Chapter 2Current and proposed uses
Introduction
2.1This chapter outlines the current and proposed uses of the Middle Arm Industrial Precinct. The chapter sets out:
current facilities located adjacent to the site;
the purpose of the proposed development; and
the intended uses for the proposed development.
2.2The chapter then explores key concerns raised by some submitters, including the development’s perceived focus on gas processing, its commercial viability, adequacy of public information and consultation, and the proposed use of carbon capture and storage technology and emissions offsets.
Description of the proposed new site
2.3The proposed precinct is a 1500-hectare area located on the Middle Arm Peninsula of Darwin Harbour. The proposed development area has limited access and most of the existing marine infrastructure is privately owned. As such, the precinct would require development of rail access, a marine terminal, a shared offloading facility, andproduce and feedstock corridors. This would require land clearing and dredging of the harbour.
2.4The terrestrial development area for the proposed precinct is a biodiversity hotspot that contains unique savanna and rainforest. Likewise, the precinct’s marine development region would impact pristine mangroves that support a highly specialised ecosystem. There are threatened terrestrial and marine species which are dependent on the health of these ecosystems. Concerns regarding environmental impacts are canvassed in Chapter 4.
Current facilities adjacent to the proposed Middle Arm site
2.5Part of the Middle Arm Peninsula currently hosts processing facilities for offshore gas, including two of the nation’s largest Liquefied Natural Gas (LNG) processing facilities.
2.6INPEX Australia operates the Ichthys LNG project, which is located on Bladin Point and is a joint venture between INPEX, TotalEnergies and several gas and electric companies. Gas was first produced from Ichthys in 2018. Gas and condensate from the Ichthys Field is transported to the onshore facilities at Middle Arm for processing. Most condensate is shipped directly to global markets. INPEX does not currently have any announced investments in the proposed Middle Arm Industrial Precinct. However, it is leading the development of a carbon capture and storage (CCS) project which may benefit from the operation of the proposed precinct. This is discussed later in this chapter.
2.7Santos operates the Darwin LNG (DLNG) facility, which is located on Wickham Point. It was commissioned in 2006 and is planned for refurbishment as part of the proposed Barossa Gas Project—an offshore gas and condensate project. The Barossa Gas Project ‘proposes to provide a new source of gas to the existing [DLNG] facility’. Santos is not directly involved in the proposed Middle Arm Industrial Precinct, however, like INPEX, Santos is involved with the development of a separate CCS facility, also discussed later in this chapter, and may benefit from the common user infrastructure proposed to be funded by the federal government.
Purpose of the proposed development of the precinct
2.8The Northern Territory (NT) Government’s stated aim for the proposed development of the Middle Arm Industrial Precinct is to ‘capitalise on the Territory’s access to natural gas and renewable energies to grow manufacturing and value-adding jobs while supporting economic growth’. Its planned focus would be on low emissions hydrocarbons, green hydrogen, advanced manufacturing, CCS and minerals processing.
2.9In its Stage 2 submission to Infrastructure Australia (in which the NT Government set out its case for Commonwealth equity funding to support the precinct’s development), the NT Government described the opportunity for the NT to play ‘a redefined role’ in Northern Australia as a resource export hub, highlighting the contribution of minerals and energy resources to the Australian economy (around 8 per cent of GDP and 75per cent of Australian exports).According to the NT Government, the proposed precinct would support the delivery of the NTGovernment’s goal of creating ‘a $40 billion economy by 2030, while meeting commitments to net zero emissions by 2050’.
2.10Indeed, the Chief Minister of the NT, the Hon Eva Lawler MLA, told the inquiry that the proposed precinct would facilitate a reduced reliance by the NT Government on Commonwealth funding:
It truly does mean a change of direction for the NT around having our own source revenue. In the NT we get GST, as most people understand. I think about 42 per cent of our income each year is from GST. We have a large percentage that's tied revenue. It's tied to education or to a national housing agreement that we have. We have very little of our own source revenue...
Projects like Middle Arm provide the large increase in population that we need. An increasing population means more GST. It means ongoing, secure, good jobs for Territorians—about 20,000 [direct and indirect] of those—let alone the revenue that'll come in for the NT.
2.11Since 2020, the purpose of the proposed development has changed to highlight elements of environmental sustainability rather than its earlier focus on growing and supporting the gas industry. In evidence to the inquiry, the NTGovernment described the proposed precinct as ‘a future-focused eco-industrial precinct that provides certainty for investment and safeguards environmental, cultural and social values’. According to the NT Government, central to the planning of the site is the protection of the environment and human health.
