4.1
The NT Government is responsible for the regulation of onshore gas resources in the Territory, for which the key legislation is the Petroleum Act 1984 (NT) (the Petroleum Act). The environmental regulations, made under the Petroleum (Environment) Regulations 2016 (NT) (NT Environment Regulations), aim to ensure that ‘regulated activities’ are carried out in a manner that is consistent with the principles of ecologically sustainable development (ESD) and by which the environmental impacts and risks are reduced to a level that is as low as reasonably practicable and acceptable.
4.2
This chapter discusses environmental and emissions regulation in the Beetaloo, with specific attention to greenhouse gas (GHG) emissions, and covers the following topics:
the implementation of recommendations from the Independent Scientific Inquiry into Hydraulic Fracturing in the Territory (Pepper Inquiry);
lifecycle GHG emissions from an onshore gas industry; and
the NT Climate Change Response policy.
Implementation of recommendations from the Pepper Inquiry
4.3
In February 2022, the NT Government reported that 65 of the recommendations (47 per cent) from the Pepper Inquiry (see Chapter 1) had been fully implemented, as assessed by the Independent Officer, Dr David Ritchie.
4.4
The Australian Petroleum Production and Exploration Association (APPEA) submitted that 31 of the 65 recommendations were required to be implemented prior to the grant of exploration approvals. However, Ms Alina Leikin, Special Counsel to the Environmental Defenders Office (EDO), disputed the number and adequacy of recommendations implemented.
4.5
Ms Leikin stated that the EDO’s analysis showed that 100 Pepper recommendations had not been implemented (74 per cent), meaning that ‘the NT regulatory framework is patently inadequate to ensure the necessary safeguards and oversight mechanisms are in place’. In particular, Ms Leikin remarked:
Of the 65 implementation actions marked as completed by the NT government, 27 have not been fully or properly implemented on our analysis. This is either because the government determined that there was no need for the recommendation to be implemented, meaning it will never be completed, or the government departed from aspects of the recommendation by setting a lower bar than Pepper required.
4.6
Some witnesses—such as Ms Jade Kudrenko, General Manager of the Arid Lands Environment Centre—contended that the gas industry in the Beetaloo should not proceed until all the Pepper Inquiry recommendations have been fully implemented.
4.7
In response, the NT Department of Industry, Tourism and Trade representative, Mr Shaun Drabsch, Chief Executive Officer, advised that the Territory’s regulatory regime now represents best practice:
Government investment in delivering the [Pepper] inquiry recommendations, to date, has been extensive and diverse. We have already seen significant legislative reform and dramatic shifts to increase regulatory efficiency for both government and industry… We are proud to have introduced regulatory requirements to these high standards, which industry [has] publicly stated are some of the strictest in the world. The calibre of the independent inquiry and the extensive culturally appropriate and targeted consultation which informed [its] findings ensure that government, community and industry can be confident the recommendations represent best-practice measures to support the responsible development of the onshore gas industry…
We are confident we are on track to complete inquiry recommendations this year [2022] and be in a position to consider production approvals in the Beetaloo sub-basin in 2023. The Northern Territory as the regulator of this development will drive and manage this industry in a way that protects the environment…involves and assures the community and facilitates sustainable economic development.
4.8
As at March 2023, the NT Government reports that 75 per cent of the Pepper Inquiry recommendations have been completed and 25 per cent have commenced but are not complete.
4.9
The committee notes that the Commonwealth–Northern Territory Bilateral Energy and Emissions Reduction Agreement (Bilateral Agreement) (see Chapter 3) specifically recognises:
The Territory is working to…implement all the recommendations of the Scientific Inquiry into Hydraulic Fracturing in the Northern Territory [Pepper Inquiry]… The Territory will complete implementation of its response to the Recommendations of the [Pepper Inquiry] by the end of 2022, in line with public commitments to enable consideration of production approvals.
4.10
The committee recognises that the Territory’s environmental regulation for gas exploration and production in the Beetaloo requires the full implementation of all recommendations from the Pepper Inquiry. While the NT Government is making progress towards implementation, based on its most recent advice, the government is well behind schedule on its commitment, including under the Bilateral Agreement.
4.11
The committee recommends that the Northern Territory Government expedite full implementation of all outstanding recommendations from the Scientific Inquiry into Hydraulic Fracturing in the Northern Territory, to fulfil its promise made to Northern Territorians to fully implement all recommendations of the independent inquiry.
Surface and groundwater in the Beetaloo
4.12
As noted in Chapter 3, the Beetaloo Geological and Bioregional Assessment (GBA) Program specifically considered potential regional-scale impacts on water and the environment from the development of unconventional gas resources. In relation to water, the assessment concluded:
Surface water - Where activities are conducted in the vicinity of waterways, a small number of pathways have potential for impact. There is high confidence that existing mitigation strategies will avert these impacts.
Groundwater - Groundwater is the most probable source of water for unconventional gas resource development. The assessment has found that aquifers in the region, such as the Cambrian Limestone Aquifer, can supply this water without adverse regional impacts.
