourage new renewable energy and other safe projects.
9. SA can develop new climate-safe exports to make up for forgoing potential future export income that might accrue from drilling for oil in the Bight or from future new gas extraction projects. How much or how little will NMBI legislation affect future export income potential? Probably less than most people might think.more...
Banning new fossil fuel extraction projects would indeed affect future export income since it is likely that any new extraction would be for export. Australia’s domestic energy consumption has been close to flat for the last 40 years, and over half of what we extract is exported (Point 3 above). Various states have carbon reduction targets which, if met, will mean we need less and less extraction to meet domestic demand as time progresses. Assuming our current mines and wells are not depleted any time soon, we should need no new extraction projects to meet a falling domestic demand (and if they are approaching depletion, new renewable energy projects can be built to meet demand rather than allowing new extraction projects).
But, export income is important to Australia’s economy. The majority of companies wanting to extract and export Australian fossil fuels are likely to be foreign-owned, meaning the income from selling the actual commodity stays outside Australia. However, we do receive an injection of foreign funds to the extent that foreign companies pay wages and buy goods and services within Australia.
Other potential sources of foreign funds from foreign-owned companies are company tax and royalties. In the case of oil and gas, Petroleum Resource Rent Tax (PRRT) also applies, but due to its design as a ‘super profits’ tax, new oil and gas fields are unlikely to pay any PRRT for a decade or more, and in the meantime PRRT ‘credits’ reduce the amount of company tax payable.
New coal and onshore gas extraction attracts state royalties, but based on historical figures (see Point 8 above) the amounts are likely to be less than one might expect, partidularly since new extraction projects tend to receive more in subsidies and other state government assistance than established projects.
So, yes, it is important to maintain Australia’s future export income, but given the small amount of export income we actually receive from fossil fuel exports, it should be relatively easy to replace that with new climate-safe exports and new foreign investment in local renewable energy projects provided we plan and prepare accordingly.
Of course we need to stop new fossil projects of all types for climate reasons regardless of what it might cost us, but it seems we are not as dependent on fossil fuel exports for our prosperity anywhere as much as the fossil fuel industry tends to imply.
10. NMBI legislation would stop all new climate-damaging projects once and for all. Currently, as soon as one proposed new coal mine, gasfield, or oil well is successfully stopped as a result of community opposition based around local environmental impacts or other non-climate reasons, another similar proposal nearby or elsewhere takes its place.more...
Currently the SA government deals with endless submissions and appeals related to environmental threats whenever a new company applies to drill for gas or oil, for example. Under NMBI legislation, there would be no new fossil fuel project applications.