2.12Similarly, the Australian Energy Producers (AEP) emphasised the sustainability aspect of the proposed precinct, arguing that ‘while gas will be a key industry in the precinct, it is expected to host a wide range of low-emission industries that will support economic diversification and growth in the Territory’.
2.13Natural gas, however, remains central to arguments in favour of the precinct. According to one of the proponents of the proposed development, Tamboran Resources (Tamboran), it is intended that shale gas from the Beetaloo will be processed at and exported from the proposed Middle Arm Industrial Precinct.
2.14Indeed, the Australia Institute submitted that, at full capacity, this proposed LNG facility would be the largest in Australia, exporting up to 20million tonnes per annum (Mtpa) from an initial capacity of 6.6 Mtpa.
2.15Evidence provided by Climate Analytics noted that the NT Government’s Stage 2 submission committed 75 per cent of the Middle Arm Industrial Precinct land area to fossil fuel related facilities.
2.16Although Tamboran emphasised how its development would contribute to meeting domestic energy demand, the Department of Industry, Science and Resources informed the committee that the proposed precinct had not been considered as part of Australia’s Future Gas Strategy and that the Beetaloo and the Barossa gas projects could proceed without Middle Arm.
2.17As mentioned in Chapter 1, the August 2020 Stage 1 submission made by the NT Government to Infrastructure Australia flagged petrochemical processing as a potential use of the proposed development:
The potential recovery of natural gas liquids from the onshore Beetaloo Sub-basin project means there is also an opportunity for future production of ethane-based products such as plastics, paints, polymers and rubbers as well as the production of liquid fuels to help address Australia’s energy security... Downstream gas processing in Darwin will create a new gas demand centre and open up opportunities for related industrial development, employment, education and training.
2.18When questioned by the committee, Chief Minister Lawler did not rule out the possibility of petrochemical processing at the proposed Middle Arm precinct. Concerns raised by some submitters regarding potential petrochemical processing at the proposed Middle Arm Industrial Precinct are canvassed later in this chapter.
Known proponents and their intended uses for the site
2.19Current proponents for the site have plans for facilities relating to LNG export, green hydrogen production and export, and critical minerals-led manufacturing.
2.20Five proponents, estimated to occupy around 80 per cent of the Middle Arm Industrial Precinct, were first issued ‘not to deal’ (exclusivity) commitments by the NT Government in 2023. These commitments mean that preferred sites in Middle Arm will be set aside for up to 12 months to provide each proponent certainty to continue developing their proposals.
2.21According to the NT Government, when the initial ‘not to deal’ commitments approach their expiration, an assessment will be undertaken of each proponent's progress. If the commitments lapse without extension, the land can be reallocated to new proponents. However, if a proponent demonstrates significant progress and requires more time to reach a final investment decision, extensions may be granted.
2.22The five proponents and associated facilities are:
Tamboran Resources—proposed new LNG export facility which will be ‘a lower CO2 emissions’ facility. Tamboran is also conducting shale gas exploration activities in the Beetaloo Basin. Tamboran was allocated a large proportion of the overall proposed development site (170 hectares) and is expected to be the main beneficiary of the Commonwealth’s equity funding into shared infrastructure (discussed later in this chapter). Concerns raised by some inquiry participants about government support of the fossil fuel industry are explored later in this chapter and in Chapter 3.
TE H2—proposed green hydrogen production facility using solar energy, which would be capable of producing more than 80 000 tonnes of renewables-based hydrogen per year for domestic and export applications. TE H2 told the committee that it has ‘experienced ongoing delays in milestones’ associated with progressing its project on the site and that ‘a failure to secure extensions’ to the not to deal commitment or have binding land security ‘will result in the development of Darwin H2 Hub be[ing] put on hold’.
Tivan—proposed critical minerals processing facility to produce vanadium oxides, with titanium dioxide and iron oxide also produced as by-products. Tivan is also working to facilitate an industrialisation pathway for vanadium redox flow batteries. Tivan advised that it is waiting for the publication of the Strategic Environmental Assessment as well as the findings of the committee ‘before investing further significant resources in these projects’.
Avenira—critical minerals facility for the manufacturing of lithium-ferro-phosphate cathode, which will manufacture pre cursor battery cathode materials from critical minerals, including phosphate sourced from the Wonarah Project in the NT. Avenira did not respond to the committee’s request for information regarding its not to deal commitment.