4.13
Throughout the inquiry, submitters and witnesses expressed heightened concerns regarding the sustainable management of surface and groundwater in the Beetaloo. For example, Mr Ray Dimakarri Dixon, a Mudburra Traditional Owner from Marlinja north of Elliot in the NT, expressed his key concern that fracking in the Beetaloo could contaminate water sources with widespread and deleterious impacts on Country:
While fracking is taking place in the Beetaloo…I've been concerned with water and our sacred site, our families and our future children, and the environment, the trees and the animals. It's about our culture and identity, our connection to country. Fracking uses a lot of chemicals underground. That's what we are worried about, that it's going to contaminate the water; it's going to make it bad for our people. It doesn't matter where we are. It doesn't matter where we live. It doesn't matter what colour or race we are, what tribe we are, water's still very important for us. It doesn't matter what language we speak. Water's very important for life. We shouldn't have fracking in our Country.
4.14
In March 2022, Rallen Australia Pty Ltd (Rallen) owned four stations in the Beetaloo: Tanumbirini, Kalala, Forest Hill and Larrizona, which collectively spanned more than one million hectares. Rallen was running approximately 70 000 head of cattle across the four properties, however, Tanumbirini is the station most affected by gas exploration activities in the Beetaloo.
4.15
Rallen’s submission described gas exploration by Santos Ltd (Santos), Tamboran Resources Ltd (Tamboran) and Origin Energy Ltd (Origin) on Tanumbirini Station, pointing out:
All of this onshore petroleum activity intends to draw its water from the Cambrian Limestone Aquifer (the CLA). The CLA feeds around 80% of the water bores drilled in the Beetaloo Basin, supplying water for the pastoral industry and for communities including Elliot, Daly Waters, Larrimah and Newcastle Waters.
4.16
Rallen argued that, for geological reasons, the impacts of an onshore shale gas industry in the Territory will surpass impacts seen so far in Queensland:
What is proposed for the Northern Territory is far more dangerous. In Queensland they seek coal seam gas, closer to the surface, through softer material that requires less fracking. In the Territory they seek to frack through shale – harder rock, kilometres deeper, requiring more chemicals, water and sand. All that is costly and high risk… At the same time, the Territory landscape is more fragile, less able to carry cattle, totally dependent on aquifer water, and requiring more land to sustain each head of cattle.
4.17
When asked whether fracking would adversely impact water in the Beetaloo, Santos stated that the company meets all requirements for its petroleum activities, including the minimum standards in relation to water:
Santos has been granted water licences that set a limit on the extraction of groundwater for use in operations. The NT Government assesses applications in the same way as any other licence applicant, including checking proposed water requirements and verifying that these are reasonable, evaluating water availability and evaluating the potential impacts on the water source. Additional rigour for this assessment is also applied to the petroleum industry to ensure the extraction does not impact nearby water bore supplies.
The licence details volumetric limits and Santos measures and reports the volume of all water we extract to the NT Government. We are confident that this activity does not impact the availability of groundwater to other users or the environment.
4.18
Origin provided similar evidence, as did Tamboran, whose Vice President of Operations and External Affairs, Dr David Close, informed the committee that the company mitigates any risk to aquifers in accordance with the Territory’s Code of Practice for onshore petroleum activities:
The code of practice is very explicit about aquifer protection. There are minimum standards that must be met by all well designs… We have drilled water bores before. We've drilled the Maverick 1 well, understood the depth of the Anthony Lagoons and the depth of the Gum Ridge Formation—those two Cambrian limestone aquifers—and the depth to the watertable, and we've been able to assess what we'll require in terms of monitoring of and isolation between those aquifers… So, yes, we understand the hydrogeology and the drilling engineering very well. The code of practice is rigorous, so aquifer protection is part of every well design.
4.19
Mr Ray Hall, Managing Director of EcOz Environmental Consultants, the largest environmental consultancy in the Territory, expressed his confidence in the Territory’s groundwater monitoring and reporting requirements:
…monitoring has been set by the Pepper inquiry as to what's required. It's incredibly detailed and rigorous. We have to reach particularly high standards to ensure that we do that monitoring properly… [W]e do it independently of the companies. We report to the government… [N]othing gets missed, covered up or hidden and everything gets reported.
4.20
The Central Australian Frack Free Alliance was not so assured, submitting:
In our 6 year-long engagement with the Central Australian community on the topic of fracking, the concern most often vocalised is the risks fracking poses to water. This includes competition between the gas industry and other water users, the potential for negative impacts on groundwater and groundwater dependent ecosystems from contamination and excessive extraction as well as the risk of contamination of surface water. These concerns have been expressed at every chance since fracking was first proposed in the NT, and they still have not been addressed in a way that is publicly acceptable.
