Managing the decline of gas in Australia

Managing the decline of gas in Australia is a multi-decade challenge. In this podcast, our energy experts detail the the tough decisions Australia has to make.

In this podcast, Grattan Associate Molly Chapman talks to Grattan Energy Program Director Alison Reeve about our report, Out of gas: Managing the decline of gas in Australia.

Transcript

Molly Chapman: Australia is at a critical juncture in energy policy. For too long, governments have assumed that Australia will be able to use the gas that we produce forever, and in doing so, have failed to plan for an alternative.

It’s a dangerous fiction. Australia is already on its way out of gas.

Driven by a war in the Middle East, we’re now in the midst of a global fuel crisis. This crisis has prompted the public and politicians alike to call for a doubling down on fossil fuel production. But Australia is already well on its way to transitioning off them and onto greener, renewable energy.

We need to go faster, not slower, and policy decisions we make now will have long-lasting consequences. That’s the backdrop of Grattan’s new report, Out of Gas: Managing the Decline of Gas in Australia.

Welcome to The Grattan Podcast. This podcast is being produced on the lands of the Wurundjeri people. Grattan acknowledges and celebrates the First Nations people on whose traditional lands we meet and work, and whose cultures are amongst the oldest in human history.

I’m Molly Chapman, associate at Grattan Institute, and I’m here today with Alison Reeve, program director of Grattan’s Energy and Climate Change Program. She’s also the lead author of Grattan’s new report, Out of Gas. Alison, welcome to the podcast.

Alison Reeve: Hi, Molly.

Molly Chapman: From reading the report, it’s clear to me that it does two things. It points to a lot of data that explains why Australia can’t keep using gas the way we have been, but it also plots a realistic pathway towards a coordinated and coherent low gas future.

There’s a fair bit of technical information in the report. You dive into the fact that Australia’s already on its way to reducing our gas and gas emissions, and how governments should prioritize policies to continue those efforts and not go backwards. But you also go into detail on the level of coordination that’s going to be required in the transition away from gas.

This includes the development of renewable alternatives and approaches to regulating gas pipelines, but also new mechanisms for financing the development of gas-powered generators.

I think the other really interesting point you make in this report is that governments need to make the most of the gas export sector while we still have it.

That’s where you dive into some of those hot button issues we’ve been hearing so much about lately, the gas reservation and the gas tax.

So clearly we’ve got a lot of ground to cover today. I think it might be worth starting at the very start and going back to the basics. So Alison, when we talk about gas- What are we actually talking about? Where does it come from, and how do we use it?

Alison Reeve: So gas is a pretty important energy source that and it’s all through the Australian economy. What we’re really talking about is a gas called methane, which is composed of carbon and hydrogen. It sits mostly underneath the ground, either under the ocean or, on land in what are called reservoirs, and we drill for it, and we extract it, and then there’s sort of four things that we use it for.

We use it in households, so a lot of our listeners will probably have a gas stove, a gas water heater, or a gas heating system. We use it in industry. It can be used for heat, you know, smelting metals food processing, those sorts of things. And also, particularly in industry, as a feedstock where we’re not using it for its energy content, we’re using it for its chemical content. So that’s for things like making plastics or fertilizers.

Gas is also used in the electricity system for backup generation, and about three-quarters of the gas that Australia extracts, we turn into what’s called LNG or liquefied natural gas. So that’s where you take this gas, you cool it down, and you put it under a lot of pressure.

You put it on a ship, and we sell it. We mostly sell that into Asia, particularly, Japan and Korea and China.

Molly Chapman: Okay, I think have a bit of an orientation now. So let’s jump into your new report, Out of Gas.

As I mentioned before, it does two things. It tells us about where Australia is with its current gas production and usage, and it also tells us where we’re going as a gas-producing nation who is on its way to transitioning to net zero.

Why did you choose to write this report now?

Alison Reeve: One of the things that we really wanted to do with this report was to set out a very clear narrative about how we use gas now and how that needs to change in the future.

