LNG Threatened in WA: State Government and Industry to Have a Sit-Down

LNG Threatened in WA: State Government and Industry to Have a Sit-Down

LNG Threatened in Western Australia

State Government and Industry to Have a Sit-Down

The State Government of Western Australia and resource industry leaders in the state are attempting to negotiate an emissions reduction plan, amidst the Environmental Protection Agency’s (EPA) radical plan to implement a zero emissions target for all new projects. The State Labor Government are currently working with the industry on alternative climate change initiatives to curb carbon output, especially from the large LNG segment. The EPA also expressed concerned about the trajectory of WA’s emissions, which had increased by 27% from 2000 to 2016.

Western Australia’s EPA announced early last year that it would introduce tough new regulations aimed at curbing greenhouse emissions from large projects. Saying that they were setting a “higher bar” for how they will assess the impact of major projects on the climate, and whether a project would be inline with Australia’s 2020-Paris obligations.

The authority’s chairman Tom Hatton told reporters in WA early last year that Australia was not on track to meet its targets and the federal government, “are not going to deliver the outcomes as currently applied that are necessary for Australia to meet its international obligations”. The presented guidelines target project proposals with direct emissions of over 100,000 tonnes of carbon dioxide equivalent per annum. Proposals would need to demonstrate they have taken all “reasonable and practicable design measures”, including the use of renewable energy – also having to offset all net direct emissions associated.

Since then, the EPA withdrew the set of guidelines after being confronted with significant government and private push-back, especially from the state’s powerful mining lobby. The WA EPA has also announced that it will open its greenhouse gas guidelines on June 10 for consultation and is likely to be based upon the aforementioned guidelines.

Whilst the guidelines are not binding on the state government, the industry warned they will suffer as international investor confidence will most likely be deteriorated, whilst adding extra political and legal risks to ventures.

According to the AFR, the LNG industry had also received assurances from the Australian Labor Party, in which the industry would receive special exemptions from national targets. Obviously, this was to no prevail, given the election result, and with the re-elected Coalition government the industry has been exposed to the hardline views of the EPA.

The Western Australia Labor Premier, Mark McGowan, attended the Australian Petroleum Production and Exploration Association to provide his assurances to executives in Brisbane that the EPA guidelines would not be government policy in Western Australia. Mr McGowan is attempting to temper the political lobbying powerhouse of the resource industry with a policy outcome which he could sell to his political constituency, insisting to the energy sector that the EPA has an “open mind”.

Alternatives are being explored in confidential negotiations between the government and large companies, which explore commitments to offset a percentage of project emissions via large-scale planting of trees and land management – this approach is not new and has been explored by Woodside Petroleum in the past.

Whilst the private sector and the Labor government have seemingly warned off the EPA’s concerns, increasing pressure for the resource industry in general and LNG in particular to take more of an initiative has only increased. Initiatives that take the shape of Chevrons’ much anticipated plans for carbon capture and storage on Gorgon’s Barrow Island, which will be functional later this year. Chevron will also offset its emissions at the colossal Wheatstone LNG project, despite its obligation to do so being lifted.

Overseas, there is increasing appreciation by large players for investor and financier demand to be seen operating in a sustainable manner in terms of emission reduction. Given this, and the ever increasing pressure for energy companies to become more sustainable, the EPA’s non-binding guidelines being sidestepped is likely only the start of regulatory tightening in the long-term but a speed bump in the short-term.

By Sydney Robertson

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