Committee view
4.21
As discussed in the Interim Report, and noted in Chapters 4 and 5 of this report, surface and groundwater are critical to the wellbeing, livelihoods and culture of people who live and work in and around the Beetaloo, as well as being a critical environmental consideration.
4.22
The committee recognises that it would be highly detrimental to deplete or contaminate the valuable water resources of the Territory and, for this reason, approves the Australian Government’s decision to expand the water trigger in the Environment Protection and Biodiversity Conservation Act 1999 to better protect water resources that might be impacted from shale gas activities in the Beetaloo (see Chapter 3). The expansion of the water trigger will provide the Commonwealth with greater oversight of water-related environmental impacts in the Beetaloo resulting from gas activities.
4.23
The committee acknowledges that this action will not reassure all stakeholders. Given the importance of water to the various communities in and around the Beetaloo, as well as First Nations people with cultural connections in the area, the committee considers that the Australian Government should fund a further research study of the impacts to water resources in the Territory arising from the gas exploration and potential production in the Beetaloo.
4.24
The committee recommends that the Australian Government fund the Department of Climate Change, Energy, the Environment and Water; Geoscience Australia; the Bureau of Meteorology; and the CSIRO to conduct a collaborative and targeted study of the impacts to water resources (surface and groundwater) in the Beetaloo resulting from implementation of the Beetaloo Strategic Basin Plan.
Environment Management Plans
4.25
The NT Environment Regulations require interest holders (activity proponents) to submit environment management plans (EMPs) to the NT Minister for Environment and Parks and Water Security. These plans are activity specific plans that seek to implement appropriate environmental management practices during the various stages of that activity. They identify the key environmental matters associated with an activity and provide strategies and plans for managing them effectively.
Concerns regarding EMP approvals
4.26
According to the Department of Environment, Parks and Water Security (DEPWS) 2021–22 Annual Report, there were 22 active EMPs across the Territory between 1 July 2021 to 30 June 2022, nine of which were approved in that financial year. Six of these EMPs appear to relate to petroleum activities in the Beetaloo.
4.27
In the previous financial year—1 July 2020 to 30 June 2021—Santos received approval to drill an additional well at the Tanumbirini Station well site within EP 161. This expansion of activities led to litigation between Rallen and Santos. Mr Langenhoven informed the committee that the litigation highlighted the Territory’s ‘worthless’ system of EMPs:
…the EMP system in the Northern Territory is not worth the paper it's written on. It is atrocious. For example, the first EMP is for seismic exploration. They plan to cut our paddock up into 150-kilometre by five‑metre grids. In the first EMP they state that they will rehabilitate all of the seismic lines so that it will have no significant impact on the environment. The second EMP, which is the civil drilling EMP, proposes they will repurpose those seismic lines in order not to cause more damage… But the first one's been approved on those lines. That's one of many inconsistencies in the EMPs. It just gets rubber-stamped, because no‑one is looking at anything.
4.28
Similar to Rallen, one community member, Dr Samantha Phelan, also questioned how activity proposals are presented in EMPs. Focussing on well pads, Dr Phelan submitted that there is a difference between the Pepper Inquiry’s understanding of ‘multiwell pads’ and industry’s understanding or portrayal of that term:
General understanding throughout the Pepper Inquiry was that "multiwell pads" were related to the horizontal projections off a single vertical well. Origin and Santos described a system of 6-10 horizontal wells off a single vertical well at many of the hearings…
Last week I reviewed the Tanumbirini site photograph and noticed 3 wells within metres of each other. I had previously read the EMPs for Tanumbirini 2H and 3H at the time of their approval and even in reading them my assumption was that the 2H and 3H were horizontal projections off the Tanumbirini 1 well rather than the drilling of full separate vertical wells… [T]he risk of aquifer roof subsidence with a single, well‑constructed, stringently monitored, vertical well…is less than 3 separate holes…in close proximity to each other.
4.29
DEPWS representative Ms Amy Dennison, Executive Director of Environmental Regulations, informed the committee that activity proponents are now submitting more holistic EMPs that provide ‘a much bigger picture of [their] exploration program’.
4.30
The committee notes stakeholders’ concerns that EMPs are being approved without reference to previously approved EMPs for the same permit area, leading to misunderstandings and lack of agreement regarding gas activities. The committee urges the DEPWS to consider how this issue might be resolved, such as through a review of internal processes or the inclusion of a user‑friendly and holistic summary for each proposal.
Lifecycle GHG emissions in the Beetaloo
4.31
The Environment Protection Act 2019 (NT) (EP Act) is the Territory’s key environmental protection legislation. This Act requires certain proposals—such as petroleum activities—to be referred to the NT Environment Protection Authority (EPA) for assessment.
4.32
Under the Environment Regulations, the NT Minister for the Environment, Climate Change and Water Security cannot approve an EMP unless the EPA has determined that: an environmental impact assessment (EIA) is not required; an EIA is required and has been granted environmental approval; or the EP Act otherwise permits the making of the decision.
