A fix for an ‘east coast problem’: WA wary as gas reservation policy unveiled

The Cook government may be happy, but Western Australia’s peak resources lobby is nervous the proposed federal gas reservation policy could undermine the state’s current longstanding system.

Federal Resources Minister Madeleine King announced the new laws at the National Press Club on Wednesday, revealing they would force large gas exporters to reserve 20 per cent of extracted gas for the domestic market as the Albanese government looks to address high energy prices in the eastern states.

The WA gas sector and Cook government both were concerned the federal rules would nullify the unlegislated but longstanding 15 per cent reservation policy in the state, which has been credited with keeping WA energy prices lower than in the east.

WA has been granted a carve out of sorts, with the legislation stating the federal reservation policy did not “exclude or limit the operation of a law of a state or territory”.

However, Premier Roger Cook previously expressed concerns about ministerial discretion allowing a future federal government to come in over top of WA’s policy.

On Wednesday, Energy Minister Amber-Jade Sanderson said she needed to see more detail in the policy, but “on the face of it, it does look like Western Australia’s concerns are being considered by the federal government”.

“Our position is that the national domestic gas reservation is a policy to fix an east coast problem, and that is where the policy needs to stay,” she said.

“Western Australia has a successful policy. We have the right settings to encourage investment, to make sure we have gas available to industry and the community, and to make sure that those gas prices are competitive and low, so we want to remain as we are, and we will continue that advocacy.”

But Sanderson reiterated Cook’s concerns about ministerial discretion.

“I think the premier’s concerns are valid … because can you imagine if Pauline Hanson got her hand on the domestic gas policy?” she said.

“We think that there have to be certainly guardrails around it, and I support the premier’s position.”

Chamber of Minerals and Energy WA chief executive Aaron Morey welcomed clarifications that the effectiveness of WA’s reservation needed to be considered before any Commonwealth legislation was applied.

“The flexibility in [the WA] scheme has delivered a balanced WA gas market – with prices consistently well below those on the eastern seaboard – while continuing to incentivise the development of new projects that are critical to safeguarding future supply,” he said.

However, Morey remained concerned about ministerial discretion and ambiguity over whether any carve-out for WA would apply to new projects.

“Those powers of discretion create a high degree of uncertainty, which is why our preference remains for WA’s exemption from the national reservation scheme to be directly enshrined in law,” he said.

“These are fixable problems. We’ll be working with the government and the senate to address them before the bill passes.”

The legislation also had the support of Conservation Council WA executive director Matt Roberts, but he urged the policy to be strengthened to avoid “loopholes” being exploited by gas producers.

“We’ve consistently called for the federal reservation scheme to apply alongside the state government’s policy, to ensure big gas exporters are meeting their obligations to WA homes and businesses, and we’re glad the legislation proposed today provides a pathway for that,” he said.

“Now, the federal government needs to strengthen the legislation further to make clear the responsibility on each individual gas exporter to meet their obligations, not just the sector as a whole.

“The legislation can be further tightened to ensure gas exporters don’t weaponise it or find loopholes.”

WA shadow energy minister Steve Thomas said the bill gave a future government the freedom to undermine WA’s gas reservation system.

“The bill introduced by Albanese government today requires the federal government to consult with WA, but it also allows any current or future federal government to simply ignore and override WA,” he said.

“The Commonwealth should either support Western Australia fully by legislating certainty or butt out of our business.”

Institute for Energy Economics and Financial Analysis lead Australian gas analyst Josh Runciman said the legislation could be used to bump up gas exporters gas to the WA market during the expected shortfalls in the next few years.

“The bill has been amended to allow the federal minister to exempt Western Australian exporters only where there are no concerns about the level of supply,” he said.

“With the Australian Energy Market Operator forecasting gas shortfalls in WA, and with most exporters behind on their state-based reservation commitments, this change provides government with much-needed flexibility to apply the federal scheme to WA.”