There’s this sort of term that gets thrown around a lot, which is a bit catchphrase of, like, gas is an important part of the energy transition, but there’s actually not a lot of substance that sits behind that a lot of the time.

So when you say important, what do you mean, do you mean large, or do you mean critical? When you say the transition- When does that start and when does it end, and is that different for different groups?

And one of the things that we really wanted to do was to map that out and see how do we make our economic considerations about how we produce and use gas consistent with our emissions reductions targets?

And also draw out that there’s a lot of hard trade-offs there that governments have, in particular, but also I think industry have been avoiding for a long time, and we wanted to provide some recommendations about how we start to make those trade-offs.

Molly Chapman: We know that gas produces a lot of emissions, and you start this report by explaining how if we ever wanna hit our net zero target by 2050, we’re gonna have to significantly reduce them.

Can you talk us through the kinds of emissions we see from gas, and about some of the ways that we’re currently hoping to reduce those emissions?

Alison Reeve: Emissions come from two places in gas. One of those, and I think most people would be familiar with this, is when you’re burning the gas, you get greenhouse gas emissions that come off that because the methane contains carbon.

You burn that, you get carbon dioxide, and that’s a greenhouse gas. But a fair portion of the emissions from gas actually come out of the production process, and there’s two types of gas you get there. So some of those, again, are burning emissions because a lot of the way that you power that process of extraction is by burning some of the gas.

But a big chunk of them are what we call fugitive emissions and these are particularly methane emissions that just escape directly into the atmosphere during that production process. And those, particularly the methane, are a fairly significant chunk of Australia’s emissions, and they’re ones that get a lot less attention than the ones that we get from burning the gas.

So the second part of your question was, what are the options for getting rid of those emissions? So there’s four things you can do. One is you can not emit them in the first place, and that means shifting to a different process.

For a lot of parts of the economy, that’s shifting to using electricity instead of using gas. So at a very simple level, boiling an electric kettle rather than putting a kettle on a stove top.

The second option that you’ve got, which is also a replacement option, is using a renewable gas. So this is something that kind of behaves the same way as a burnable fuel, but it comes from a source that is renewable rather than a fossil source. And so it, over its life cycle, has zero emissions.

The third option we’ve got is carbon capture and storage. So this is where you let the emissions happen, and then you capture them and then inject them back down underground, often where the gas came from in the first place, and try and keep them there.

And then the third one is what are called removals, and this is where, again, you let the carbon go into the atmosphere, and then you draw it down and store it as a very separate process.

A very good example of this is a tree. A tree is a form of carbon removal. It’s pulling carbon dioxide out of the atmosphere and storing it in the material of the tree. You can also do it through an engineered process called direct air capture. So those are kind of your four options.

And I should say too, within that option of a renewable gas, you’ve got two sub-options within this.

One of those is hydrogen, and people who are longtime podcast listeners will know we’ve done a couple of podcasts on hydrogen. And the other one is what’s called biomethane, which has the same chemical structure as fossil methane, but it’s made from a biogenic source.

Molly Chapman: Well, It sounds like those are great options. This might be a naive question, but why can’t we just use those to get us to net zero?

Alison Reeve: So we are gonna use all of them.

But those three options outside of electrification that I was talking about, so bio renewable gases, carbon capture and storage, and carbon removals, those all have limits on them.

So carbon capture and storage, for example, It’s often not economical to do that. It’s can also be quite difficult to capture the carbon dioxide effectively out of the top of a chimney on a factory- or something like that ’cause it’s quite, the gas is quite diffuse at that point.

With things like carbon removals, if you think about planting trees you need a lot of land, you need a lot of water. That might not be the best economic use of that land or that water. And the other thing that we need to remember with those ones as well is that they are very susceptible to the effects of climate change.

The more that the climate changes the more the vegetation composition is gonna change, and that’s gonna have impacts on carbon as well. And then when it comes to renewable gases, we need feedstocks to make those. There are some limits to feedstocks a lot of renewable gases are made from agricultural waste, for example.