4.33
The EP Act requires the application of a decision-making hierarchy for developments that may have a ‘significant impact’ on the environment:
first—to ensure that actions are designed to avoid adverse impacts on the environment;
second—to identify management options to mitigate adverse impacts on the environment to the greatest extent practicable; and
third—if appropriate, to provide for environmental offsets in accordance with the Act for residual adverse impacts on the environment that cannot be avoided or mitigated.
4.34
Stakeholders focussed primarily on the third element—the offsetting of environmental impacts that cannot be avoided or mitigated—in relation to GHG emissions.
Projected emissions
4.35
As noted in the Interim Report, the Pepper Inquiry assessed the quantity of lifecycle GHG emissions for any new onshore shale gas field in the Territory. The Australian component (i.e. domestic production, use and preparation for export) was estimated to range from an increase of 4.5 to 6.6 per cent of Australian GHG emissions, depending upon the amount of yearly production.
4.36
Project proponents—such as Tamboran—highlighted their plans to achieve ‘net-zero’ with respect to Scope 1 and 2 emissions, including by the use of renewable energy at their production facilities and by purchasing carbon offsets. The company’s Managing Director and Chief Executive Officer, Mr Joel Riddle, told the committee:
…with our net-zero plan, we will be a net-zero energy company not in 2050 or 2035 but by first commercial production in 2025. Our business plan has been able to achieve this because the gas that Tamboran plans to commercialise has CO₂ levels in the reservoir of approximately three per cent.
4.37
Tamboran’s emissions forecasts for its pilot facility would be 50 000 tonnes CO₂‑e. Mr Scott Crabtree, Sustainability and Climate Change Advisor, explained that the company is considering the use of renewable technologies and battery storage to electrify ‘the facility so that it's able to run on different fuel sources in addition to gas’.
4.38
Tamboran is also exploring options to reduce fugitive methane emissions:
…with the greenfield facility, it does allow us to implement some of the proven technologies from the US as well, around methane leak detection repair and really making sure that we're operating at the lowest emissions possible.
4.39
A Santos representative, Ms Tracey Winters, Acting Executive Vice President, Environment, Sustainability and Governance, stated that with respect to Scope 1 and 2 emissions, Santos has ‘a clear decarbonisation strategy and a commitment to achieve net zero emissions by 2040 by producing cleaner energy and clean fuels’. Ms Winters added:
We have a target to work with our customers to reduce their emissions by a million tonnes a year by 2030 and we are working with them to do that, but, in addition to that, Santos is responsible for scope 1 and 2 emissions, which are our own emissions, and we're very focused on achieving net zero by 2040 when it comes to those emissions. The accounting framework for emissions is that customer emissions are actually the scope 1 and 2 emissions of other companies [that is, Scope 3 emissions]. So we will work with them to help them reduce those through carbon capture and storage and by other means.
4.40
As discussed below, Scope 3 emissions, that is emissions resulting from end users’ consumption of gas, will be the largest component of the Beetaloo emission profile. Professor Nerilie Abram, a paleoclimate scientist based at the ANU Research School of Earth Sciences at the Australian National University, suggested that the Beetaloo GHG Scope 3 emissions could be even higher than estimated by the Pepper Inquiry:
Combustion of gas from a new Beetaloo Basin shale gas field would result in annual emissions of approximately 64 Million tonnes CO₂-equivalent… This equates to a 13% increase on Australia’s 2020 greenhouse gas emissions of 499 Million tonnes CO₂-equivalent.
4.41
Similarly, Emeritus Professor Ian Lowe argued that, if the Beetaloo resource proves to be equal to the Marcellus Shale deposit in the United States, then:
…the scale of production [from the Beetaloo] would contribute about 600 million tonnes of carbon dioxide equivalent per year. To put that figure in context, Australia’s total emissions for the most recent year—the highest ever recorded—were 560 million tonnes. So just extracting and burning gas at the rate projected, without taking into account the extra contribution from fugitive emissions [methane leakage], would do more to accelerate climate change than Australia’s entire current activity.
4.42
APPEA, which represents upstream gas suppliers in Australia, considered that achieving net zero in respect of Beetaloo gas would not be the sole responsibility of the companies producing that gas. Former Chief Executive Mr Andrew McConville stated:
[I]t's an economy wide response to emissions reductions, so that emissions from the development will be offset not only by actions undertaken by the gas industry but by actions across the economy, whether that be greater adoption of renewable energy, the adoption of electric cars and so on.
Pepper Inquiry lifecycle GHG recommendation
4.43
Arguably, the most important recommendation from the Pepper Inquiry was for the Australian and NT Governments to ensure that there is no net increase in lifecycle (Scopes 1, 2 and 3) GHGs emitted in Australia from any onshore shale gas produced in the Territory (Recommendation 9.8):
…while this recommendation may present a challenging task, it is based on the principles of ESD. It also reflects widespread and strongly held concerns that were articulated to the Panel regarding the impacts of increased GHG emissions. To achieve this outcome, the increase in lifecycle GHG emissions in Australia from any onshore shale gas produced in the NT…must be fully offset. For example, 26.5 Mt CO₂e/y must be fully offset for a gasfield producing 365 PJ/y [equating to a relatively small domestic production facility] and 38.9 Mt CO₂e/y must be fully offset in Australia for a gasfield producing 1,240 PJ/y [equating to a large export and domestic production facility]. In the latter case, the residual emissions of some 60 Mt CO₂e/y are emitted overseas, and they should therefore be offset overseas.
