Labor's Gas Reservation Scheme: A Response to Rising Energy Costs

The Albanese government is preparing to unveil a new gas reservation scheme aimed at addressing soaring energy prices and potential supply shortages in Australia. Following a six-month review of the gas market, the government is expected to announce its plans as early as next week. The initiative comes amid pressure from blue-collar workers and manufacturers who argue that the current approach favored by gas exporters is insufficient to stabilize prices quickly.

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Labor's strategy includes two potential models for the gas reservation scheme. The first model would require three Queensland-based liquefied natural gas (LNG) exporters to supply a specified amount of gas to the domestic market in exchange for export permits. The second model would mandate all gas producers, including both exporters and domestic-only suppliers, to contribute a certain volume of gas to the local market. The Australian Workers' Union (AWU) advocates for the first option, asserting that it directly addresses the exporters who have contributed to the domestic market's instability.

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East coast gas prices have tripled over the past decade, largely due to the linkage of the domestic market to international demand through major LNG export terminals. Paul Farrow, the national secretary of the AWU, emphasized the urgency of implementing a workable model, stating, “To shore up Australian industry for the 21st century, we need affordable gas reserved for domestic use right now.” Manufacturing Australia, representing large energy users, echoed this sentiment, arguing that an effective gas reservation scheme is crucial to mitigate high gas prices that threaten jobs.

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In addition to the gas reservation scheme, the Labor government is contemplating an unprecedented intervention to bulk-buy natural gas from east-coast producers. This initiative would allow the government to sell gas to local businesses at discounted rates, aiming to prevent manufacturing plant shutdowns due to escalating energy costs. This proposal has garnered support from major manufacturers and the AWU, highlighting the critical need for government action in the face of rising energy prices.

The Sydney Morning Herald

While the government’s plans are being formulated, there are dissenting voices regarding the effectiveness of the proposed measures. The federal Coalition and the gas industry argue that any reservation policy should only apply to new gas projects. Conversely, the Greens have proposed a 25% levy on LNG exports as a more effective means of ensuring domestic gas availability, suggesting that taxing gas could replace the existing Petroleum Resources Rent Tax (PRRT), which they claim is inadequate.

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A spokesperson for the government stated, “The government is conducting a review of the gas market. The government is committed to ensuring Australian homes and businesses get access to Australian gas at fair prices.” However, specific details regarding the options under consideration remain unconfirmed.

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• “To shore up Australian industry for the 21st century, we need affordable gas reserved for domestic use right now – not years down the track,” — Paul Farrow, National Secretary, Australian Workers' Union

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• “Australian industry has been bleeding for over a decade while we’ve waited for the gas reservation scheme we desperately need,” — Paul Farrow, National Secretary, Australian Workers' Union

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• “Taxing gas will be much more effective way of keeping gas in this country and replacing the Petroleum Resources Rent Tax (PRRT) that’s broken and simply not bringing enough money,” — Steph Hodgins-May, Assistant Climate Spokesperson, The Greens

The Guardian

The Labor government's forthcoming gas reservation scheme and potential bulk-buying initiative represent significant steps toward addressing the challenges posed by rising energy costs and securing the future of Australia's manufacturing sector.

The Guardian