Fracking Madness: “hottest play on the planet” or giant sinkhole for public money?

by | Jan 3, 2021 | Energy & Environment

“The hottest play on the planet,” Keith Pitt calls it. Resources Minister Pitt and his government are keen to open up the Northern Territory to gas fracking but, if the NT’s Beetaloo Basin is so “hot” for investors, then why do they need public money to drill it? Even more bizarrely, the industry has made it clear that it does not want public subsidies but Pitt and Co appear determined to throw public money at the gas companies anyway. Callum Foote and Michael West report on another extraordinary case of corporate welfare, environmental destruction and the political donors and large US hedge funds who we are all subsidising.

They just don’t get it. Or if they do, are they are so compromised by donations from multinational oil and gas companies they are prepared to risk both the planet and the financial future of Australians?

Egged on by the toadies in the financial press, the Australian government is pushing ahead with plans to open up the Beetaloo Basin in the Northern Territory to fracking. Make no mistake, this is a carbon bomb. 

If the Beetaloo development proceeds it will unleash up to 1.2 million tonnes of greenhouse gases, blowing Australia’s Paris targets out of the water. Such is the stranglehold however that the gas industry has over governments in Australia – both state and federal – that they are throwing money at the gas industry when even its peak body APPEA has plainly said it does not want or need.

We will get to that grotesque paradox shortly. Firstly, a reminder of the sheer madness of ramping up Australia’s oil and gas developments when the rest of the world is fleeing fossil fuels for both climate and financial reasons.

  • gas is almost as destructive to the environment as thermal coal in terms of emissions,
  • the epic flight of capital from the oil and gas industry proceeded apace last year with dozens of institutions globally exiting gas investments.
  • gas use in 2020 is down 21% from the 2014 peak, indicating structural rather than cyclical decline,
  •  wind and solar use keeps rising as the cost of renewable energy keeps falling sharply
  • US renewable energy consumption has just exceeded coal for the first time in over 130 years
  • even the top energy regulator Clare Savage has questioned the future of gas networks.

A Savage Call: energy tsar calls time on Australia’s gas cartel

Undaunted by reason however, politicians continue to assist this sunset industry to make as much money as possible before the curtain falls.

“The Beetaloo Basin has been described as the ‘hottest play on the planet’ with the potential to be a world-class gas resource, transform the Northern Territory economy and generate 6000 jobs by 2040,” according to Resources Minister Keith Pitt.

Who knows from which “independent expert’s report” Pitt is obtaining his 6,000 jobs estimate. Gas is capital intensive, not labour intensive but the real story here is corporate welfare.

“If the Beetaloo really was the “hottest play on the planet”, IEEFA gas analyst Bruce Robertson told Michael West Media, “wouldn’t all the gas companies be lining up to drill exploration wells and not need taxpayers hard earned dollars?

“Why would the government need to subsidise the “hottest play on the planet”? Origin energy is farming down its interest in the Beetaloo, as noted in its investor presentation 2020.

It’s not often that Robertson, one of Australia’s leading renewables voices, finds himself in agreement with the gas lobby, but in this case he is gobsmacked that the government seems to be tossing money at the gas sector which even its peak body has said it doesn’t want or need.

In an Australian Financial Review article, APPEA executive Keld Knudsen (Director Northern Territory and Exploration at APPEA), said that the industry hadn’t sought government subsidies to carry out drilling.

Interestingly, the AFR article was written at 3.59 on December 17 and revised at 5.35 to exclude the paragraph below:

“But he played down any expectation of early production: “The Beetaloo sub-basin still requires billions of dollars of investment in high-risk exploration and the construction of production wells, gas processing and pipeline infrastructure to get the gas to market – and this will take a number of years”.”

“What this tells us is that the industry did not seek subsidies for high-risk drilling in the Beetaloo, according to APPEA, but got $50m anyway.”

As the drilling is high risk and development is years away, this waste of public money does not even fit with the government’s pronouncements on an immediate “gas fired transition” of the economy.

“Mr Knudsen says that there is unlikely to be early production because the Beetaloo requires “billions of dollars of investment in high risk exploration”,” says Robertson. “Note the government is spending $50m … will it end up throwing hundreds of millions down holes?”

Even more bizarre is that Origin is selling while the government is talking it up.

“Why would Origin sell down its Beetaloo interests now if it was the “hottest play on the planet”.  What gives the minister such confidence that Origin appears to lack?

“For a “gas fired recovery” to work it must stimulate investment in the next few years to create jobs.”

The revised version of the AFR in question says: “Most analysts expect any commercial production from the basin would only start in the second half of the decade”.