4.44
The NT Government reports that Recommendation 9.8 is 50 per cent complete, with the government ‘having taken significant actions to implement the recommendation within its sphere of control’. Two of these actions are discussed below (see ‘Greenhouse Gas Emissions Offsets Policy’ and ‘Greenhouse Gas Emissions Management for New and Expanding Large Emitters policy’).
4.45
However, the NT Government emphasises that Recommendation 9.8 is also directed to the Australian Government in recognition that:
…the NT Government has limited control over full life cycle emissions from gas production in the Territory, with a shared commitment from the Commonwealth Government required to meet the recommendation.
The Commonwealth Government has a major role to play in implementing Recommendation 9.8. If Territory gas is consumed elsewhere in Australia, [the Commonwealth] will be responsible for managing the majority of emissions from the production of onshore petroleum in the Territory. The Commonwealth Government has committed Australia to emissions targets for 2030 and 2050 and is undertaking reforms to the Safeguard Mechanism and is reviewing the integrity of the Australian carbon credit units.
4.47
DEPWS representative Mr Paul Purdon, the Executive Director of Environmental Assessment and Policy, later added:
The Northern Territory government has been pretty clear that it's not paying for the cost of offsetting these emissions [resulting from the domestic consumption of Beetaloo gas that occurs outside the NT]. That's not the government's responsibility. The government is setting the regulatory and policy framework to implement 9.8, and the cost of managing emissions—whether it's avoiding, mitigating or offsetting—will rest with the industry itself.
4.48
The committee notes that Pepper Inquiry Recommendation 9.8 has not yet been fully implemented, although this had been expected to occur by the end of 2022.
Commonwealth actions on Recommendation 9.8
4.49
The Bilateral Agreement executed by the Australian and NT Governments in April 2022 explicitly reaffirmed:
The Commonwealth will work with the Territory on its commitment to seek to ensure there is no net increase in greenhouse gas emissions in Australia associated with the production of gas in the Territory.
This will be achieved through the use of appropriate technologies and policies to support industry to avoid, mitigate or offset emissions produced in Australia from gas produced in the Beetaloo Sub-basin, as well as from existing gas production facilities in the Territory in line with commitments in the [Pepper Inquiry] and where the Parties have jurisdiction to facilitate these outcomes.
4.50
In answers to questions on notice, the former Department of Industry, Science, Energy and Resources (DISER) provided examples of some actions already taken by the Australian Government to support the NT Government. These included:
a. Investing $40.4 million to increase participation in the Emissions Reduction Fund (ERF)…and the supply of Australian Carbon Credit Units [ACCUs], by increasing the number and types of activities recognised under the ERF;
b. Finalising the development of a carbon capture and storage method, which will encourage investment in projects that reduce fugitive emissions from natural gas production; and
c. Prioritising the development of a new and updated savanna fire management method, which will support land managers in the NT to undertake activities that reduce the frequency and extent of late dry season fires, thereby reducing carbon emissions.
Stakeholders’ view on actions
4.51
Submitters and witnesses commented on the actions identified by governments and proponents to satisfy Recommendation 9.8. In general, they voiced concerns about whether those actions would be capable of offsetting the high levels of predicted GHG emissions from the Beetaloo and whether the cost associated with these reductions or offsets would be economically viable.
4.52
Dr Kirsty Howey, Co-Director of the Environment Centre of the NT Inc (ECNT) stated:
The Pepper inquiry said that the scale of the carbon emissions to be generated by fracking the Beetaloo is gargantuan by most standards, and that therefore there are limits to what could be achieved within the Northern Territory itself as a jurisdiction in terms of offsets… Thus there would need to be offsets achieved elsewhere in Australia. That can be achieved by simply purchasing those offsets.
4.53
RepuTex, a leading carbon market specialist, published a detailed analysis of the NT’s gas expansion plans. It estimated production of up to 1.4 billion tonnes of GHG emissions over the first 20 years, more than 2.5 times Australia’s total annual emissions. Based on this estimate, RepuTex forecast that the cost of offsetting these emissions could reach $22 billion.
4.54
By comparison, over five years, the former Australian Government’s primary abatement program, the ERF, has contracted approximately 200 million tonnes of abatement from the 11 auctions conducted between April 2015 and September 2020. The overall cost to taxpayers has been $2.4 billion.
4.55
Arnhem Land Fire Abatement (Northern Territory) Ltd (ALFA) is an Aboriginal‑owned carbon business that operates five eligible offsets projects which generate ACCUs through an approved methodology determination (the savanna fire management method).