Fortescue Future Industries (FFI)—green hydrogen and green ammonia production and export facilities. FFI is a ‘global green energy company’. FFI’s not to deal commitment lapsed in May 2024, ending its involvement in the precinct.
2.23On 29 February 2024, Tamboran’s not to deal commitment was extended to 31December 2024. TE H2’s agreement is due to expire on 30 August 2024; however, it advised that the NT Government stated that it ‘will continue to extend the arrangement over the coming months’ and that TE H2 had requested an extension to 31 December 2024.
2.24In March 2024, Tivan's commitment was extended for a further 12 months.
2.25Some submitters raised concerns that most of these industries are either linked to the production of gas and/or are involved in petrochemical production or minerals processing, which are among the highest polluting industries in the world. Concerns raised by some inquiry participants about the potential pollution and climate impacts of the proposed development are discussed in Chapter 4.
2.26TE H2’s development is aiming to produce renewable hydrogen that would ‘decarbonise hard-to abate and energy-intensive sectors…such as refining, chemicals or the energy sector and to help our industry partners achieve Net Zero by 2050’. TE H2 supported ‘the NT Government’s ambition to develop the…precinct which facilitates new investments in the clean energy sector’ advising that ‘[i]t has led…ultimately to the creation of the Darwin H2 Hub and our ongoing activities today’.
2.27The NT Government advised that the CCS hub is ‘central to emissions reduction technologies’ at the proposed Middle Arm Industrial Precinct and ‘will enable existing infrastructure and LNG production to operate and grow with a significantly lower carbon footprint’. Concerns about the use of CCS technology are discussed later in this chapter.
Additional planning stage uses
2.28The remaining industries, which would presumably cover the residual 20percent of the proposed precinct, were unknown at the time of writing. However, other uses were identified in the planning stage which were not included in the announced not to deal commitments. These include:
a CCS hub (discussed below);
an ammonia export plant, produced with hydrogen, zinc oxide and nitrogen inputs and ammonia and zinc sulphide outputs. The resulting ammonia would be a urea feedstock;
blue hydrogen, produced with natural gas and water inputs and hydrogen and carbon dioxide outputs. The resulting blue hydrogen would be a feedstock to methanol and ammonia export plants and the carbon dioxide would be captured and sequestered;
green hydrogen, produced with renewable energy and water inputs and hydrogen output. As with blue hydrogen, resulting green hydrogen would be a feedstock to methanol and ammonia export plants;
ethylene (ethane cracker) plant, with ethane and propane inputs and an ethylene output;
a methanol export plant, with hydrogen, carbon dioxide or synthesis gas inputs and methanol and water outputs;
a condensate refinery, produced with condensate, water, gas and renewable inputs and gasoline, kerosene, diesel, marine and heavy outputs;
a phosphoric acid production facility, with phosphate rock and sulphuric acid inputs and phosphoric acid and calcium sulphate (gypsum) outputs. The facility is linked to the ammonia export plant to produce fertiliser products;
urea, produced with ammonia and carbon dioxide inputs and urea outputs, with feedstock from the ammonia export plant and CCS hub; and
lithium hydroxide, produced with lithium carbonate and calcium hydroxide inputs and lithium hydroxide outputs.
2.29Renewable energy to enable Middle Arm facilities to process and manufacture their outputs would be provided through SunCable, TotalEnergies (co-owner of INPEX) and Larrakia Energy. SunCable’s AAPowerLink is ‘a key enabler of the Precinct’ and proposes to deliver between 900 and 3900 MW of renewable electricity to Darwin. SunCable recommended that the Commonwealth’s funding be expanded ‘to cover the electricial network infrastructure to supply the Precinct with renewable energy’. SunCable highlighted its role in supplying electricity to the Precinct’s proposed facilities, including green hydrogen and ammonia and critical minerals processing required for a transition to low emissions, among others.
2.30SunCable set out that it anticipates that its project would be ‘one of the largest in the world’ and would enable industrial scale electricity to be provided to Darwin and Singapore customers, and that, relating to the Middle Arm Precinct:
We anticipate providing about four gigawatts worth of supply to customers in Middle Arm. That will underpin a really significant wave of green industrial development in Darwin to support industries such as hydrogen, hydrogen derivatives and critical green mineral processing.
2.31Larrakia Energy, a joint venture between Larrakia Development Corporation and Korean power company KOMIPO, plans to build a 300MW solar farm on Larrakia Country near Bladin Point, where the INPEX Ichthys LNG facility is located. According to the proponents, the solar farm would be the largest in the NT, and Australia’s largest Aboriginal-owned solar farm.
