Friday, 20 September 2013

So how will local government and greenhouse gas abatement businesses fare now that Abbott & Co have changed the goal posts?

Prime Minister-elect Tony Abbott says his government will waste little time before getting down to business after he and his frontbench are officially sworn in this morning.
Ten days after being elected to government, the Prime Minister-elect, his ministers and parliamentary secretaries will be officially commissioned by the Governor-General Quentin Bryce at Government House.
Mr Abbott says he will immediately instruct the Department of the Prime Minister and Cabinet to prepare legislation to repeal the carbon tax. He also says incoming treasurer Joe Hockey will instruct the board of the Clean Energy Corporation to cease operations. [ABC News 18 September 2013]

Right now there are local councils across Australia considering the installation of landfill gas extraction systems. A laudable aim.

One particular council received advice that under the Labor federal government scheme its gas extraction project would generate revenues and savings worth between $1.8 million to $2.6 million over 7 years for estimated installation/operating costs of $1.18 million.

However, under the Abbott Government it is predicted that this council will have to outlay an est. $1.18 million in installation/operating costs over the next 7 years in order to generate revenue and savings in the vicinity of $512,000 during that same time period. Leaving the project with a net present value of an est. -$670,000.

An unenviable position for the council to be in and, one that residents and ratepayers will recognise as a harbinger of rises in domestic and commercial waste charges.

Companies which supply these landfill gas extraction systems to local government may be in an even worse position. Particularly those companies which have multiple councils on their customer lists.

If one looks at past minutes of various council meetings held up and down the east coast of the country, some of these waste management businesses committed themselves to long contracts in the belief that the carbon pricing mechanism/emissions trading scheme was here to stay.

A company which was relying on future trading of carbon credits on the domestic/international market or renewable energy certificates - to offset generous terms in tenders submitted to and accepted by a council – may be wondering what its financial bottom line will look like by 2015-16.

Especially if its tender also involved energy creation, given falling electricity demand in Australia

One particular December 2011 contract on the public record (which was predicated on potentially higher revenue for the company under Labor's Clean Energy Future legislation) can be found in Gladstone Regional Council records:

1. Accepts the offer from LGI Pty Ltd for contract number 35/12 for a period of 30
years for:-

A). No capital or ongoing maintenance costs for:-
i. the landfill gas extraction system,
ii. the flaring system,
iii. the electricity grid connection and generation system.

B). No costs for:-
i. creation, registration, sale & reporting of Carbon Farming Initiative
credits generated,
ii. sale & reporting of all electricity generated,
iii. creation, registration, sale & reporting on large renewable energy
certificates relating to all renewable electricity generated.

C). A share in the gross revenue generated form the carbon credits, raw
electricity generated and the Large Renewable Energy Certificates
associated with the renewable electricity generation as outline in the
attached confidential tender evaluation.Page 5

2. Notes the capital value of the landfill gas extraction & flaring system to be of the
order of $450,000 and the total value of the credits from the Carbon Farming

Initiative for legacy waste to be $4.6 million over 30 years.

The markedly lower revenue and savings expected under the Abbott Government’s ‘direct action’ scheme may see some of the smaller businesses involved in landfill gas extraction go to the wall if the they hold too many pre-Abbott Government council contacts. 

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