4.56
ALFA’s Chief Executive Officer, Dr Jennifer Ansell, emphasised that GHG emissions should be avoided, mitigated then offset, as per the decision-making hierarchy in the EP Act and particularly in relation to the gas industry in the Beetaloo:
…offsets work only in the context of strong efforts to avoid and reduce emissions, and offsets shouldn't be used to enable a significant increase in emissions from new developments of the scale which is estimated from the Beetaloo basin. And, as a large producer of [ACCUs], ALFA has serious concerns about the ability of the Northern Territory and Australian governments to deliver on their commitment to uphold [Pepper Inquiry Recommendation 9.8]…given the scale of the offsets that would be required to be purchased and surrendered.
4.57
Dr Ansell continued:
Looking at the Pepper inquiry, the most conservative annual emissions estimates for the Beetaloo basin are in the range of 26½ to 38 million tonnes of carbon dioxide equivalents per year. To put that in perspective, annual production of [ACCUs] is 16.5 million tonnes. So, we're talking about an additional quantity that exceeds current offset productions.
4.58
In February 2023, the CSIRO published its report, conducted as a GISERA collaboration, titled ‘Mitigation and Offsets of Australian Life Cycle Greenhouse Gas Emissions of Onshore Shale Gas in the Northern Territory’. This research assessed options to mitigate and offset GHG emissions associated with potential production and Australian consumption of gas extracted from the Beetaloo. These included ‘mitigation activities during production, potential carbon capture and storage based out of Darwin, savannah fire management and other land-based offsets.’ The CSIRO reported:
Four scenarios considered production of 365 PJ/year and one scenario of 1,130 PJ/year [similar to the Pepper Inquiry], with a variety of end use cases for the shale gas. The estimated annual emissions associated with these scenarios range from 6.6 million tonnes (Mt) to 33 Mt CO₂e/year…
[F]or the lower impact scenarios (365 PJ/year production) the majority of GHG emissions could be mitigated or offset with options available in Australia. The higher impact scenario (1,130 PJ/year production) would require international offsets in addition to mitigation and offsets within Australia.
Committee view
4.59
There are several assessments of the potential amount of lifecycle GHG emissions from the development of the Beetaloo resource. These range from 6.6 million tonnes per annum at the lower end, to hundreds of millions of tonnes per annum at the upper end.
4.60
The committee notes that, without the effective implementation of Pepper Inquiry Recommendation 9.8, Australia’s GHG emissions could increase by 4.5 to 6.6 per cent based on that inquiry’s estimate of lifecycle emissions of between 26.5 and 38.9 million tonnes per annum.
4.61
The committee further notes the importance of the Pepper Inquiry Recommendation 9.8, particularly in the context of the recent debate on the Safeguard Mechanism (discussed below).
4.62
Based on the NT Government’s information to the inquiry, the committee understands that the Territory has partially completed implementation of Pepper Inquiry Recommendation 9.8. As discussed earlier, the NT Government has committed to full implementation of the recommendation prior to shale gas development in the Beetaloo.
4.63
The committee understands that the Pepper Inquiry and the NT Government anticipated that the Australian Government would have a role in the offsetting of lifecycle GHG emissions produced in the Beetaloo, specifically in respect of Scope 3 emissions. The committee notes that, until recently, this was not a view shared by the Australian Government (see ‘Safeguard Mechanism reforms’ below). As discussed, the recent parliamentary debate on the safeguard mechanism has clarified the ministerial council mechanism by which governments will address the requirement to not increase lifecycle emissions.
Safeguard Mechanism reforms
4.64
On 30 November 2022, the Albanese Government introduced the Safeguard Mechanism (Crediting) Amendment Bill 2022 (the Safeguard Bill) into the Parliament. This bill is one component of the broader ‘Safeguard Mechanism’ reform package, which in turn is part of the government’s whole‑of-economy plan to meet legislated emissions reduction targets and Australia’s Nationally Determined Contribution under the Paris Agreement (see Chapter 3).
4.65
On 30 March 2023, the Safeguard Bill passed both Houses of Parliament. The reformed Safeguard Mechanism requires Australia’s 215 largest GHG emitters—those with emissions of over 100 000 tCO₂‑e annually, including large onshore gas producers such as Santos, Empire Energy and Tamboran—to gradually reduce their facilities’ emissions. This will reduce large facility emissions at source, through trading reductions made by other industrial facilities or by purchasing carbon offsets.
4.66
In addition, safeguard facilities will deliver a proportional share of the national 43 per cent by 2030 emissions reduction target. According to the Department of Climate Change, Energy, the Environment and Water (DCCEEW):
…net emissions covered by the Safeguard [will] fall from a projected 143 million tonnes in 2022-23 before the reforms start [in July 2023] to no more than 100 million tonnes by 2030… The reformed Safeguard Mechanism is expected to deliver [on aggregate] an estimated 205 million tonnes of abatement by the end of the decade.