2.32TotalEnergies was noted to be considering plans to operate their own solar farm to provide electricity to the INPEX plant.
Plans for common user infrastructure
2.33In addition to individual proponent’s projects, common user infrastructure has also been flagged for development at Middle Arm.
2.34According to the Department of Infrastructure, Transport, Regional Development, Communications and the Arts (DITRDCA), Commonwealth equity funding would include $1.5 billion to support common user marine infrastructure (such as wharves, modular offloading facilities and dredging), and another $440 million to support ‘Regional Logistics Hubs’. Funding for the precinct is examined in Chapter 3 of this report.
2.35The committee heard that the proposed common user marine infrastructure would be able to be used by project proponents and third parties (such as existing operators at Middle Arm), however, it is unclear what fee structure might be used until the Stage 3 business case has been evaluated by Infrastructure Australia. According to DITRDCA, the modular offloading facility would be used by Middle Arm proponents (known and future) and charged on a user basis. As mentioned, this is discussed later in this chapter and also canvassed in Chapter 3.
2.36According to Infrastructure NT, the Regional Logistics Hubs ‘will support different modes of transport to improve local supply chains and connection to the national transport network’ by strategically locating ‘terminals, rail sidings, warehousing and other enabling infrastructure along the Darwin-Tarcoola rail line’. It is unclear whether third parties would be able to use the regional logistics hubs, and if so, what fees might be imposed.
Proposed carbon capture and storage hub
2.37A common user CCS hub has also been proposed for the Middle Arm precinct.
2.38‘CCS’ refers to the capturing, transporting, and storing of greenhouse gas emissions in the subsurface with the goal of permanently preventing the release of these gases into the atmosphere. The technology involves capturing carbon dioxide produced by large industrial facilities, compressing it for transportation and then injecting it deep underground—at least 800 metres below the surface, and typically 2 km or more. Carbon storage sites can be located both onshore and offshore.
2.39According to the NT Government, the CCS hub would be the first in the NT, and the NT Government is working with the Commonwealth Scientific and Industrial Research Organisation (CSIRO), the LNG industry, and the Government of Timor-Leste to develop the hub.
2.40The CCS facility at Middle Arm is expected to capture carbon dioxide for transport and storage in the now-depleted Bayu-Undan reservoir in Timor-Leste waters, and later in the saline aquifers of the Bonaparte Basin in Australian waters.
2.41Santos, the operator of the Bayu-Undan offshore gas production facility, is testing the viability of existing Bayu-Undan infrastructure and using the reservoir for CCS. In terms of operational timeframes, Santos advised that:
…CCS is still at a development phase. It hasn't gone to a final investment decision. All of that process does actually involve getting all the required approvals both within Australia and in Timor Leste. But we're not yet at that point. So we will go through that process. The appropriate consultation will be done. It will be a transparent process in compliance with the rules and regulations when we do it.
2.42Separately, INPEX will operate the planned Bonaparte CCS project which it anticipates will reduce the carbon footprint from its existing LNG plant ‘by some 40 per cent’. INPEX flagged that its planned CCS project could also ‘become common user infrastructure for others in the region…[including] the broader Middle Arm precinct’.
2.43According to the NT Government, the CCS hub is estimated to ‘capture at least…90 per cent of LNG plant emissions at source, and have excess capacity to provide storage options for other industries and jurisdictions’. Indeed, Tamboran advised that the CCS hub would be one of the world’s largest CCS facilities.
2.44The CCS facility would manage Scope 1 emissions from the existing LNG industry, with inbuilt capacity to offset Scope 1 emissions to meet emissions reduction obligations under the Safeguard Mechanism. Excess capacity could be used by other precinct industries as needed.
2.45The NT Government advised that the CCS hub is critical to Santos, Shell and INPEX’s ambitions to be at net zero emissions by 2050. Likewise, Santos referred to CCS as a critical technology which requires a significant increase in storage capacity.
2.46While not specifically in relation to the proposed Middle Arm CCS hub, the International Energy Agency (IEA) explained the potential of using a CCS hub model:
The CCS hub model spreads infrastructure costs between emitters and generates economies of scale, allowing smaller emitters and those located far from identified CO2 storage sites to connect to shared infrastructure.
2.47In support of using CCS technology, Santos drew attention to IEA advice which called on policy makers to support the implementation of CCS. Similarly, INPEX argued that there ‘are more than 40 projects underway at the moment…This is a proven technology and it's essential if the world is serious about getting to net-zero by 2050.’
