Will the Federal Government approve new offshore gas licences?

Since the 2022 election, the Federal Government has successfully harnessed a wave of goodwill on climate change and energy policy. But hard decisions are coming.

There has been significant progress on Australia’s climate and energy policy at the federal level over the last 11 months.

The Federal Government passed their Climate Change Bill, enforced price regulation on the fossil fuel industry and secured parliamentary support for modest reforms to the safeguard mechanism. After a decade of obstinance and dysfunction from the previous Federal Government on energy policy, this represents substantial albeit insufficient progress to avoid the worst impacts of climate change. The Federal Government has successfully brought along the majority of stakeholders and interest groups in support of these reforms, by arguing that these policies are strong enough to achieve emissions reductions but not so ambitious that they will substantially disrupt the status quo.

But 2023 will present some hard decisions for the government, especially with regards to one area: fossil fuel project approvals. This is especially true for the offshore gas industry, which will be the subject of this post.

Approvals processes for fossil fuel projects

Before addressing the offshore gas industry, firstly a brief explanation of the Federal Government’s role in project approvals for onshore and offshore fossil fuel projects. (Note that what follows is a very simplified explanation of what are in reality very complex approvals processes).

Onshore coal and gas project approvals are primarily handled by state governments and their relevant departments. This is a long process that can last for years. Only once state approvals have been granted do project approvals then go to the Federal Government. This occurs under the terms of the Environment Protection and Biodiversity Conservation (EPBC) Act, whereby the Environment Minister Tanya Plibersek can approve or reject a project based on its environmental impacts.

The EPBC Act was drafted in the 1990s and has been widely criticised for being outdated and ineffective, providing limited grounds for the Environment Minister to reject a project – for example, high greenhouse gas emissions are not sufficient grounds to reject a project. As such, the Federal Government has committed to overhauling the Act this year. This will be one of (if not THE) most important climate and environment policy reforms of this term of government, as it could have major implications for all proposed fossil fuel projects in Australia.

Offshore fossil fuel projects are regulated somewhat differently. Offshore gas and oil projects (there are no offshore coal mines for obvious reasons) more than a few kilometres off Australia’s coasts are in Commonwealth waters. That means they fall under the sole jurisdiction of the Federal Government – not the states.

If a gas company wants to explore or produce gas, it first seeks approval from the Federal Government via the Department of Industry, Science and Resources and the National Offshore Petroleum Titles Administrator (NOPTA). The Department then assesses an application and provides a recommendation to the ‘Joint Authority’, which consists of the federal Resources Minister Madeleine King and the relevant state resources minister. Although the ‘Joint Authority’ consists of both federal and state ministers, in practice the final decision-making power rests with the federal minister – a state minister cannot veto the decision of the federal minister (although there are political incentives for both ministers to reach common ground).

Once a gas production development gets more advanced, it then usually needs state approvals for onshore infrastructure (eg. a pipeline starting in Commonwealth waters and finishing on the coast would require federal approvals for the former section and state approvals for the latter section).

The EPBC Act still applies but because the Federal Government also provides primary approvals for offshore projects, they have significantly more power over the different stages of the approvals process.

This brings me to the main focus of this post: the offshore gas applications sitting on Resources Minister Madeleine King’s desk awaiting a final decision.

Gas exploration applications

Gas companies have submitted 13 applications to explore for gas in Commonwealth waters. Ten of these applications pre-date the current Federal Government – they were made as part of the 2021 offshore gas acreage release under the Morrison Government, which ran out of time to award licences before the May federal election. An acreage release is when the Federal Government invites companies to make bids to explore for gas and oil in certain areas. In 2021, these areas included off the coast of Western Australia and Victoria, as well as the external territory the Ashmore and Cartier Islands. These ten applications are sitting on the Resources Minister’s desk awaiting a final decision.

The other three applications were made as part of the 2022 acreage release, launched under the Albanese Government. Available areas included off the coast of Western Australia and some small areas off the coast of the Northern Territory and Victoria, plus the Ashmore and Cartier Islands. These three applications are still being assessed by the Department and they have not yet made it to the Minister’s desk.

There is no deadline for the Minister to make her decision, but I suspect an announcement will be made on most or all of these applications no earlier than May and no later than August.

But how many of these 13 applications will the Resources Minister grant?

The previous Federal Government awarded dozens of new gas exploration licences. They handed out 47 licences in the last six years: four in 2022, eight in 2021, seven in 2020, thirteen in 2019, seven in 2018 and eight in 2017. That’s an average of almost eight per year. But that is actually a decrease from the first half of the 2010s: between 2010 and 2014, the average was almost 19 new licences per year! It is clear demonstration of the strong bipartisan support for the gas industry that existed across both the Coalition and Labor during that period.

Table 1. The number of new offshore gas exploration licences granted by the Federal Government by year.

YearNumber of new offshore gas exploration licences

The Albanese Government has staked its reputation on responsible action on climate change and its price regulation of the gas industry has demonstrated that they will not always do the industry’s bidding. But will this translate into a rejection of gas exploration applications?

It is highly unlikely all 13 applications will be rejected for two reasons:

  • The Albanese Government launched the 2022 acreage release and it would presumably be a source of some embarrassment if they were to reject all the applications when they themselves invited gas companies to apply.
  • Although the Government has taken a hardline on gas prices, they have previously been at pains to point out that their policies will not have an impact on gas exploration.

It is equally unlikely they will approve all 13 applications because it would be the equal highest number of new licences granted in nine years and would totally undermine their claims to be addressing climate change.

So we can expect something in between. Here are my thoughts on how to interpret the announcement when it eventually comes:

  • Seven approvals or more: a continuation of the previous government’s strong support for gas exploration
  • Four to six approvals: a reduction in the rate of approvals from the previous government but still gives the gas industry plenty to work with
  • Three approvals or less: a marked reduction in approvals that may indicate the government is bringing gas approvals into line with their other climate and energy policies.

The advice of the Department to the Resources Minister will also be important. Will the shake-up of the federal bureaucracy and personnel changes affect the advice the Minister will receive?

Gas production applications

It is not just exploration licences that the Resources Minister will have to decide on – there are also six production licence applications, five of which are on the Minister’s desk awaiting a final decision. Production licences give companies the right to produce and sell gas and oil, usually for many decades, unlike exploration licences that only give companies the right to search for gas for a fixed period of time (usually five to seven years). There are far fewer production licences than exploration licences, but they have longer term consequences.

Of the six production licence applications, four are from 2020 and relate to Woodside’s Greater Sunrise gas project, which is the subject of ongoing difficulties between Woodside and East Timorese company Timor Gap. There is unlikely to be a breakthrough on this issue soon, so those four applications are effectively frozen.

The other two new applications (one from 2022 and one from 2023) are not in the same boat and a decision could be made as early as this year (although the Minister is unlikely to be in any rush). It is not yet clear based on publicly available information which projects these applications relate to. Any new gas production is not consistent with the Federal Government’s stated aim of reducing greenhouse gas emissions.

All in all, there are some major decisions on the horizon for Resources Minister Madeleine King and the Albanese Government that will reveal to what extent fossil fuel expansion will be supported in the coming years.

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