We’ve only got so much agricultural land. We can only produce so many crops, so we only have so much feedstock in order to do that. So the thing that we’re pointing out in the report is that while these three things are part of the solution, they are not either by themselves or all together, enough to support using gas in the way that we use gas now. And so what that points you towards is we need to reduce the amount of gas that we’re using.

Molly Chapman:  So there’s some data in the report that points to the fact that we’re heading in the right direction. We’re already seeing a decline in the use of gas across many different sectors of the economy. What would be the harm in letting industry and household use just continue down that path naturally and letting it sort itself out in its own time?

Alison Reeve: So there’s sort of two parts to this. One is that while we are seeing gas use decline particularly in industry, in the electricity sector, and in households, that is not going fast enough for where we need to get to for climate targets, so we do need to pick the pace up. The other part of it is that there are coordination issues as well because the way that gas is delivered to us relies on a big, common pipeline network, and as people start to drop off that network, you actually start to get problems with how you operate it, how you pay for it, and how you make sure you get the right infrastructure in the right place, and those things actually require a lot of coordination.

When we’re talking about the role of renewable gases as well, those are very, very nascent industries in Australia at the moment. They need a lot of work to build them up to the stage where they’re going to be part of the solution.

We also know that while my spreadsheets kind of show that electrification is a really good economic option, like particularly for households, there are some pretty formidable non-economic barriers that are in the way, and those need to be removed before a lot of people can make that shift.

Molly Chapman:  That really gets us to the second function of the report, where you detail a roadmap for getting off of gas. In the report, you say that it’s going to require structure and coordination with lots of elements moving together at the same time in the right way in order for us to hit that target.

What are some of those elements?

Alison Reeve: We have a chapter in the report where we say, “Here’s all the different ways that we’re gonna move towards using less gas.” A lot of that is drawing on previous work that Grattan’s done. But most of what we go into the report is actually going through the how and the trade-offs that have to be made and the sort of system impacts that happen when you’ve got that level of gas reduction really starting to pick up.

And so we talked about that decline across four separate areas: households, industry, the electricity sector, and exports, and then we’ve also talked about the system impact and how those interact.

When it comes to how consumers use gas and how this transition will affect them, I guess let’s start with households ’cause that’s where I, and I’m sure most people listening, are most familiar with seeing gas. What kind of policies or support do governments need to provide to assist in that transition?

So when you sort of look at the straight-up economics of using gas in homes, for most people in Australia, it’s actually a better economic option to be using electricity for your heating, your cooking, and your hot water system.

The thing is that about half of households will have another barrier that they face, that’s not just about the economic barrier. A really common one is about 30% of households rent-

Molly Chapman:  That’s exactly what I was gonna say. I currently rent a house that has a gas stove, and you know, as much as I’d like to, I can’t just rip it out of the wall and replace it with an electric one.

Alison Reeve: Exactly, and that’s 30% of households. We also know there’s another cohort of households who they own the home that they live in but they don’t have the cash in the bank to do it, or they live in a multi-unit building where the gas is often rolled into your owners’ corporation fees and that sort of thing.

And when you add all those up, that’s about half of households, and that’s why governments need to get involved in this space. And, there is a certain amount that will happen at a natural pace, but there’s half of people who are gonna need assistance with it. One of the things to understand about this is we are not talking about ripping out a whole lot of gas stoves tomorrow, the reason we can’t do that is ’cause there’s five million households and we don’t have five million tradies who could do that tomorrow.

This is a change that will happen over the next, you know, 20 to 25 years. And the thing is that over that period of time, pretty much every single gas appliance is gonna break. so the really important thing for governments to do is to help people get onto that replacement cycle so that you don’t pull your stove out now, but when the stove breaks, your landlord puts in a new induction cooktop, for example.

What this means is governments need to put a lot of structure around what that pathway’s gonna look like. So it’s really important to set a phase-out date to say, “All the gas will be gone out of households by this date,” that might be 2045, it might be 2050. But what that does is that signals to everybody, “Oh, okay. Maybe when I’m getting the kitchen redone I’ll switch over my appliances at that point.”

