Carbon offsets threaten projects

Australia’s oil and gas heavyweights will intensify their push for WA to legislate against carbon offset measures.

Woodside Petroleum chief operating officer Meg O'Neill. Picture: Colin Murty

Australia’s oil and gas heavyweights will intensify their push for the West Australian government to legislate against the new carbon offset measures put forward by the state’s environmental regulator, amid fresh forecasts that the proposals will kill off projects worth tens of billions of dollars.

But WA Mines and Energy Minister Bill Johnston has said he does not believe that any such legislation is required, setting the scene for a tense meeting between industry and government in Perth today.

Woodside Petroleum chief operating officer Meg O’Neill yesterday said the controversial guidelines announced by WA’s Environmental Protection Authority last week could spell the end for projects such as Woodside’s proposed $US20.5 billion ($29bn) Browse liquefied natural gas project and its $US11.5bn Scarborough LNG project.

The EPA, an independent body that makes recommendations to the state government on whether major projects should go ahead on environmental grounds, announced last week that it would expect the proponents of projects with large greenhouse gas footprints to demonstrate how they would fully offset all their emissions.

Fresh analysis from Macquarie yesterday noted that meeting the new EPA guidelines could impose more than $US5bn of additional costs on the Browse project alone. Macquarie’s modelling was based on forecasts that the costs of carbon abatement would rise from around $US10 per tonne to as much as $US40 a tonne in the longer term.

Those forecasts were backed up by analysis from RepuTex Energy, an independent firm specialising in Australian renewable energy and emissions markets, which said carbon abatement prices could rise from $15 a tonne to as much as $50 per tonne under the new rules amid a tripling of investment in offset projects.

Speaking on the sidelines of the Australian Oil and Gas conference in Perth yesterday, Ms O’Neill said the EPA’s change would put at risk both Browse and Scarborough and the estimated 5000 jobs they would create during their construction. The move had also complicated Woodside’s efforts to attract a new equity partner for Scarborough.

Any failure of those projects could also jeopardise the long-term future of Woodside’s existing LNG North West Shelf and Pluto LNG plants on WA’s Burrup Peninsula.

“If the projects don’t go ahead, (due to) the natural course of the gas fields we are producing from today at the North West Shelf fields and the Pluto fields, we will start ramping down trains in the 2020s,” Ms O’Neill said.

Forecast cost of WA carbon offset proposal

Ms O’Neill said that without firm legislation or guidance from Western Australia’s Labor ­government, all major projects slated for development in the state would be under a cloud.

“We are now living in a realm of great uncertainty about what the fate of each individual project proposal might be,” she said.

Mr Johnston, however, dismissed the concerns raised by the likes of Woodside and law firm Gilbert + Tobin that the new EPA guidelines would raise the prospect of long-running court battles over proposed projects.

He said the government had received advice that the new EPA guidelines would not lead to any change in government practices and rubbished suggestions they could lead to situations akin to the drawn-out legal fights that have mired Adani’s proposed Carmichael coal project in Queensland.

“What happens on the east coast is not relevant because we have a completely different systems here — it’s not a court-based system. It’s not the EPA that makes the decision, it’s the minister,” Mr Johnston said.

“It would be silly for me to rule out any action but we have no advice that legal changes are required.”

Woodside will be among a host of companies and industry bodies that will meet with WA premier Mark McGowan this morning to discuss their concerns about the EPA’s new position.

Mr McGowan has already distanced his government from the EPA’s stance, saying last week that he did not endorse the EPA’s position and stressing that job creation was his “No 1 priority”.

The pressure has been growing on the government to take stronger action over the EPA proposals.

Business Council of Australia chief executive Jennifer Westacott has written to Mr McGowan, warning him that the EPA’s guidelines were “reckless and unachievable”.

“It is critical that bureaucrats understand that decisions such as this have a real and immediate impact on companies and serve as another blow to investment confidence in this country,” she said.

The Western Australian Chamber of Minerals and Energy has also joined Woodside in taking out full-page advertisements in The West Australian newspaper, warning that the EPA’s recommendations “threaten thousands of jobs and tens of billions of dollars in investment across WA’s mining and resources sector”.

Macquarie’s analysts said that the new EPA guidelines were “highly likely” to delay Browse and potentially Scarborough, and warned that even if the EPA issue was resolved the recent moves by international oil majors BP and Royal Dutch Shell to link executive bonuses to their companies’ emissions could further endanger the next wave of Australian LNG developments. “Even if Australia doesn’t institute a carbon price, we wonder what BP or Shell’s approach to sanctioning Browse may be given the recent remuneration link to Scope 1 emissions,” Macquarie said.

Yesterday’s opening proceedings at the Australian Oil and Gas conference were briefly disrupted when a group of environmental activists stormed the stage.