Gas lobby gets its wish as Labor dials back domestic reservation scheme

Labor has yielded to gas industry demands and reined in the resource minister’s powers as part of a controversial domestic gas reservation scheme, which the minister says will instil a consistent reservation framework. 

Resources Minister Madeleine King announced a change to the legislation, which was introduced to parliament on Wednesday, ahead of her speech to the National Press Club.

As well as limiting ministerial discretion over how much gas an exporter can be forced to reserve  for the Australian market, Ms King said she has also made it harder to game the scheme and ensured states and territories will be consulted on decisions that affect them.

“Australians expect our resources to serve the national interest. Australians expect a reliable supply of affordable gas at home, and that’s what a domestic gas reservation scheme delivers,” she told the lower house.

“A decade of chaotic policy making from the coalition combined with weather events, coal power station maintenance backlogs from COVID-19 and the consequences to global gas supply due to Russia’s illegal invasion of Ukraine saw energy prices spike severely.”

A gas industry lobby group called for ministerial discretion to be narrowed in a submission to the draft legislation in September.

The reservation policy risked crowding out domestic-focused producers, reducing competition and diversity of supply, and discouraging investment in gas supply, Australian Energy Producers, chief executive Samantha McCulloch said.

Labor has already watered down the proposal after an uproar from gas companies, changing a requirement for exporters to set aside 20 per cent of their production for the domestic market to a more ambiguous obligation of “up to 20 per cent”.

Existing contracts are also exempt.

A broad range of critics, from unions and conservationists to business groups, say the draft legislation provides exporters such as Santos loopholes to continue selling gas to the more lucrative foreign market at the expense of domestic users.

“The gas reservation debate looks complex but it really isn’t,” Australian Industry Group chief executive Innes Willox said.

“Will we do now what we should have done before, and put strong clear and fair expectations on gas exporters ahead of their next wave of contracts? 

“Or will we fudge it until it’s too late, and condemn Australia to decades more of costly insecurity?”

It comes as a report from the Australasian Centre for Corporate Responsibility said Western Australia’s domestic gas shortfall was driven by exporters selling to higher priced export markets, rather than a lack of gas.

The report found committed and uncontracted gas made through existing infrastructure could make the state’s needs under every scenario from the energy market operator.

Ms King will say that Australia’s gas exports have played an important role in maintaining peace in the Asia-Pacific.

“A successful, peaceful energy transition relies on continued Australian exports of energy,” according to an excerpt of her speech.

“We must continue exporting traditional commodities – like gas and coal – while our export markets still need them, and while our regional trading partners follow their important paths to net zero.”

Deputy Greens leader Steph Hodgins-May vowed to keep up the pressure for a 25 per cent tax on gas exports instead of the reservation scheme.

Source: AAP, with reporting from Lucinda Garbutt-Young and Andrew Brown