The other thing to do is to stop the problem getting bigger, so this is around banning new connections. This has already happened in the ACT and in Victoria, and in other states now, people have to pay the full cost upfront of getting a gas connection.

It’s no good having governments putting a whole lot of stuff into helping people electrify if at the same time the whole problem is getting larger on the other side of the equation.

There’s a couple of other things, and I might actually refer people back to our report called Getting Off Gas for a lot of the detail on this, rather than go into it now. But there’s a lot of things also that governments should be doing around financing, around appliance regulation, and so on.

Molly Chapman:  So in this world where we’re making significant strides towards many households transitioning off of gas and onto electric energy, the report says that we might actually see some newer problems emerge that we haven’t had until now.

What kind of problems would those be, and how can we avoid them in the transition?

Alison Reeve: We’ve got this big common network that delivers the gas to everybody who’s using it, and we all pay a share of that network, and that’s often a fixed fee. That share was worked out on the basis that we had, maybe 80 years to recoup those costs, and we’re now actually seeing that a lot of people are saying “I don’t wanna pay those costs anymore,” because they’re leaving the gas network. And of course, if we accelerate the pace, then that problem’s gonna accelerate, too.

What that does is it means that for the people who are left using gas, and so that might be some industrial users and also that cohort of households that we talked about before, they’re going to have to pay a larger share of supporting that network.

And the worry is that you could get into a situation that people refer to as a death spiral.

Molly Chapman:  That’s so hardcore.

Alison Reeve: It is hardcore. No one will actually die.

Molly Chapman:  Good. Okay.

Alison Reeve: But what it means is you’ve got, everyone is paying for the gas network. A bunch of people leave. There are fewer people who have to pay the same fixed cost, so their costs are higher. Anyone who is cost sensitive says “i’m not hanging around and I’m gonna leave,” and that just spirals- gets worse and worse. And the fear that you have is either you end up in a situation with completely unmanageable gas bills for some people and/or a situation where the network owner says, “Actually, I can’t financially sustain this anymore.”, “My balance sheet’s impaired”, ” I am gonna go bankrupt,” or, “I’m gonna give back my license,” or whatever it is.

Molly Chapman:  And can I just check, are those people left on the network going to be the people who can’t afford to get off of gas? Yeah. The most vulnerable households?

Alison Reeve: That’s definitely a risk that you’ve got. The other side of it you’ve got, a lot of the industrial gas users will be slower to electrify, and at the moment they only pay a very low share of the network.

Molly Chapman:  As you identify in this report, there are some factories and processing plants that have only one connection to the gas network, and they use lots of gas. Now, a part of this network piece is also that these users might end up paying significantly more for the gas networks as well.

It’s likely that as we head towards an electrified future, these industrial users are going to want to disconnect. What are the barriers here for those users?

Alison Reeve: A lot of the ways that industry uses gas is not quite as straightforward as a household. Like a household, we all have a cooktop. Some of them might be slightly different shape, and that sort of thing, but pretty much we all have a cooktop and all does the same thing.

The way that gas is used in industrial facilities is a lot more bespoke, and a lot of the way that it is used is also about how the rest of the facility is arranged. If you think about, say a factory that makes tinned tomatoes the rate at which they use gas is also gonna be affected by, like, how fast does the little conveyor belt carrying the cans move? What’s the shift pattern of the workers? What’s the seasonal input of tomatoes? And so on. So all of that has a lot more complexity, which means that the shift to using gas means unpicking all of that complexity as well. And so what that means is for a lot of industrial users, that pathway to moving away from using gas is a lot more complex.

There’s also a subset of industrial users where electricity can’t do the job. so that’s often the case if they want a very high temperature heat, so like up in the thousands because they want to melt metals, for example.

And it’s also for industrial users who want the chemical properties of the gas, not the energy content. So for example, people who make fertilizer or explosives or plastics.

And so those factories who do have to keep using gas what are they gonna do? Considering we know we need to move to this very low gas future.

