Interview with Kieran Gilbert, Sky News Australia

Kieran Gilbert
12-month price cap, windfall profits tax, reasonable price mechanism

KIERAN GILBERT: I began by putting that to the Resources Minister Madeleine King, when I caught up with her earlier in the day, suggesting now that the Bill and the laws look like they will be a lay-down misere, when put to Parliament. 

MADELEINE KING: Well, I don't know about that, but, you know, there's other parties to talk to, and people, but it's really great news that Senator Pocock is getting behind this legislation, because it will bring cost of living relief to many Australian consumers, but also enable manufacturers to have some certainty about ongoing gas prices. 

KIERAN GILBERT: He's got a big concern though with the compensation to coal companies. He says it's unconscionable that taxpayers should have to stump up to compensate fossil fuel companies making war time profits. What do you say to that? 

MADELEINE KING: And Senator Pocock is entirely entitled to those views, and I know those views would be shared with many other Australians, and I do understand them. We did make a decision to not pursue windfall profits tax, and I know other countries have done so, but we do need to keep continuing investment streams in the supply of fuel into our economy, whether it be gas, but also coal, because whilst we are deeply committed to reaching net zero emissions and a transformation of energy use in this country, right now, and in the short term, we do have to make sure that there is supply of these commodities for manufacturers, but also for power generators, so people can heat or cool their homes, of course, depending on the seasons. 

KIERAN GILBERT: This 12-month cap on prices that the Government's going to introduce, it seems like there's sort of broad acceptance with the 12-month timeline; okay, they'll cop that. The thing that the industry is worried about, it seems, certainly the gas industry, is this notion of a reasonable price test. How rigid would that regulation be? 

MADELEINE KING: Well, we're working on that, and that's part of the consultation that is open until early February, so we welcome all of industry participating in that consultation period. I know it's over the summer, but a lot of us work over the summer, and we'll continue to do so, of course. 

It's important to know that the reasonable price mechanism foreshadowed by the consultation paper will be within a mediation and arbitration process. So, the threshold for when it is activated is a matter for consultation as well, but should it be activated it is because there has been unreasonable behaviour, either by the sellers of gas or possibly by the purchasers as well, because it may be the case that there are reasonable offers being made, but some purchasers don't like them. 

So, I wouldn't want anyone to think that this is a cure-all for bad planning and poor management on behalf of some consumers of gas, and by that, I mean industrial consumers. Equally, gas producers and gas suppliers have to be reasonable as well, and that's part of the pricing mechanism. 

KIERAN GILBERT: Are the companies guilty of beating this up given their exports and export prices are untouched; this is a small percentage of their overall extraction of gas? Are they beating it up?

MADELEINE KING: I think – well, any industry has concerns. And it's legislation that does affect them, and it affects them greatly, and I don't want to ... I don't think we should underestimate the seriousness of this intervention in the market. It's not something this Government set out to do at the start of its term when we came into power, but the fact is we are left with an inheritance of bad and continuing bad energy policy, and we do need something to fix it. There is a ...   

KIERAN GILBERT: But they could have avoided it as well? 

MADELEINE KING: Well, they perhaps could have    

KIERAN GILBERT: The companies - if they'd listened to the warnings, they could have avoided all this.  

MADELEINE KING: I would have hoped that. That hasn't happened to date, but I might that many supply contracts have indeed been inked and contracted, and clearly, they were thought to be reasonable by the people involved in them, and maybe they would want better, and I do accept that. But what we see now is a continuing high pricing. We want to make sure there is this price cap in to deal with this emergency for 12 months to sort of re-set the market in a way, if you like, to bring it to some stability, and then have an ongoing system of management of that market. 

KIERAN GILBERT: It does seem a little hard to take though, the suggestion that they were taken by surprise. 

MADELEINE KING: I would agree with that statement. I don't think they were taken by surprise. I know they have only seen the legislation very recently, but it has been an emergency situation. We have gone through, over weeks and weeks, different options; we have gone through every possibility. The Government have thought about this. 

KIERAN GILBERT: But they've been warned publicly and privately, haven't they? 

MADELEINE KING: There's certainly been a lot of warning publicly, but you know, they're coming to the table, and you know, I'm meeting with those exporters as well tomorrow, and I've just come from a meeting with the Prime Minister and the Treasurer, and with APPEA the representative of the gas companies    

KIERAN GILBERT: What was the message from that? 

MADELEINE KING: It was a really productive meeting, and it's really important to hear from them, and the Prime Minister's door is always open to industry, he's said that openly, and you know, we'll work with APPEA and the gas companies to address their concerns. I can't say we can address all of them, but we're certainly going to take their comments on board and try to make this a better solution because it will be going toward Parliament tomorrow. 

KIERAN GILBERT: So, it was constructive? 

MADELEINE KING: Absolutely constructive, yes.

KIERAN GILBERT: They're not trying, some of these companies trying to hold the country to ransom with their behaviour just in terms of saying they're suspending their negotiations with buyers. Is this some sort of threat?

