Legislative Council – Wednesday, 26 November 2008, Page 916


The Hon. SANDRA KANCK (16:22): I move:

That the report be noted.

This is a very important report about an issue that will have severe impacts on our state when it ultimately hits. This is not a question of if but when, and the when could be within just a few years. What is peak oil? One of the easiest descriptions comes from one of the written submissions we received from Dr James Barson of the Australian Association for the Study of Peak Oil and Gas, as follows:

Some time in the very near future half of the estimated two trillion barrels of oil originally on the planet will have been extracted. When this happens, the world’s production of oil will have reached an all-time peak. We will be pumping oil out at the maximum possible rate. From that point production will begin an accelerating decline, with less oil available every year. The second half of the earth’s available oil will be harder to find, extract and refine because all the easy oil will be exploited first. Global use of oil continues to accelerate. Half of all the oil ever consumed on the planet has been consumed since 1983. Peak oil is not about how much oil is left in reserves; it is about the rate at which oil can be produced, that is, how many barrels per day. It is not the size of the tank that matters, it is the size of the tap.

Peak oil is an issue that has not yet made its way into the public consciousness in the way that climate change has, yet its ramifications will be immense. Queensland has led the way in Australia in recognising the problem. Ideally, the actions taken to deal with this problem should be taken at the federal level because peak oil will require a coordinated national approach.

When Darwin was bombed by the Japanese we did not rely on the Northern Territory government to sort out a response. It was a national emergency and it required an urgent national response. Peak oil is an impending catastrophe that far exceeds the successful bombing missions of the Japanese in the Northern Territory. It is more like the equivalent of a sophisticated and sustained nuclear missile strike, but unfortunately it does not have an instantaneous and visible impact with a crater to show for it.

Yet, it has been creeping up on us from the moment that human beings began extracting oil from the ground. Action is imperative now, so that transition to a lower energy economy can be accomplished before the situation hits crisis proportions. Spending money on mass transit systems, on rail freight systems and on alternatives to oil-based agricultural fertilisers and developing alternative energy sources that are truly environmentally sustainable needs to be happening now.

As peak oil impacts, the money coming into state coffers through taxation will reduce because the whole of the economy will slow down, so the moment to act is now when the economy is still relatively strong. Waiting to take action will exacerbate the pain. The planning ought to have been in place five years ago so that the infrastructure could be being built now.

Without action at the federal level the state, however, must show leadership. This was put quite succinctly in one of the submissions we received from Sophia McRae who belongs to the group, Beyond Oil South Australia. She said in her written submission:

Government leadership is an essential part of the process. The need for leadership is urgent. I am looking to the state government to have the courage to honestly address the issue of peak oil and its impacts publicly. I will do as much as I can on a personal and community level, but I cannot make the broad regulatory and legislative changes that the state and federal government must make to increase our resilience and change our consumption patterns on a broad level. The first step is for the government to publicly acknowledge the problem of peak oil, presumably after receiving the recommendations of the select committee.

As the committee heard, we must anticipate price increases in all commodities because of either increasing transport costs in shifting goods from source to their markets and/or the shortages of petrochemicals needed in the production of many consumables.

Our primary recommendation is that an energy transition group be established within the Department of the Premier and Cabinet to ensure that all aspects of energy policy are managed in an integrated and informed manner. The group would be tasked with analysing and assessing all government legislation and policy in light of the impacts of peak oil.

So there needs to be action at the top. The committee recognises that that is where leadership has to come and it is why we have recommended that this new body be located in the Department of the Premier and Cabinet. We made 25 recommendations, and there are a number of subsets to recommendation 1, so effectively there are 28 recommendations. I will not address all of them, but I will address some that I think are very significant.

The issue of transport fuel poverty was one of the terms of reference. If you are someone on the economic margins in society you are more likely to be pushed out to the geographical margins in our city. That means that you will be pushed to an area where there is no public transport. So, if you are already on the economic margins, having to rely on your own car at a time when peak oil starts to hit, this means that the government may well be facing increasing costs in supporting these people.

The committee heard that social dislocation will result for those who live on the edge of the metropolitan area or in the regions, particularly for those who are car dependent. This links into the issue of urban sprawl. Our cities and our urban sprawl are predicated on a false but unstated, and therefore never explored, belief that the supply of oil is inexhaustible. We have received a submission from Kirsty Kelly, the State Manager of the Planning Institute of Australia, South Australian Division. She says:

PIA supports integrated land use and transport planning, which acknowledges that transport and development are not two separate things but two facets of the same challenge, that is, transport is land use planning.

Fundamentally, PIA supports an integrated planning and decision making framework where land use planning processes fully account for the transport implications and requirements of our towns, cities and regions.