So this is where the renewable gas story comes in. We need something that behaves like a gas for those people, but doesn’t have that that climate change impact. So there’s sort of two types of renewable gases that we could look at here. There’s hydrogen and then there’s biomethane.

I talked a little bit before about the difference between those two gases. The thing is that- Both of those industries are really small at the moment. The amount that they produce is really tiny and also quite expensive. And so there’s a whole sort of industry growth trajectory that needs to happen over that same period where we’re helping other people to transition off gas, is to build up the industry that’s able to supply these substitutes for the sort of residual industrial gas users.

They’re gonna need a lot of help from governments to grow. So at the moment there’s a lot of money floating around for hydrogen. I think we talked about this a little bit in the budget podcast a couple of weeks ago. The thing is that we need to structure that funding so that it’s a bit more useful to meet the industry where it’s at.

We need to do lots of things like, figuring out how to build larger scale hydrogen projects, figuring out how to commission them, figuring out how you get the financing to work. How do you get the purchasing agreements to work? How do you then integrate that hydrogen into your your tinned tomato factory or whatever else it is?

And then similarly for the biomethane sector, it has not had anything like the same support that hydrogen’s had. And it needs that industry development focus as well. So like, doing proof of concept, doing demonstration projects jumping up to creating the demand as well.

So this is something we’ve talked about a lot in industrial policy. It’s not enough just to stimulate the supply of a new product. You also need to create the demand for it.

The way you often do that is through a target. So one of the things that we’ve said in the report is the government should look at some kind of national target that creates that demand pool so that there’s someone somewhere who has to buy the renewable gas, and that really help to build up the industry.

Molly Chapman:  So if I’m in my factory where I’m melting my metal at, 1,000 degree temperatures- I could just keep using gas, which is nice and easy. So something needs to pull me across to using these new kinds of fuels.

Alison Reeve: Yeah, that’s right. You need a couple of things actually. You need something that’s gonna pull you across to using it. You also need the long-term investment signal, because we were talking about the appliance turnover in households before. You also get equipment turnover in factories. It’s just that those points tend to happen a lot further apart in time, maybe 20 or 30 years.

And so that’s the other thing that we’ve said several times throughout this report, is that this is where it’s really important for governments to have long-term targets and long-term carbon price signals, because that is about signaling to industry and to business that the next time you turn that asset over, you need to turn it over to one that is capable of being low carbon.

Molly Chapman:  If we’re following this theme of coordination and structure, you mentioned before that gas is used for electricity generation as well. Can you walk us through the relevance of that sector and what’s going on there?

Alison Reeve: We’ve been using gas in the electricity system for a while. Australia’s system was very dominated by coal for a long time. At the moment, mostly where we use gas, a bit of it is kind of always-on, and a lot of it is what’s called peak generation. So it tends to come on in the mornings and the evenings when the demand for electricity is a lot higher.

And that flexibility’s really important because demand moves up and down. It’s not sort of constant. The other place where the flexibility of gas is important is as we add more renewables to the system.

Those tend to come on and off. You know, the wind might drop a bit, a cloud goes over the sun, that sort of stuff, and it’s important to have a flexible source of generation that can respond to that, that keeps supply and demand in balance.

One thing that we’re seeing though is that over time, gas is playing that role less and less than it used to. And that role is being taken up particularly by batteries. And when you start to look forward at the forecasts of when we’re gonna be using gas, we’re gonna be using it a lot less frequently.

Now that is kind of a problem. We know we’re gonna need it, and we know that there’s going to be times when, you know, you sort of get that two-week period in winter where it’s cloudy and it’s cold and-

Molly Chapman:  And even the batteries can’t help you …

Alison Reeve: and the batteries can’t help you over a two-week thing. And so that’s really the residual role for gas. It’s gonna be really, really critical. The thing is, if you wanna build a generator to do that, and you-

Molly Chapman:  And use it only two weeks a year.

Alison Reeve: Exactly, right? What bank is gonna lend you money, right ? and say, “Oh, yeah, y- I’m using this for two weeks a year. I’m not sure which two weeks.”

