Could the east coast’s gas crisis prove to be an opportunity for WA?

That sensitivity stems from the barrage the former Labor state government of Alan Carpenter copped in 2006 when he proposed imposing obligations on the proponents of the new wave of LNG export mega projects to set aside a share of the gas to supply the West Australian domestic market.

The so-called ‘domgas’ policy was criticised relentlessly by the federal Coalition’s then-resources minister Ian Macfarlane, who even sought legal advice to block it.

He echoed industry warnings such a policy was artificial interference in the market and would result in projects becoming unviable and leave Australia’s reputation as an investment destination in tatters.

Woodside’s then-boss Don Voelte described the plan as “crazy”.

ExxonMobil, amid negotiations with its joint venture partner Chevron on Gorgon – which turned out to be the largest resources investment in Australian history – compared it (unfavourably) to policies in Venezuela, Russia and Peru.

In one meeting, executives threatened to walk away from the project unless every molecule of gas was available for export.

Carpenter stood his ground and the executives reportedly returned the next day having “re-crunched” the numbers.

In the end, Carpenter won the day when Woodside relented and agreed to meet the policy’s intent while committing to the $1.5 billion Pluto project in December 2006.

“We have, in a sense, cracked the nut of domestic gas reservation,” Carpenter told the WA parliament at the time.

“This deal has demonstrated that, despite all the doomsayers, gas producers can reserve for both export and domestic use. I urge the Commonwealth government in particular to take note.”

Carpenter has almost never spoken publicly about politics since his shock 2008 state election defeat to Colin Barnett, but has made exceptions this week to highlight his signature policy in comparison to the latest wave of chaos roiling east coast markets.

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“No other energy producing jurisdiction in the world allowed unfettered access to its energy resources for export without any consideration for what the domestic demands would be,” he told the ABC in one interview.

“So I fronted the industry players with that information, and they had to accept what I was saying was true.

“They couldn’t do it anywhere else in the world and I wasn’t going to let them get away with it in Western Australia.”

The commitments by major LNG proponents secured in the mid to late-2000s did not end the controversy in the west.

In 2014 and back in government, Macfarlane, then industry minister, told reporters on the sidelines of a gas producers conference in Perth: “There is no good reason for a reservation policy. It is ideological claptrap … in WA, if you ask anyone they’ll tell you it’s corrupted the market and affected supply.”

Ironically, Macfarlane now sits on Woodside’s board, and another West Australian Labor politician is being urged to intervene in the market.

New Resources Minister Madeleine King says a “perfect storm” of war-induced supply disruptions, freezing east coast weather, and unplanned outages of ageing coal generators are causing the price crunch.

She’s been working the phones to the energy company bosses and says she wants coal generation units back online ASAP while accepting gas producers are able to help only at the margins in the short term to boost supply.

On the question of whether she would support an east coast reservation policy, King makes the point that the WA policy cost a lot of political skin, but also that it was implemented up front, ahead of the development of the new generation of LNG projects that had it baked into their design.

A backer of gas (despite the Greens and many on the Labor left’s opposition to any new fossil fuel developments), King seems to be saying that while all options are on the table, the reservation horse has bolted in the east.

As our columnist Elizabeth Knight noted, what’s really happening here is the chickens coming home to roost because of a lack of framework for the transition to renewables.

Each (privatised) player in the market is acting in the (narrow) interests of its shareholders and no one has an eye.

So back to WA, which has resisted the excesses of east coast power privatisations and retains a dominant (though no longer exclusive) public generation company in Synergy.

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As a major buyer of gas but with board/political direction to get cracking on renewables (amid surging houshold take up for rooftop solar panels in particular) – plus an energy market design that features a capacity mechanism for security – the task of coordination in the public interest actually gets a look in.

There’s no question the structure of the east and west coast energy markets are markedly different and in reality, the bulk of the reserved gas in WA is taken up by three major customers: Synergy, privatised gas utility Alinta and aluminium smelter Alcoa.

Insiders say much of the trading in the spot markets is generated by the seasonal or other surpluses these major buyers have under their long–term, 20-year, take-or-pay contracts.

The question that should be on the mind of the state government is whether the east’s crisis is the west’s opportunity.

WA Premier Mark McGowan has returned to talking about diversifying WA’s economy and advanced manufacturing after riding the iron ore wave through COVID-19.

Could stable, affordable gas prices, supplemented by targeted industry support and attraction lure greenfields manufacturing jobs west?

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