Federal Court voids Beetaloo gas drilling grants, ruling they are legally invalid

In an early Christmas present for environment groups, the Federal Court has voided $21 million in grants provided by the Morrison government to gas drilling projects in the Beetaloo Basin, ruling the contracts providing the grants were unreasonable and therefore invalid.

The orders, issued by Federal court justice John Griffiths on Thursday, declared that the federal resource minister Keith Pitt’s decision to enter into three contracts providing a total of $21 million in grant funding to Imperial Oil and Gas, a subsidiary of ASX-listed Empire Energy, was invalid and that each of the three contracts was declared void.

The primary issue identified by Justice Griffiths was a decision by the federal government to sign contracts awarding the grants in September, a month after the Environment Centre NT has commenced a legal challenge to Pitt’s decision to award Empire Energy the three grants.

The grant announcement had been made by Pitt in July, but it took until September for the formal contracts to be signed.

In the intervening period, Environment Centre NT launched its legal bid – in early August – to stop the funding from being awarded.

The Environment Centre NT had sought to challenge the awarding of the $21 million grant on the basis that it had been unreasonable for Pitt to award the grant because he had failed to consider the impacts of climate change when making the decision.

Justice Griffiths rejected that argument, finding that there was no obligation for the resources minister to consider climate impacts when awarding grants under the Beetaloo Co-operative Drilling Program.

However, Justice Griffiths did find there were alternate grounds to find that the contracts should be made void, ruling that it was unreasonable for the Morrison government to proceed to sign the contracts with Empire Energy, given there was a legal challenge underway.

“I find that, having regard to the circumstances and context in which it occurred, the Commonwealth’s decision to enter into the Imperial Contracts on 9 September 2021 was unreasonable in the legal sense,” Justice Griffiths’ judgement says.

Justice Griffiths slammed the federal government for failing to fulfil its ‘model litigant’ obligations.

This included lawyers acting for the government telling the Environment Centre NT that there were no imminent plans to execute the grant contracts with Empire Energy, but the government them proceeded to sign them without providing any notice to the environment group.

Justice Griffiths said that this act had effectively prevented the environment group from seeking an injunction that could have prevented the contracts from being executed, with legal representatives for Keith Pitt acknowledging that there had been “quite regrettable conduct that involved a departure from model litigant standards.”

“For these reasons, I find that the Contracts Decision was legally unreasonable,” Justice Griffiths said, declaring the contracts void.

Co-Director of the Environment Centre NT, Kirsty Howey, said the group would continue to put pressure on fossil fuel companies.

“This doesn’t close the door on the scrutiny of fossil fuel grants,” Howey said.

“Fossil fuel subsidies are not a reasonable use of public money. Under Australia’s commitment to the global Glasgow Climate Pact, we need to phase out funding of new oil, gas and coal projects.”

“The public has an expectation that taxpayer money will not be used to accelerate climate catastrophe by funding projects that will release vast amounts of emissions, without due consideration of these risks.”

The Environment Centre NT was represented by the Environmental Defenders Office, whose director of legal strategy, Elaine Johnson, adding that the decision underlined the need for governments to use public funds appropriately.

“This case was critically important and put fossil fuel subsidies in the spotlight,” Johnson said.

“The findings reinforced that Federal Ministers have a legal obligation to make reasonable enquiries about the proper use of public money when making funding decisions of this nature.”

“In this case, the court found those reasonable enquiries didn’t extend to climate risk given the project does not involve extensive gas extraction and production. Importantly, the door has been left open for climate risks to be considered in other decisions around the use of public funds for fossil fuel projects,” Johnson added.

The decision is a massive blow to both Empire Energy – which has seen $21 million in government funding effectively cancelled out – as well as to the Morrison government’s ‘gas fired recovery’.

Given the decision to void the grants was made on the basis of the government’s failure to fulfil its model litigant obligations, there remains the possibility that new contracts could be signed allowing Empire Energy to still receive the grant funding – albeit on a delayed basis.

Pitt confirmed in a statement on Thursday that he intended to still proceed with the grant funding.

“This is a common sense decision that will allow grants for the development of the Beetaloo Basin to proceed, which has the potential to deliver thousands of jobs and billions of dollars in economic activity to the Northern Territory,” Pitt said.

“The Instrument under which the grant program was written and the Approval Decision to award grants to Imperial Oil and Gas were both valid and we welcome that decision so that we can move forward with the program.”

Shares in Empire Energy were placed into a trading halt on Thursday morning, pending an announcement from the company about the impact of the Federal court decision.

The grants have proven to be controversial, due to the awarding of government funding in support of the expansion of the fossil fuel industry in the Northern Territory, as well as the involvement of a number of Liberal Party aligned figures within Empire Energy, which has so far been the only financial beneficiary of the Morrison government’s $50 million Beetaloo Co-operative Drilling Program.

Earlier this year, a parliamentary enquiry into the oil and gas industry in the Beetaloo Basin heard that representatives of Empire Energy had attended a fundraiser hosted by federal energy minister Angus Taylor in Darwin, a day before Empire Energy paid for Taylor and a number of senior Liberal party members to attend the company’s operations in the Beetaloo.

Just a few months later, the Morrison government announced the $50 million grant program, with Empire Energy securing the $21 million in grants shortly thereafter.

Taylor has denied any involvement in the decision to award the grant funding to Empire Energy, which was ultimately a decision made by Pitt as resources minister.