4.67
When announcing the agreement on the broader safeguard package, the Minister for Climate Change and Energy, the Hon Chris Bowen MP, stated:
Australia is one step closer to achieving net zero by 2050… [T]he Albanese Government has secured additional Parliamentary support for the Safeguard Mechanism reforms… These are overdue, sensible reforms which ensure Australia’s largest emitters are competitive in a decarbonising global economy and make a fair contribution towards the nation’s emissions reductions task.
4.68
As part of the reforms, new facilities will need to meet international best practice to ensure GHG emissions decline over time. New gas fields supplying existing liquefied natural gas facilities will be treated as new facilities. For these fields’ reservoir CO₂ emissions, best practice is zero given the existence of low-CO₂ fields and opportunities for carbon capture and storage.
4.69
The agreement on the Safeguard Mechanism reforms included specific arrangements in relation to the Beetaloo:
…all new gas entrants in the basin will be required to have net zero scope 1 emissions from entry, consistent with the then Commonwealth Government’s April 2022 commitment to “work with the [Northern] Territory to support its implementation of recommendation 9.8 of the [Hydraulic Fracturing Inquiry] using available technology and policies”.
4.70
During the second reading debate in the Senate, the Minister for Finance reiterated the Australian Government’s commitment to ‘help deliver the commitment to scope 1 emissions’ and:
…given the cross-jurisdictional nature of scope 2 and 3 emissions, the government will refer scope 2 and 3 emissions to the Energy and Climate Change Ministerial Council.
4.71
The committee notes another element of the Safeguard Mechanism reforms was to increase transparency by improving the reporting of methane emissions to the minister and the public.
Committee view
4.72
The committee acknowledges the significant progress made by the Australian Parliament to reduce GHG emissions from large industrial facilities through the implementation of the Safeguard Mechanism reforms. The committee welcomes the government’s commitment to assist with the offsetting of Scope 1 emissions in the Beetaloo, by requiring ‘new entrants’ to have net zero Scope 1 emissions from commencement.
4.73
The committee recommends that the Australian Government:
strongly assist the Northern Territory Government to create a regulatory framework that will enable the Territory to fully implement Recommendation 9.8 of the Pepper Inquiry prior to shale gas production in the Beetaloo; and
ensure that supporting frameworks and materials are developed expeditiously and made available to all ‘new entrants’ in the Beetaloo, to support the net zero Scope 1 emissions requirement.
4.74
The committee notes that Scope 2 and Scope 3 emissions, the latter of which comprises the bulk of GHG emissions, would be referred to the Energy and Climate Change Ministerial Council. The committee notes the complexity of the task facing the council and urges all members to work collaboratively to ensure there is no increase in lifecycle emissions from the development of the Beetaloo, in accordance with Recommendation 9.8 of the Pepper Inquiry.
4.75
The committee recommends that the Australian Government, in collaboration with other members of the Energy and Climate Change Ministerial Council, prioritise developing a national approach to offsetting all Scope 2 and Scope 3 greenhouse gas emissions from shale gas production in the Beetaloo.
The NT Climate Change Response
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In July 2020, the NT Government released the Northern Territory Climate Change Response: Towards 2050 (the NT Climate Change Response). This document sets out a broad policy framework that aims to respond proactively to the risks and opportunities of climate change, while maximising the economic, social and environmental well-being of Territorians.
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A key objective of the NT Climate Change Response is ‘to progressively reduce net greenhouse gas emissions in the Territory, with the goal of achieving net zero emissions by 2050’. The response explains:
The objective of net zero emissions will be achieved by strategies and actions aimed at reducing emissions, investing in renewable energy and supporting opportunities for carbon sequestration and storage. The Territory Government will provide a policy and regulatory environment that incentivises and facilitates business and industry investment in reducing emissions. The Territory Government is also committed to reducing emissions and transition to more sustainable energy sources.
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As part of the NT Climate Change Response, the NT Government established the Northern Territory Offsets Framework (the Offsets Framework). This framework aims to support the use of offsets under the EP Act and comprises several related but separate policies and guidelines. Two of these policies are the Greenhouse Gas Emissions Offsets Policy (Offsets Policy) and the Greenhouse Gas Emissions Management for New and Expanding Large Emitters policy (the Large Emitters Policy).
Greenhouse Gas Emissions Offsets Policy
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According to the NT Government, GHG emissions offsets might be required as ‘a last resort to compensate for emissions from a development proposal that cannot be avoided or mitigated’. The Offsets Policy provides for the consistent and transparent use of GHG offsets under the EP Act, with a view to:
transitioning the Territory to a low carbon economy; and
supporting achievement of the Territory’s net zero emissions target.
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The NT Government approved the Offsets Policy in August 2022. Under the policy, emissions offsets must make a ‘material and meaningful contribution’ towards achieving the Territory’s target of net zero GHG by 2050. Offsets must also contribute to any additional or interim targets established by the government to achieve the 2050 target. Additionally, offsets might be required under the Commonwealth’s Safeguard Mechanism.
