Senate Economics Legislation Committee [Part 2], , 3:09:52 to 3:15:08
Technical debate regarding additionality requirements in the gas reservation bill and how they interact with existing market swap mechanisms between exporters.
Topics: Energy prices, Fossil fuels
Speakers: Senator Susan McDonald, Robert Jeremenko, Speaker 1, Speaker 22, Unknown Speaker
>> But but won't swaps still be offending additionality? So if the currently so currently what happens now is that APLG offers 120 pedigles into the market and other exporters buy that gas in order to fill their export requirements. Now, if they're not able to do that, then they won't need a swap if they if they have to supply into the domestic market and it's not going to inform additionality.
No. So, the legislation doesn't or the bills do not prevent that um existing market mechanism and it still allows swaps. what it makes sure does not occur is that those swaps substitute for a a um reservation obligation.
>> But that's exactly what you're asking them to do. >> So exporter B who doesn't have domestic production, you're saying they can do a swap with exporter A to to now have gas to meet um requirement. But where's the additionality piece in
>> So the um uh legislation ensures that if that occurs, as I say, it's not prevented under the bill, but then um in in effect that uh gas is then added back in to the calculation of the domestic supply obligation so that um there is no uh advantage given in terms of uh meeting that portion of that entity's supply obligation. So it it allows that to continue but it doesn't it doesn't allow that um swap to count towards that entity's DSO domestic supply obligation.
>> So how are they going to meet their domestic supply obligation?
>> Well there are um you know it's it's up to them to operate in the market in a way that uh that meets it should they uh continue to want to um you know to meet the requirements to have an export license. So,
all I'm seeking to to understand is that I don't see how they can with the additionality requirement in place because if they have done a swap with exporter A that they're not allowed to use that towards their domestic gas obligation.
I think the answer is that they can as long as the producer A hasn't already used it for its domestic supply obligation.
>> No, they won't have because they're well in excess of their domestic supply obligation. But producer B, this is their entire domestic well a large chunk of their domestic supply obligation. How about tomorrow for tomorrow? Because we'll cover this again because I've had a number of people come to me and say this just doesn't work. the additionality provision for these big exporters is problematic. So for tomorrow, perhaps you could sketch it out on a piece of paper so that somebody like me can understand it. How's that
sound? >> Perhaps I don't want to elongate things, but um either tonight or for tomorrow, it's not just about um the producers, [snorts] it's also about consumers. So we want to talk about um gas about how the gas market is functioning properly for consumers because I think that is
part of the story. >> This is the problem is that it won't because
>> well I think there are differing views about that. So I mean
>> this is what I'm seeking to understand chair is I can't the department can't explain that in a way that says no because here's provision blah blah that is going to say that's all I want is I want to be assured that on the first day of the legislation commencing that everybody doesn't go ah oh oh now I understand what she meant that doesn't work
>> no we're happy to provide that um that additional um description that supports what we've um given evidence on tonight, Senator. Um but I will just add that the um exposure draft of the bills um did not produce and colleagues will correct me if I'm I'm misstating did not produce any feedback along the lines of what you're saying that this uh mechanism that has been designed in this particular instance in terms of the questioning um does not work.
>> Okay, great. All right. Happy to be wrong.
>> Bit of a sneak peek for tomorrow.
What that they haven't had any feedback that would not be what I >> Not much. Mr. Jerco, you said last Friday you don't expect that there will be unsavory behavior from either of the parties. We all of course hope that that is the case. If the framework imposes significant legislative and regulatory obligations and penalties on gas producers, why there no minimum obligations on buyers for how they conduct negotiations, particularly with respect to the 90% of the DSO volumes that exporters must sell to them? Why is there no reciprocal obligation on bars