“The initial exploration drilling program will be carried out by highly specialised fly-in-fly-out workers so will not stimulate employment in the NT,” says Robertson. “The second half of the decade, subject to highly speculative drilling success, is hardly a plan for stimulus for the economy coming out of a Covid 19 epidemic.”

It seems the Resources Minister Keith Pitt may have borrowed his “Hottest play on the planet” line directly from some lines from the managing director of Tamboran Resources, the speculative explorer which stands to benefit from the public subsidies.

Joel Riddle, chief executive of Tamboran Resources, described the exploration area in the NT as “the hottest play on the planet”, based on much better than expected flow rates from testing at the Tanumbirini-1 well last week and the ready market for gas on the east coast and in Asia.”

Could it be true that the real winners from this plan to subsidise gross environmental destruction are not even Australians? This:

“Tamboran, backed by two large US funds, is heading for an ASX sharemarket listing early next year, either through an IPO of up to $195 million or a reverse takeover of a listed junior. It is one of several players working – amid opposition from environmental groups – to firm up a potentially huge gas resource in the NT that could prove to be Australia’s answer to the US “shale gale”.

Why do Tamboran’s wealthy foreign investors need public subsidies from Australian taxpayers? 

Tamboran’s two cornerstone investors are US funds Baupost Group and Lion Point Capital who had a track record of backing successful shale plays in the US and “have the risk tolerance to support an accelerated pilot development” in the Beetaloo.

Tambouran, which has 25% of the project with large political donor Santos as the major stakeholder, is also backed by Rich Lister Paul Fudge, who made billions from the sale of coal seam gas acreage during Queensland’s CSG boom. 

“Essentially the explorers in the Beetaloo are big enough or have big enough backers to go it alone without the government if the prospects really are that bright,” says Robertson. “The lobbying must have been pretty intense by these billionaires. It even seems to have taken APPEA by surprise!”

Gas deal: “a massive transfer of wealth from gas customers to China and Singapore”

 

ABOUT THE AUTHOR

Callum Foote

Callum Foote

Callum Foote is our Revolving Doors editor exposing the links between the highest level of business and government. These links provide well-resourced private interests with significant influence over Australia's policymaking process. Callum has studied the impact of corporate influence over policy decisions and the impact this has for popular interests. He believes that the more awareness this phenomenon receives the more accountable our representatives will be.

20 Comments

  1. Avatar

    “that they are throwing money at the gas industry when even its peak body APPEA has plainly said it does not want or need.”

    That text needs work.

  2. Avatar

    It is becoming simpler everyday all the States are committing 50% by 2050 . Why is the commonwealth government getting involved unless it is to subsidise the industry. Matt Kean’s policy is a classic example of much of the madness he refuses to release the modelling WHY rumour has it it is to cover up subsidies and pass on increased electricity prices . The real tragedy today is the refusal of all the justify their claims eg in the the article above
    gas is almost as destructive to the environment as thermal coal in terms of emissions, purely a claim not backed by evidence .
    US renewable energy consumption has just exceeded coal for the first time in over 130 years . This clearly needs an explanation and justified by facts

    This debate is totally evidenced by lack of real verfiable evidence

    • Avatar

      It is quite clear from an even cursory search that methane (a.k.a. natural gas) leaks from the production and distribution of fossil gas. Recent research has shown that just in pipelines, a 2% to 3% leakage is common, and in some cases 6% has been recorded.

      In purely CO2e terms, it has been suggested in journals such as the Journal of Industrial Ecology (August 2016) that leakage as little as 2% (plus final use) is worse than burning an equivalent amount of coal (minus that product’s other pollutants such as Hg, SO2, particulates, etc).

      Now, if CO2 has a “Global Warming Potential” of 1, methane’s GWP is 84 – I.e. releasing 1 kg of CH4 into the atmosphere is about equivalent to releasing 84 kg of CO2. Methane’s 100-year GWP is about 28x CO2 as it only persists in the atmosphere for a little more than a decade. (The 100-year GWP is used to derive CO2e.)

      So subsidizing technologies by way of power lines to REZ and the LGC scheme (basically worthless now) that do not have this problem seems to me a good thing. After all, the FF industry gets something like $29 billion p/a in subsidies, grants, royalty holidays, pollution waivers, etc.

      • Avatar

        Chris , Thanks for your response but it merely illustrates the lack of verifiable evidence not mere assertions that are made typical at the amateur level of debate

      • Avatar

        I appreciate that 4 paragraphs in a discussion forum may not satisfy your need for scientific evidence.

        Nevertheless, to you or anybody else who may be interested in the evidence, it suggests that there may indeed be such evidence out there to satisfy a genuine skeptic.

        You may also be moved to ask if persons and organizations (plus those backing them) have as much evidence to justify their claims that backing (and even funding) fossil gas is a good thing on balance for the state or other political unit.