2.48Likewise, the AEP,argued that CCS ‘is a proven technology that has operated internationally for decades’, highlighting that the Intergovernmental Panel on Climate Change found that CCS ‘is key to reaching net-zero emissions by mid-century and mitigating climate change’ and that the IEA had stated that ‘reaching net zero will be “virtually impossible” without it’.
2.49The AEP further argued that Australia should be looking to meet the demands of countries like Japan and Korea, due to a lack of local storage opportunities. The AEP pointed out that Australia has competition from countries like Malaysia and Indonesia which are also developing CO2 storage hubs to provide services to the region.
Concerns raised by some inquiry participants
2.50Some inquiry participants raised various concerns regarding the proposed Middle Arm Industrial Precinct. These concerns, which are discussed below, centred on:
gas processing as the primary purpose of the precinct;
uncertain commercial viability;
lack of public information and consultation;
use of CCS technology; and
use of emissions offsets.
Gas processing as the perceived primary purpose of the precinct
2.51Although the sustainable development elements of the proposed precinct were highlighted by the Australian and NT Governments, some inquiry participants questioned whether the precinct would, in reality, function primarily as a gas processing facility. Some expressed concern that the government’s funding of shared infrastructure would primarily benefit the gas industry.
2.52For example, the Australian Conservation Foundation (ACF), put forward the view that despite being called a ‘sustainable development precinct’, it was evident to them that the site would have a ‘heavy concentration of fossil fuel-based industries’.
2.53The ACF pointed out that, in 2012, the NT Government had outlined its ‘vision for a petrochemicals hub in Darwin Harbour to create a “value add” for the soon to be constructed INPEX facility’. Then, in 2018, the Australian and NT Governments recommended the creation of a Middle Arm industrial hub with the aim of ‘establishing the NT as a world class gas production, manufacturing and services hub’. According to the ACF, the parties agreed to ‘delivery of infrastructure and programs in support of the NT Gas Industry and gas leveraged industries’. The ACF noted that, by the time the project received funding in 2020, it had been renamed to the Middle Arm Sustainable Development Precinct (MASDP).
2.54The Beyond Gas Network argued that this committee ‘should identify the nature of the Middle Arm Industrial Precinct’ as it was concerned that the development was ‘essentially a gas hub’.
2.55Similarly, the Environment Centre NT (ECNT), described the language around sustainability as ‘greenwashing’, arguing that the proposed petrochemical manufacturing on the site would rely on gas ‘as a feedstock for the creation of ammonia, methanol, ethylene, ethane, urea and other gas-based products’. The ECNT noted that the Stage 2 submission to Infrastructure Australia stated that nearly 75 per cent of the site will host gas-based industries.
2.56Some environmental groups and individuals also characterised the information provided about the development by the NT Government and proponents as ‘misleading’.
2.57Indeed, the NT Government’s Stage 2 submission consistently highlighted the role of the precinct as a gas processing hub, including referring to the proposed precinct as a ‘world class gas production, manufacturing and services hub’.
2.58Meanwhile, Parents for Climate Darwin noted broader concerns about the effects of climate change, arguing that the Commonwealth’s funding commitment is essentially ‘a fossil fuel subsidy’. Concerns about government support for the fossil fuel industry are discussed further in Chapter 3.
2.59Concerns raised by some inquiry participants relating to climate change and potential impacts on communities are discussed in Chapter 4.
2.60The Department of Industry, Science & Resources identified that the Middle Arm precinct could support a range of industrial activity in addition to gas, including supporting the development of a critical minerals processing industry in the Northern Territory.
2.61The Department of Industry, Science & Resources stated that Tivan Limited has proposed a critical minerals facility to process minerals from its vanadium, titanium and iron ore project at Mount Peake, 235 kilometres north of Alice Springs. Avenira has proposed manufacturing pre cursor, lithium-ferro-phosphate (LFP) battery cathode materials from critical minerals.
2.62The Department also identified that the development of a critical minerals processing industry would rely on a reliable supply of gas to support high-heat mineral processing at Middle Arm. The Department said that ‘[the] security of gas supply to the Middle Arm Peninsula is essential to sustain industry’.
Uncertain commercial viability of the Middle Arm Industrial Precinct
2.63Several submitters questioned the commercial viability of the precinct’s facilities. For example, the Institute for Energy Economics and Financial Analysis (IEEFA) asserted that the project has ‘multiple flaws’, that its ‘market assumptions are overly optimistic’, and that the plan is ‘misaligned with global efforts to curtail greenhouse gas emissions’.