Molly Chapman:  It’s gonna be really important when I do need it, but- Yeah … I just rarely need it.

Alison Reeve: That’s right. So one of the things that we’re saying in the report is that The government really needs to think about how they underwrite those generators- so that they get built, and also so that people can make their money back on them.

There’s a couple of processes underway in the national energy market at the moment that go part of the way towards that, but it’s also possible that they’re gonna need to go further.

As more things are able to be electrified, you’re saying that we’re going to start seeing more of a relationship between the gas and the electricity sectors.

Molly Chapman:  In the report, you have a chapter talking about the increasing importance of capturing that relationship in our planning. How did we get to this point, and where do you see the relationship between the networks going?

Alison Reeve: Historically, we regulated gas very separately to how we regulated electricity. And that was fine when both sectors were growing.

The problem we’ve got now is that we’ve got people transferring what they used to do with gas into the electricity system. So the growth trajectory of the electricity system is gonna be dictated by what happens in the gas system. But as we were just talking about as well, there’s this important residual role for the gas system in supporting the electricity system.

And at the moment, having two separate governance structures and two separate planning structures means that we’re not really capturing that properly. When we plan the electricity market, there’s just a, an unwritten assumption there that just says, “Assume you have a functioning gas market that will provide the gas whenever you want it for however much you want.”

And increasingly, that’s not a good assumption to make. So what we need to actually start doing is bringing the two governance structures together and then also integrating how we plan so that we’re capturing trade-offs between how fast we electrify versus what we do with the gas system.

And there’s sort of two things that we’ve said there that we need to do.

One is to move towards having a single objective in the two pieces of legislation so that we are using the same definition of a consumer. We’re trying to do the same thing in the two pieces of legislation. And then the other two is bringing the planning together on a more practical level.

Molly Chapman:  So we’ve discussed a lot about Australia’s production and use of gas and the importance of the transition off of it, and the last piece of this puzzle, and probably the most media-salient piece, is our gas exports.

We’ve seen and heard so much in the news on gas exports recently, on taxes and on reservations. How does the LNG export sector affect what we’ve spoken about here today on consumer prices, on the energy transition, and in emissions? And what was the government solution to the gas reservation?

Alison Reeve: So we’ve been doing LNG exports in Australia probably, I think, since the early ’80s. That was mostly in WA, and we started doing it on the East Coast, in around the mid, I think around 2015.

One of the things that happens when you start selling anything overseas is you start paying the international price for that, and that’s one of the things that happened on both sides of the, the country when we started moving to being an exporter. If you wanted to buy the gas to use domestically, you had to be prepared to pay what someone in Japan or Korea was prepared to pay, and they’re prepared to pay a lot more for the gas than historically we were.

The other thing that happened on the East Coast, was that a couple of the companies who were setting up gas exports did not actually have enough gas in the reservations that they controlled to fulfill the contracts that they had written.

And so they started pulling gas out of the domestic market, and that did two things. It pushed up the domestic price further, and it also created this perpetual anxiety around shortages of gas on the East Coast.

There’s Been this sort of patchwork of things to try and fix this, particularly on the East Coast over the sort of last 10 years. The government has now said what it wants to do is what’s called a reservation. There’s been a reservation in WA since i’m gonna say the ’90s. And really what that means is you create an obligation for exporters to send gas to the domestic market first. So that gets you out of that anxiety about is there gonna be enough gas, and it can also have a price effect as well.

Molly Chapman: So you can’t send it overseas until you’ve saved some in Australia for us.

Alison Reeve: Yeah, that’s right. And I think a lot of people just sort of intuitively go, “Yeah, that seems fair,”.

Now this reservation is underway the, or the design of it is underway at the moment. There’s a lot of ways it could work, but it’s really important that we get it right so that we’re getting enough gas now when we need it, but we’re not actually locking in a lot of gas use- long term. And so that’s gonna be a really critical part of the design, is making sure that we’re getting the right amount of gas when we need it, but we’re actually not flooding the market with gas for, the 2030s and the 2040s when actually we want to be largely not using gas anymore.