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In the 46th Parliament, several stakeholders expressed concerns about the draft Offsets Policy, which distinguished between ‘direct emissions offsets’ and ‘indirect emissions offsets’. As explained in the draft document released for public consultation:
Direct emissions offsets are offsets delivered through activities that reduce, remove or capture emissions. The amount of emissions abatement achieved is represented by emissions offset units. Direct emissions offsets must be delivered using emissions offset units that are recognised as legitimate by the Australian Government. This includes Australian Carbon Credit Units administered and regulated by Commonwealth legislation, or eligible offset units listed under Commonwealth Climate Active Neutral Standards (alternative emissions offset units). Under these frameworks, one emissions offset unit represents the abatement of one tCO₂-e.
Indirect emissions offsets are offsets delivered by contributing funding towards research and development (R&D) that will support emissions abatement in the Territory and contribute to the 2050 net zero target. For example, this could include research that results in new carbon abatement methodologies that apply in the Territory context.
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The Australia Institute commented that this aspect of the draft Offsets Policy is ‘entirely novel, not done elsewhere and opens the NT Government to criticism of the lengths it will go to accommodate the gas industry’. The Wilderness Society agreed, adding in respect of ‘indirect emissions offsets’, that ‘decision-makers only need to have “reasonable confidence” that the new technology or practice will actually work’.
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The committee notes that ‘indirect emissions offsets’ have been removed from the final version of the Offsets Policy.
GHG Management for New and Expanding Large Emitters Policy
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In September 2021, the Large Emitters Policy came into operation. This policy outlines the NT Government’s emissions management and abatement expectations for activity proponents:
[The policy] includes emissions production thresholds that establish when these NT Government expectations apply to a development proposal. Where a development exceeds the emissions thresholds, and requires assessment under the EP Act or Petroleum (Environment) Regulations 2016, the Large Emitters Policy requires proponents to provide a Greenhouse Gas Abatement Plan (a GGAP) with the development proposal. The GGAP must outline how the proponent will use avoidance, mitigation, and then offsets, to achieve net zero emissions by 2050, or justify why an alternative target is appropriate.
Application and scope of the Large Emitters Policy
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The Large Emitters Policy applies to new projects and the expansion of existing projects that are considered to be ‘large emitters’. ‘Large emitters’ are defined as projects that meet or exceed emissions thresholds. The industrial project threshold is 100 000 tonnes carbon dioxide equivalent (tCO₂-e) (Scope 1) in any financial year over the life cycle of a project.
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In the 46th Parliament, submitters and witnesses expressed concerns about the scope and application of the Large Emitters Policy. For example, the Arid Lands Environment Centre (ALEC) submitted that the industrial project threshold fails to fully implement Pepper Inquiry Recommendation 9.8, as it does not encompass all lifecycle GHG emission, only Scope 1 GHG emissions.
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The ECNT and Dr Timothy Neale queried whether the policy would require gas companies to offset their emissions, due to the high industrial project threshold, and, like the ALEC, commented on the ‘arbitrary’ exclusion of Scope 2 and 3 GHG emissions:
The industry that will have the greatest Scope 3 emissions is, of course, the gas industry: it extracts gas for the primary purpose of that gas being combusted by consumers, releasing greenhouse gases. While it may be useful for accounting processes to separate emissions into Scope 1, Scope 2 and Scope 3, these definitions do not reflect the actual pollution caused by fossil fuel extraction projects. Further, the Pepper Inquiry found that the residual lifecycle emissions from fracked gas (essentially Scope 3 emissions) posed unacceptably high risks to the environment, recommending that these risks could be reduced by fully offsetting the lifecycle emissions from fracked gas.
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The Indigenous Carbon Industry Network submitted that the Large Emitters Policy has ‘extremely high caps on greenhouse gas pollution’, adding:
We are very concerned that this is already generating perverse outcomes… It appears that the large emitters policy essentially incentivises greenhouse gas pollution by unintentionally giving false licence to new developments below the caps (up to 100,000t)…with little regard for cumulative impacts. These caps render the [policy] mostly meaningless and limit its application unless it is for a single, extremely large development application.
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The Large Emitters Policy applies more broadly across the Northern Territory, rather than specifically to the Beetaloo resource. The committee understands that the Large Emitters Policy does not capture all lifecycle GHG emissions, as recommended by the Pepper Inquiry, nor does it apply to all emitters. Noting earlier evidence concerning the difficulty and expense involved in developing the Beetaloo resource and getting it to market, the committee is of the view that only ‘large emitters’ would be operating in the Beetaloo and should therefore be subject to the policy.
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The committee recommends that the Northern Territory Government reconsider the industrial project threshold set out in the Greenhouse Gas Emissions Management for New and Expanding Large Emitters policy, to ensure that the policy captures large emitters which establish shale gas production facilities in the Beetaloo.