PIA supports transport planning and decision making that has due regard to the land use and development implications of these activities. PIA supports an integrated planning and decision making framework that considers cost effective and efficient and sustainable movement of people and freight, and a focus to reduce car dependency and subsequent emissions.

The Conservation Council addressed the issue of urban sprawl in its submission and said that we need to go back to having a moratorium on our urban sprawl and enforce the urban growth boundary. In fact, it went further and said that not only should we reinforce that but also in fact we should go through the process of acquiring land—that is, the government—and wind back the urban growth boundary so that it is actually smaller. The committee recommended in response to what we heard on this particular term of reference that the integrity of the urban growth boundary be strongly supported.

In relation to that issue of transport fuel poverty, public transport becomes an essential part of the solution. In full or in part, the committee has made eight recommendations about public transport. Recommendation 12 states:

The committee recommend that the State Strategic Plan be amended to significantly upgrade targets for public transport use.

Recommendation 15 states:

The committee recommend that state government apply for funds from the Building Australia Fund to invest further in public transport infrastructure.

Recommendation 16 states:

…that there be greater public consultation in identifying areas where future tram, train and bus routes have potential to increase public transport patronage.

This is not all of them but they are the significant ones. Recommendation 19 states:

…that all significant extensions to urban areas be supported by a railway, tramway or alternate mass system.

I think recommendation 16 is interesting, because we saw the fuss that was made over the extension of the tram line here to North Terrace, and part of the fuss occurred because the public was not involved and was not consulted. We now have a peculiar situation where the government has decided that the tram line will be extended to the Adelaide Entertainment Centre and we will have three choices of public transport for the people who live in Bowden and Brompton—they will be able to get there by bus, train or tram. Yet there are other areas in need such as Magill Road. The Magill Road traders are saying, ‘We would like to have the tram come out there.’ So we do need to have that consultation so that we get public transport infrastructure in the right place.

Health was something that came up under ‘Any other related matter’, and we received a surprising amount of evidence on this, although we have not made a specific recommendation. I want to turn to the comments made by Dr James Barson, who I referred to at the beginning of my comments. He is the Convenor of the Health Sector Working Group of ASPO Australia. He makes some very telling points. He is an anaesthetist in rural Victoria, so he is talking at least partly from his own on-the-ground experience. He says:

South Australia’s health care system is critically dependent on oil and its products. Almost every aspect of health care delivery uses oil in one form or another. The dependence is so extreme that the entire system will come under severe stress once peak oil occurs and petroleum products become increasingly scarce and expensive.

Our current model of health care assumes unlimited mobility of staff, patients and their families and stable costs for delivering goods to and removing waste from health facilities. It is in this area of declining affordable, convenient and timely mobility that peak oil will have its biggest impact on health service delivery in South Australia.

He says:

The South Australian health care system needs a comprehensive oil vulnerability analysis as soon as possible to provide the information on which to develop migration strategies.

I think he may have meant mitigation strategies, but he is suggesting that the health care system alone needs its own strategy. He goes on to say:

We have to address the prospects for health care in a totally new and uncertain period. So when we try to start by addressing the issue of how much plastic we use and discard, for example, it is not a contrived or frivolous point. The time when we will not have access to affordable disposable plastic is not far in the future. Given the total absence of any plan to find an alternative, which will take years to develop, it might as well be tomorrow.

He then goes on to talk about how most of our health systems work on what is called a ‘just-in-time logistical chain’ of getting goods to our hospitals and health services. He says:

We will need to consider warehousing spare critical components, drugs and equipment, and moving to reusable vs. disposable equipment.

He says:

Hard-nosed decisions will have to be made, such as: who gets what, where, when, how, from whom and at whose expense?

He refers to a recent points system that has been established to determine access to renal dialysis in New Zealand. In fact, I observed that in Oregon in the US. They went through a process of public consultation about 10 or 12 years ago and, as a consequence, they listed a series of medical procedures that are no longer available within the public health system, so they have already gone through that process of prioritising which procedures will be available and which will not. We in South Australia will have to confront this some time in the very near future. I continue with what Dr Barson had to say:

The current obsession with disposable everything is unsustainable. The vanishingly small risk of contracting CJD, for example, which has been overblown by companies keen to sell single use equipment, will have to be balanced by the real risk of non treatment when the single use gear ceases to be affordable or available and the reusable equivalent doesn’t exist.

We will need to reverse what has been for years an increasing trend to centralise services which has been driven by :

· The cost of resources, the need to minimise duplication and to extract maximum use from equipment and institutions with huge capital and operating costs.

· Medico-legal pressure to have as many services as possible provided in centres of excellence with expertise in uncommon condition s

· Shortages of qualified staff.

Then he makes the point that I think our Minister for Health must take on board. He said:

These economic arguments to centralise complex services are understandable but these arguments will cease to be as valid when private car transport declines.