  3. Avatar

    The real question is, what exactly, do these gas industry types have, in terms of Ministerial blackmail, ‘guilt’, scandal, financial bribery and plain fraudulent deals, are we looking at, other than the most blatant we already see?

    How many years and Ministers are involved, as it seems that the printing presses of taxpayers money is there just for the taking, not to mention the dirty deals that were done by Howard & Downer regarding East Timor and gleefully pursued by Frydenburg et al.

    That was not a stand-alone deal, as all Energy corporates were involved in this schadenfreude of Timor Sea from what I have read thus far, Exxon, Woodside, Santos, and more to the point, what ‘original’ contract content has underpinned this ongoing fraud?

    Seems to me that this ‘original’ contract appears to undergo substantial revision as often as one changes their underwear, daily.

    • Avatar

      yes many big names are implicated in Timor Sea. That’s the way this incestuous industry works, with major players jostling for portions of one another’s projects. Then of course the treaty implicates not just the greater sunrise field but implicates others that overlap the borders of the joint petroleum development area. and its not just companies, but parliaments, who share dirty hands: so its weird to highlight howard & downer, when they were merely following through on the dirty deal done by paul keating and gareth evans

  4. Avatar

    Larrakia Elder the feisty Aunty June Mills has been taking on the fracking industry in NT for years…””For the sake of all children, I don’t only want to stop fracking in the Northern Territory, I want to see the industry done and dusted. It’s the dirtiest industry since Uranium and I feel its urgency. So I’ll just keep talking, saying this stuff over again. You know the saying, give them enough rope and they’ll hang themselves? Well this is no laughing matter.” https://www.thequo.com.au/stories/490-indigenous-elders-ask-what-it-will-take-to-stop-the-nt-fracking-industry

  5. Avatar

    stealing from the poor to give to the rich – your LIberal government at work …

    • Avatar

      It’s the only way they know to work, not how to work, that’s a different methodology all together.

    • Avatar

      hey frank, the nt fracking goverment is a fracking labor government. please notice also that federal labor went to the last federal election with a proposal to spend $1.5b of public funds to support fracking the beetaloo. this insanity is bipartisan.

  6. Avatar

    The Liberal Party is very generous to donors with our money. Every subsidy to the gas industry could just come back as next years tax deductible donation.

    Win – win for the Liberal Party and friends.
    Lose – lose for the public.

  7. Avatar

    ASX listed companies and others are drilling. Shareholder, not Gov backed. ” Pitt and Co appear determined to throw public money at the gas companies anyway.” Gov supports mining and exploration companies and has done so for generations. One of the dumbest articles so far this year. Congratulations whoever you are.

    • Avatar

      hi joe. yes, for generations gov supported fossil fuels. But now we all see its time to transition out of carbon heavy fuels. This article is interesting because gov claims investing big in gas is a sure thing, while many others are questioning

  8. Avatar

    These Liberal Ministers are looking for a financial future life after Politics, when the time comes, they will call in the favours.

    • Avatar

      labor ministers also set themselves up in the fossil fuel industry with ‘favours’ from office. None less than the former NT chief minister paul henderson, who facilitated two massive gas plants for offshore exploitation, retired into Bespoke (a consultancy that specialises in gas). Martin Ferguson was energy minister under rudd and gillard, and retired to the board of APPEA (peak petroleum exporters). This propensity for corruption that sells out our planet for personal advantage is bipartisan.

  9. Avatar

    DeSmog did an article recently titled ‘How The Fracking Revolution Is Killing the U.S. Oil and Gas Industry’ (22 Dec ’20) and following is the introduction which says it all and mirrors Australia:

    After over a decade of the much-hyped U.S. fracking miracle, the U.S. oil and gas industry is having to deal with years of losses and falling asset values which has dealt the industry a serious financial blow. This is despite the fracking revolution delivering record oil and gas production for the past decade, peaking in 2019.

    While the pandemic has hurt the industry, companies have also benefited from excessive bailouts from pandemic relief programs but these bailouts are a stop gap financial band-aid for the struggling industry.

    The oil and gas industry has always required huge amounts of money to explore for and produce oil and gas but up until now the industry made returns on those investments

    The industry made a huge bet on fracking shale deposits to unleash the oil and gas reserves in that shale. It worked from a production standpoint; the industry produced record amounts of oil and gas. The difference is that, unlike traditional oil and gas production, the cost to produce fracked oil and gas was more than what the market was willing to pay for it.

    Supposed ‘Market forces’ benchmarks are applied to renewable energy sources, public sector, immigration etc. while the fossil fuel industry can not only attract subsidies, but avoid regulation, with loss making production…..

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