Some of Australia’s biggest nation-building projects are entangled in a broken offshore environmental regulation system that is threatening the country’s economy and climate change targets.
Vital energy supplies that underpin our domestic energy security and allow for affordable energy prices in homes and in businesses are at risk. Potential emissions reduction projects on the path to net zero are under threat. And the many thousands of jobs, tens of billions of dollars of investment and substantial taxation revenues delivered to government budgets from major projects are on the line.
Indeed, the problems surrounding the regulatory approvals process for offshore project environmental plans are far wider than is appreciated.
The Federal Court’s finding last week that the national regulator did not have the power to approve part of Woodside’s $16.5bn Scarborough gas project off Western Australia is bewildering, yet not an isolated incident.
Last year, Santos experienced a similar situation when the regulator’s approval for the $5.8bn Barossa Project off the Northern Territory was set aside by the same court.
Those projects alone total more than $20bn of investment, support thousands of new jobs, deliver critical stimulus into regional communities and produce new gas supply to support energy security in Australia and our region.
More than 40 environmental plans linked to gas projects worth tens of billions of dollars are currently before the national regulator, queued up in its approvals process – many since 2022.
Renewable energy developments such as offshore wind projects are also overseen by the National Offshore Petroleum Safety and Environmental Management Authority. The deployment of emissions reduction technologies is also at risk given offshore carbon capture utilisation and storage projects must also receive these same approvals.
And then there’s the pipeline of oil and gas decommissioning projects that will also require approvals. Yet there’s a logjam in the approval process: only four environmental plans have been approved since the first Barossa decision. The fifth was the overturned Scarborough approval.
Whether or not the official approvals these critical energy and decarbonisation projects receive is worth anything at all remains in serious doubt. To be clear, Australia’s oil and gas industry seeks better regulation, not less regulation.
Consultation with traditional owners has been an important part of our sector’s work for decades. But procedural fairness must be expected, whether it’s big business, small enterprise or personal investment. Australians would not tolerate a situation in which an aspiring homeowner was granted building approvals, after much cost and effort, only to see them disappear when the work had already begun.
Similarly, it is difficult to understand how a business that plays by the rules, consults with stakeholders in good faith and is granted an approval by the national regulator should then see that approval overturned.
The time delays and costs incurred by this mess are substantial.
The collective cost of having vessels and equipment on standby is now running into hundreds of millions of dollars. The standby fees for a rig can be as much as $500,000 a day.
We should also consider the importance of these projects to their local regions; delivering domestic gas supply at a time of growing demand and in the face of potential shortfalls and substantial economic benefits in jobs, taxation and regional investment.
In its overall economic outlook, the Northern Territory budget has noted the Territory’s economic fortunes all but hinge on the Santos Barossa project.
“Economic growth is forecast to average 2.9 per cent over the five years to 2025-26, and is expected to be heavily influenced by the Barossa project,” the 2022-23 budget said.
The regulatory uncertainty also amplifies the issue of sovereign risk. Australia’s reputation among international investors as a safe and reliable investment destination and energy supplier amid the global race for capital is at risk.
This reputation centres on certainty and stability, and is critical for our global competitiveness and valued long-term relationships with trade partners and investors.
It has helped Australia become a global resources powerhouse for commodities such as gas, coal and other minerals, and delivered extraordinary economic benefits to Australians.
It is the same reputation the nation’s energy industries are currently relying on during the net-zero transformation, as they grow export industries for hydrogen and critical minerals. But what international investor would seriously think Australia is a good place to invest billions of dollars when an approval granted by the national regulator means so little?
Regulations that provide clarity and certainty for industry, while maintaining consultation obligations, are desperately needed. In its federal budget, the commonwealth has promised a review of environmental management regulations to provide clarity for offshore energy. This review must be fast-tracked by the government.
Governments must make clear regulations that maintain high standards of consultation. But the rules must also provide regulatory certainty once an approval is granted.
Samantha McCulloch is chief executive of Australian Energy Producers.
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