As private car ownership declines, particularly for the disadvantaged, GPs in regional / urban fringe areas will have to change their role. Local GP services with capacity for definitive local treatment will be needed around the clock when people in outlying suburbs and towns do not have the option of just hopping in the car and going to hospital. Rather than travel to hospital out of hours for a primary diagnosis, patients will increasingly have to be seen by their local doctor either for definitive treatment on the spot or to determine if the difficult and increasingly expensive journey to hospital is really required.

He then talks about triage services in our health services and the need to rely, for instance, on real-time video conferencing. An enormous amount will have to occur in order for our health services to be able to adapt to peak oil.

It was quite scary to hear some of the evidence that we were given in relation to primary industries. The committee heard alarming information about the impact of peak oil, which has been made worse by another phenomenon, namely, peak phosphate, with 75 per cent of the world’s phosphate already used up and phosphate prices increasing by 700 per cent in the past 1½ years. This in turn forces greater reliance on the petrochemical-based fertilisers and, ultimately, this will result in reduced agricultural production throughout the world.

We heard about the need to turn to the artificial fertilisers that are able to be manufactured by natural gas but, because at present we are promoting it as an alternative to petrol in our cars, natural gas will be used up at an increasingly faster rate, and the estimate at which we reach peak natural gas is probably around 2020—which is only 12 years away. Farmers will not be able to rely on that artificial form of fertiliser when we are putting so much more pressure on natural gas.

Many of the chemical inputs for farms are based on raw ingredients which are mostly imported these days. Oil supply reduction has already added cost to those imported ingredients. The committee was told, for example, of the use of glycosphate, which is a major component in what is known as Roundup. We were told, for instance, that it comes mostly from China. It is imported into Western Australia where it is manufactured into a form for farmers to use; then we have it on the road or in some cases (if we are lucky) in the rail system to take it to other states. It means that there is a freight cost to the glycosphate.

SAFF told us that in the past 12 months the price of Roundup increased from about $6 a litre to about $19 a litre. They also said that during that time the cost of fertiliser had risen from about $600 a tonne. There will be enormous implications for agriculture in the future as a consequence of peak oil. Again, the government does not appear to recognise or understand this. The reality is that the age of cheap oil has ended and, in that process, so has the age of cheap food.

The reference on mining did not produce a huge number of submissions, but what came out was extremely interesting. In the report we have a slide which gives a picture of the use of fuel consumption and which is from the website of Westport Innovations Incorporated. An average family car uses 2,500 litres per year, a dump truck 27,000 litres per year, an ordinary bus 43,000 litres per year and a semi-trailer 80,000 litres per year. Then we come to the mining industry.

One of the large trucks that removes huge amounts of iron ore in Western Australia or shifts coal around at Leigh Creek uses 1.5 million litres per year. Members should consider how that will impact when we have peak oil. The Queensland Vulnerability to Rising Oil Prices Task Force report of April 2007 indicates that a Caterpillar 777D, capable of hauling 95 tonnes at any one time, consumes 77 litres of diesel per hour—which is an extraordinary amount. When the government is talking up mining, it needs to recognise that it will not be as easy as that when so much of the mining will require oil or diesel.

The Australian Conservation Foundation recently estimated that, as far as the Olympic Dam expansion is concerned (this is with the big open cut), 350 metres of overburden will need to be excavated before the ore body is reached, with 1 million tonnes of earth and rock to be moved each day for four years. So, you have to try to guess what that will mean in terms of the amount of diesel that will be used.

The Hon. Mark Parnell gave evidence to the committee, along with his intern from last year (Woodlands), and they had done an estimate on what this might mean. Their estimate was that it would mean that an additional 1.65 million tonnes of diesel consumption per year would be added to Australia’s imports. I think that, having listened to the way they reached that conclusion, they may in fact have underestimated. They suggest that this will add 9 per cent to Australia’s total diesel usage, or an additional 20 per cent on top of diesel imports. I do believe that is understating it—and this is only for the Roxby Downs expansion.

We need to consider also that most of the mining is in remote regions, and the mining personnel and their families will be heavily dependent on oil to get the staples to them for housing and food so they can live on those sites, plus the enormous amount of fuel that will be used not just in removing the overburden at Roxby downs but also in milling and processing.

We have accordingly made recommendation 22, where the committee recommends that the state government acknowledge in its economic forecasts the significant and very real limitations that peak oil represents to the state’s mining industry. In fact, we made two recommendations about the State’s Strategic Plan needing to be altered, and the first is the need to recognise peak oil and the need for adaptive strategies.

