Tonkin told Energy News yesterday afternoon that the Gina Rinehart-backed Lakes is still digesting the shocking news, which he learned about just minutes before the Premier Daniel Andrews made his announcement yesterday morning.
"It is bizarre," Tonkin said.
"We've been caught up in this ban for four years. Have they not been thinking about conventional drilling? They have done nothing, and the department seems to be in a state of ‘know nothing'."
He does not understand why the state believes it needs four years to assess the risks associated with conventional sandstone reservoirs, using drilling techniques that have been proven safe thousands of times each year around the world.
Lakes wasn't even originally supposed to be caught up in the former Napthine government's moves to keep its country and national members on side following concerns about the drilling for CSG on the water table.
"This is certainly the wrong decision for Lakes, and it is wrong for the state and the country. This could cost Victoria a lot," Tonkin said.
He sees parallels with the Victorian recession of the early 1990s, which the state only traded out of by selling its power assets.
Tonkin believes that there could be a migration of big gas users out of the state.
"I don't think the average person will understand how serious this is for the state," he said.
"The activists are loose with the truth and they exaggerate. They work on disaffecting the communities, but eventually the prices of gas and power will go up and everyone will face difficulties and unquestionably industry will leave the state.
"This is exactly the same sort of thing that happened in the early 1990s, and if Victoria hadn't sold its power generators it will have been history."
Energy News asked Tonkin whether Lakes would seek compensation, such as that offered to the Greyhound racing sector in NSW when that was shut down while the state also conducted a licence buyback, a move that saw Metgasco secure $25 million for handing back its three licences.
"We need to get together and consider our options," was his reply.
Yet with major shareholders including Hancock Prospecting, Tonkin says he does not believe any end to Lakes' gas ambitions in the state will be swift or quiet.
He has no idea how the state will cope with meeting its renewable generation target and close down its older coal-fired power stations without much in the way of domestic gas, aside from that which is generated in the offshore space.
"I wonder what the government thinks is going to happen?" he said.
If the Andrews government listens to industry, it will hear that nothing good will happen.
The Business Council of Australia and the Australian Industry Group, whose members use gas as a feedstock, say local manufacturers have been dealt a major blow, and the Minerals Council of Australia has also expressed concern, saying the decision will reduce the availability of gas for energy and industrial use across the country.
"It is a retrograde step for the nation, not just Victoria," the MCA said.
"With mining and minerals processing a large user of electricity, Australia's ability to compete on the international stage depends on access to inexpensive, reliable energy supplies.
"This decision removes a key energy generation option from the energy mix and contradicts the recent COAG Ministerial communique that emphasised the need to increase the overall supply of onshore gas."
The MCA said that with the closure of coal-fired power plants the government seems intent on increasing the state's dependence on expensive and part-time energy sources.
Energy Networks Association CEO John Bradley also warned Victoria was playing with fire.
"Imposing a state-wide ban on gas exploration and production will undermine the role natural gas can play in supporting a cleaner, affordable energy system," Bradley said.
"At a time when gas distribution networks are cutting costs, the government is making a decision to restrict supply that could lead to cost increases for families and business.
"Victoria is seeking to introduce 5400MW of renewable generation capacity in less than a decade, has an ageing coal-fired power fleet, and a high level of gas demand among manufacturers and nearly two million homes.
"This ban is a ‘step into the unknown' and will have nationwide impacts for Australia's energy system."
Shell's take
Shell Australia chairman Andrew Smith has also waded into the debate, despite the fact the company has no significant interests in the Australian domestic gas market, much less Victoria.
Smith told Fairfax media that Victorian households and businesses will now pay higher energy prices.
"In the state that depends most on gas, this means less jobs, lower growth, less investment and a higher cost of living," he said.
Smith said the government's decision had been made "without any scientific basis" and put the long-term viability of Victoria's affordable energy supply under a cloud.
"It will ripple through the state's economy and impact on all large gas users including manufacturers, fertiliser producers and the construction industry," he said.
"Bad policy is often rewritten, but once manufacturing jobs are lost they rarely come back."
Lakes CEO Roland Sleeman said the ban was unprecedented and without justification.
In a statement released to the ASX this morning he said the ban was clearly "contrary to the expressed intent of current Victorian Petroleum Legislation, which is to encourage exploration for gas and promote gas production for the benefit of all Victorians".
Lakes has already lost $1 million in underwriting from its capital raising plan.
But there was one voice praising the decision, Sex Party MP Fiona Patten.
"Fraccing sucks so good on the government for banning it," she said.
She said the government had spent hundreds of hours listening to experts and forming a set of recommendations.
The Victorian Farmers Federation said the ban and moratorium was a win for the agriculture sector.
Lakes, which is almost entirely focused on Victoria, last saw its shares trade at $0.002.