The other thing I think to understand about LNG is while this has been, , a massive boom industry for Australia, you know, it’s about 8% of our exports by value come from LNG.

Molly Chapman: Wow, that’s a lot.

Alison Reeve: That’s a lot. It is likely that this industry is gonna decline over the next 10 to 20 years. And that’s for a couple of reasons.

One is that gas is essentially a non-renewable resource. At some point, the gas runs out. Before it runs out, what happens is you run out of the cheap stuff, and you get into the stuff that’s more expensive to extract, and at some point you get to a point where your overseas customers go, “I’m sorry, I could get that gas much cheaper from Russia, from the US, from Qatar, from Saudi Arabia,” or, or whoever else.

Australia’s LNG has always been quite expensive by world standards, and so at some point we’re gonna get priced out- of the market. The third one, of course, is that most of our major, major trading partners have emissions targets just like we do. Even though a lot of people are very preoccupied with energy security at the moment because of the situation in the Middle East the problem of climate change does not wait for ceasefires.

You know, those targets are important and the thing is that, we’ve been talking a lot about the need for Australia to use less gas in order to meet its emissions targets. That situation also applies in other countries. So all of those sort of things point to Australian LNG actually becoming a declining sector, and that’s something that we haven’t really grappled with yet.

Molly Chapman: You do make the point in this report that governments need to make the most of the gas export sector while we’ve still got it, and to plan for its decline.

What do you see as being the biggest risk here?

Alison Reeve: There’s a couple of things here. So one is that the way that we tax gas at the moment, and particularly tax exports, does not raise much money for the Australian Treasury, and therefore, for the Australian people. It’s hard to make country to country comparisons because different countries structure their industries differently, but it is generally agreed that Australia makes less money out of the gas than a lot of other gas exporting countries.

We are running out of time to fix that problem and so we should be trying to make the most financially out of it because future generations are not gonna get the same benefit from a gas industry as current generations have, so we need to start putting some of that money aside.

And we also have a budget that has a deficit. We have lots of other things we wanna pay for, so it’d be a good idea to tax it better.

The other thing that we need to think about is making sure that- The taxpayer is not left with the cleanup bill afterwards. Most extractive industries, like mining or gas or whatever they rely on being a growing industry in order to pay for the rehabilitation of old sites that they’re not using anymore.

You’ve always got a new site that’s generating money that you can use to pay your cleanup costs. Once your industry starts to go into decline, that situation doesn’t happen anymore. This has already started happening on the northwest Shelf of Australia. There was a project called the Northern Endeavor, which was a gas platform that was abandoned by its owners, and the taxpayer had to pay to clean that up and make it safe.

So one of the things that we’re also saying in the report is that governments need to get ahead of that problem now, to think better about how they make sure companies have enough money set aside to pay for rehabilitation. What often happens in these sorts of things is a company will just declare itself bankrupt and walk away in order to avoid the cleanup costs. So you wanna avoid that situation as well.

Molly Chapman: So Alison, we’ve covered so much in this discussion and in this huge report. If you were to summarize a few key things that you’d like the government to take away from it, what would they be?

Alison Reeve: I think my top one would be that they have to start grappling with the reality that gas is not gonna last forever, and that that’s gonna create some problems, and that they need to actually- Lean into fixing those problems rather than pretend they’re not going to exist.

My second one would be to start thinking about gas and electricity together, because a lot of the problems that we’ve talked about become easier to solve if you start looking at the energy system as being about all sources of energy, rather than being a gas system that sits separately to, an electricity system.

And my third one would be to make sure that we are getting the best value that we can out of having an LNG export sector at the moment and also making sure that we’re not left in a situation in 10 or 20 years’ time where we really regret that we didn’t make the most of those opportunities.

Molly Chapman: Alison, it’s been really great talking to you. I feel like I know so much more about gas and the energy transition now.

The report Out of Gas: Managing the decline of Gas in Australia is available to read. If today’s conversation sparked something for you, we encourage you to dig in and have a read.

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