Movement of freight is a particularly important issue for our farmers, and it is known that, from an energy efficiency perspective, movement by rail is more effective than by road. There are rail lines in South Australia that could be reopened following some upgrading, and we also know that some rail lines exist in a vacuum, and there needs to be an effort made to link them into the main line. Recommendation 21 is that the state government pursue with the federal government the upgrading of regional freight lines, including the linking of lines into the national freight network.

We had a reference on fuel storage capability and fuel supply disruption. It is interesting that, some short time ago in Britain, Lord Cameron of Dillington stated that Britons were just nine meals away from anarchy, should oil supplies in Britain suddenly cut out. He figured that, by the end of three days of the oil cutting out when food was no longer being delivered to supermarkets, just like the aftermath of Hurricane Katrina in New Orleans, in order to feed their families people would begin stealing and looting. South Australia does not have that same sort of dependency on imported fuel (yet) as Britain does now, but the advent of peak oil will bring us closer to that.

Mr Barry Goldstein from PIRSA quoted the federal energy minister Martin Ferguson:

We’ve got to find another Bass Strait- sized oil province because if we don’t , by 2015 we will go from importing about 20 % of our needs in the 1990s to importing 80 % of all our oil and related product needs, effectively contributing to a $27 billion / year trade deficit.

I do not think the evidence is there that such a field will be discovered. I suspect, therefore, in line with what Martin Ferguson has said, that by 2015, which I remind honourable members is only seven years away—we in South Australia will be massively reliant on imported oil.

Even under existing conditions, all it would take is a strike of transport workers for South Australia to be on its knees in a matter of days but, in the future when 80 per cent of our oil is imported, we will become even more vulnerable. For rural areas in particular this could result in enormous problems, with primary producers unable to harvest, and we need to ensure that we have oil available in our country areas so that there is, in a sense, a buffer out in the regions that will at least allow farmers to farm their crops.

With that in mind, recommendation 23 is that the state government ensure backup supply of fuel for the state by ensuring that bulk fuel storage be maintained at Port Lincoln, considering the reopening of the Port Pirie site and investigating the provision of storage in association with the upgrade at Thevenard and the proposed port at Cape Hardy.

Alternative fuels was another reference. We have made no particular recommendation on it, but since the beginning of this year there has been a greater consciousness worldwide about an increasing shortage of food. The United Nations agencies, including the World Health Organisation, have stated that part of the reason is that the developed world is asking for corn in particular to be grown to produce ethanol so that we in the developed nations can continue to run our cars.

It seems to me that this is a continuum: in the twentieth century we asked the developing world (before we knew better) to stop growing crops for themselves and grow tobacco, which produced more money for those people, again, for the benefit of people in countries such as ours, and now it is being done in relation to corn.

I recognise that the project that is now under way at Flinders University, in conjunction with SARDI, is looking at algae-based ethanol production, and I think that has a greater feasibility. However, I think that even Dr Steven Clarke, who is instrumental in that project, was guarded in his comment about how much we can depend on the manufacture of ethanol as an alternative.

I turn now to the population reference. Given the existing policies of both the Labor and Liberal parties, which is to increase the state’s population, members will not be surprised to know that I could not get support from the other two members of the committee to have a recommendation included that the state government alter its population targets in the State Strategic Plan.

Nevertheless, among the submissions we received, there was one from Mr Roland Earl, who used figures provided to the Senate committee by a former Iranian oil minister. On the basis of those figures, he deduced that by 2020 ‘Australia will need to devote all its oil production to food production and distribution’, which is a pretty frightening statement. Into the bargain, we are going to have to use imported oil to have that happen. I remind members, too, that, because it is post peak oil, that peak oil is also going to be very costly. Quite obviously, this impact could be somewhat reduced in South Australia provided that we were able to reduce some of the population impacts. Another of the submissions we received was from Dr Andrew Melville-Smith. He says:

The population of South Australia has exploded from 600,000 to 1.5 million over the last 60 years and we have a Premier who would like to add an o ther 500,000 without giving us one good reason. (Apart from a few people are going to make more money). We are now in a state of over population, such that we cannot sustain this level of population for the next 1,000 years.

We should be looking at ways of reducing our population through birth control and immigration control. We should be doing this for our children and grandchildren to come. Our present policy is to push the costs of our decision onto our children, rather than bear some of it now and create a better future for the next generation. Every extra human body in South Australia is a disaster for our water supplies and oil security. It is time we came to terms with this.

As a consequence of not being able to get support for a recommendation, I do have a dissenting recommendation that I have had incorporated in the report.

One thing about a select committee report compared with a standing committee report is that there is no requirement for any feedback from government. However, because this is such a crucial issue, I will be writing to the Premier and providing him with a full copy of this report, stressing what a critical issue it is, and I will be asking for a serious response from him in regard to it. I may not be here by the time that response is given, but I am sure that this particular issue of peak oil will be something that my successor will be taking up with gusto next year.