MADELEINE KING: Look I’ll come to that point in a moment. But you've got to remember that for the gas companies themselves, they need manufacturing to keep going too, because that's their primary client. So, if manufacturing fails, or lots of companies fail, then they have no one to sell this gas to domestically. So that's problematic, right? 

And so, you can't export - to stop what people might think - you can't export everything, because not everything's suited for LNG. So, you know, there is a mutual interest in making this work and the gas companies accept that. And they point out to us the importance to them of the manufacturing industry. As for the exporters with the subject to the heads of agreement that are re-looking at their expressions of interest, I don't think that's unreasonable for them to do it while they consider the regulations enforced. And we'll be speaking with them tomorrow.

KIERAN GILBERT: So, you don't think they're holding us to ransom as a nation?

MADELEINE KING: No. Their statements have been pretty measured, I think. And, you know, if I get a different impression on that tomorrow when I meet with them, maybe I'll have to reassess my view. But at the moment, I think they are trying to be constructive. They just want to make sure that their processes align with what we're proposing to introduce. And those three exporters have been really helpful in shoring up the supply that's needed so we didn't have to activate the domestic gas security mechanism. And they know as well as everyone knows that the ADGSM does remain a tool of the Government in future.

KIERAN GILBERT: Is gas reservation. The Prime Minister seemed to open the door to that in comments this week, that the Government will consider a national gas reservation. Is that very much on the table?

MADELEINE KING: Well, it's a crisis situation and I think we've said all along, everything remains on the table. But this is what we're seeing now, is our response in the short term, a gas reservation policy nationally is a more longer-term proposition. But we will look into it. We'll look into a number of things over the coming months as well, to improve this market.

KIERAN GILBERT: Could it be done retrospectively?

MADELEINE KING: Very difficult to do retrospectively.

KIERAN GILBERT: Okay, so it would have to be future projects?

MADELEINE KING: Prospective, yes, that's right. And what the magnitude of future projects are is another matter altogether. And there are also projects online that have already committed to be reserved for domestic use, such as Narrabri, which the New South Wales Government is now hitting the express button on. And equally, Queensland has its own reservation policy as well. But we'll work with these governments and other governments and see what might be developed into the future.

KIERAN GILBERT: Was the heads of agreement on supply in September - was that a missed opportunity, given it required 157 petajoule be offered, but not necessarily secured? Should there have been firmer language in that to say to this, these companies, it's not just offered?

MADELEINE KING: Yes, it's supplied, we've got to deliver it. Yeah, you make a good point. It is a voluntary agreement, though, and my priority then was ensuring the supply, and that's why we built into the agreement quarterly updates. And, my meeting tomorrow is one of those to make sure they are meeting at those commitments, and I expect they will. The slight pause in their expression of interest process is to be understandable. 

KIERAN GILBERT: Because it's now mandatory and because of the reasonable pricing test and so on.

MADELEINE KING: Well, the Government has introduced changes and they're entitled to a bit of time to reflect on those changes and how it works within their processes under the heads of agreement. But I'm very confident that they will meet their commitment to me and to the Government. But also, it's a commitment to the Australian people to make sure there is gas available.

KIERAN GILBERT: Exactly. Well, Santos, half year profits after tax 1.66 billion, up 230 per cent. ExxonMobil's quarterly profit - 20 billion - 4 billion more than expected. Woodside increased 400 per cent to 1.82 billion US. They're making massive profits. Do they accept that they also have a social licence they've got to deliver to this country?

MADELEINE KING: I'm sure they do, and they would want to get with the program and make sure they understand that it is really important to understand what's going on in the community. And the community is distressed at the prospect of the increase in power bills. But, you know, the gas companies, like everyone else, is also rolling off nine years of inaction on energy policy, so they've not had much guidance or security either. The profits, they are important, they are startling, I get that. And I understand why people call for a windfall tax, and they've been introduced around the world, but equally, they do bank money into projects and then those profits go into new projects. But there is a question on whether new projects go to in the end. So that will be an ongoing discussion with this industry.

KIERAN GILBERT: Finally, a lot of issues around the industry right now. Do you think it's got a future gas industry in this country? 

MADELEINE KING: It absolutely does. Look, this Government is committed to net zero emissions by 2050. The gas industry committed to net zero emissions by 2050 way before the Commonwealth of Australia did. So, they've been working on technology and projects reducing emissions to operations for some time now. They are working on mature offsets, as is the Government, to make sure we have a proper trading system of offsets that the people in the general public can have confidence in. 

And this will all form part of getting to net zero, because there are certain processes in this country, manufacturing being a perfect example, where gas will be needed for the foreseeable future until some other technology turns up; we can't hope or magic that technology into existence. So, in the meantime, we have to make sure that there is that supply of gas and that will continue to exist, but equally, not just for Australia, but for our regional partners. Gas is very important because they have chosen pathways to net zero emissions, and gas is a very critical part of that.

KIERAN GILBERT: Madeleine King Resources Minister, I appreciate your time.

MADELEINE KING: Thanks so much, Kieran. Have a merry Christmas.