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Australian Paper will Pay More for Fuel Under New Legislation

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The Latrobe Valley Express (Victoria, Australia) reported this morning (Sept. 8, 2016) that a continued moratorium on conventional onshore gas exploration could impact one of the Latrobe Valley's largest direct employers. Australian Paper has expressed its disappointment at the State Government's decision to extend the ban until 2020, saying it was concerned about long-term gas supply. The Maryvale Mill is Victoria's largest user of natural gas.

"Our gas contracts are due for renewal in the next few years and it's vital that we maintain competitively-priced contracts, given the important role natural gas plays in our energy mix," said Australian Paper National Manager of Sustainability and Communications Craig Dunn. "With the fact there's really no increase in domestic supply, but an increase in export through Queensland, prices are likely to increase... We do think we can reduce the impact, but it is still going to have a significant impact potentially on our cost structures," he added.

Dunn said the mill generated about half of its energy from renewable sources. "We're going to continue to refine our operation to ensure we remain competitive into the future in line with our turnaround plan," he noted. "However, we do see an important role in conventional gas exploration in Victoria and we're disappointed there's a moratorium on conventional gas exploration."

The state government said it will support offshore gas resources in a bid to assist future supply and mitigate price increases. Last week it announced it would extend the current moratorium on the exploration and development of conventional onshore gas until June 30, 2020, and study its risks, benefits, and impacts.

It will permanently ban all onshore unconventional gas, including coal seam gas and the process of hydraulic fracturing, commonly known as "fracking." According to the Victorian Farmers Federation, conventional gas usually involves drilling into gas in porous rocks, without the need for high-pressure pumping or fracking.The Committee for Gippsland highlighted its concern about long-term gas supply to the mill in its July report, which looked at the flow-on effect of power station job losses in the community.

As part of its recommendations to attract and retain investment in the region, the group suggested further consideration be given to the blanket moratorium on all onshore gas exploration of Victoria and the "adverse impact experienced by energy intensive manufacturing businesses like Australian Paper's Maryvale Mill.

The Committee for Gippsland CEO Mary Aldred told The Express that the group understood the government's reasons for banning unconventional gas exploration like fracking, however there needed to be a separate discussion about conventional gas. "The decision (to continue the moratorium on conventional gas) comes with a backdrop of major economic restructuring that is being discussed in the Latrobe Valley, and we don't want to do anything that will further exacerbate stress on business," Aldred said. "Twenty-twenty is a long way away for businesses having to lock in contracts over the long term... We need to do everything we can possibly do as a region to keep Australian Paper in Gippsland and make sure it's operating in a local business environment that allows it to survive and thrive."

Aldred then explained to reporters the government's decision to study the impacts of conventional onshore gas, giving the group some hope it would be able to engage in discussion. 
Resources Minister Wade Noonan said the government would continue to support the development of Victoria's offshore gas resources and gas storage, to assist future supply and help mitigate price increases for the P&P industry.

"We will continue to work closely with Australian Paper so that the Maryvale wood pulp and paper mill is sustainable, competitive, and remains a significant employer and contributor to the economy of Gippsland," Noonan said.

In 2015 Australian Paper announced a turnaround plan following a fourth year of consecutive losses.
 

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