2.64IEEFA queried whether the project represents a sound investment for Australian taxpayers:
…there are some real risks for taxpayers here, particularly around some of the investment into LNG infrastructure… [this] is potentially an investment that doesn't yield a positive return purely on a financial basis for taxpayers.
2.65IEEFA pointed out that no gas reserves have been identified in the Beetaloo, that the three companies exploring for gas require significant government assistance, and that the financial position of at least one of them is in doubt:
…there are no proven and probable (2P) reserves in the [Beetaloo] basin, despite several decades of exploration and close to a billion dollars in expenditure (as well as government grants). And the past decade has seen several major gas companies walk away from the Beetaloo, including Origin Energy. There are currently only three junior explorers – Tamboran Resources, Empire Energy and Falcon Oil and Gas – actively focused on the Beetaloo. These companies are likely to require significant new funding to develop their interests in the Beetaloo, funding for which is not assured. Further, Tamboran Resources’ recent disclosures note that recurring losses from its operations, as well as negative cashflows and its net losses, raise substantial doubt about its ability to continue as a going concern.
2.66IEEFA argued that the plan to extract gas from the Beetaloo basin through fracking, to be processed at Middle Arm, ‘has proven a poor investment elsewhere’, and that the ‘robust LNG export market the Middle Arm plan anticipates is unlikely to materialise’ as export markets are saturated with LNG supply from Qatar.
2.67IEEFA compared some of the relative costs of LNG exports from Qatar with proposed LNG exports from Middle Arm:
…Qatar strategy at the moment [is] to expand their LNG infrastructure… By far, they are the world's lowest cost LNG producer… [Australia’s] future gas strategy estimates that Beetaloo gas is about $6.80 a gigajoule. You need to get that to Darwin, and the existing pipeline is probably 10 per cent of the capacity that you would need to feed Tamboran's LNG project. If we take, say, the Northern Gas Pipeline as a proxy—that pipeline is a lot smaller—it adds $1.75 a gigajoule, which means that it takes $8.50-ish just to get that gas out of the ground and into Darwin, and that doesn't include building the LNG facilities…that's around US$5.50 per MMBtu [Metric Million British Thermal Unit which is approximately 1 gigajoule]. Qatar has a long-run marginal cost into Asia of about four dollars [per MMBtu delivered]…
LNG demand is shifting. In our region it's shifting from mature markets to more price-sensitive markets. The only advantage we have, in terms of Tamboran's intel-energy project, is the shipping advantage. I checked the shipping rates a few weeks ago relative to Qatar, Dampier or Gladstone to Japan versus Qatar to Japan, and there was a 30c difference. The simple fact is that, when you look at the numbers, Tamboran's proposed project will have a delivered cost somewhere north of $10 per MMBtu; Qatar's is four dollars delivered. That is their long-run marginal cost… The simple fact is that there are external factors, which means that [Tamboran’s] project simply does not stack up.
2.68IEEFA explained that ‘in practice, Beetaloo gas developers are likely to require high prices to recoup their gas development costs…[and] this will in turn undermine the competitiveness of the Middle Arm precinct’.
2.69IEEFA submitted that the proposed Middle Arm development ‘creates financial risks for government and other industries’ and that there is no strong rationale for government investment in the precinct. According to IEEFA, were the project to proceed, then ‘it would be more appropriate to centre the plan on renewable hydrogen from the outset’.
2.70IEEFA further questioned whether it might be prudent to require CCS operators to hold liability for their projects for longer periods of time:
This is because taxpayers risk ongoing liability for any failures or mediation of CCS project infrastructure… when CCS projects like the Gorgon facility in Western Australia close, liability for any ongoing failures or remediation works is generally expected to be transferred to taxpayers after a period of 15 years. As a comparison, the US has a 50-year window for companies to hold responsibility for any adverse scenarios that might arise.
2.71In a similar vein, Tivan, one of the precinct’s four proponents, questioned ‘why a third LNG facility would be needed at Middle Arm [as] it does not look as though it's commercially viable’. Tivan questioned why existing facilities at Middle Arm were not being used instead:
…you've got two massive pieces of infrastructure there already… why is it that the gas from Beetaloo, if it is deemed to be important to national security, can't be brought in as off-take to the existing facilities?
2.72Likewise, Springmount Advisory submitted that, due to its isolation by road from population centres, need for dredging, and lack of access and loading facilities, the proposed precinct is ‘a suboptimal site in virtually all ways for industry development and supply chain diversification in comparison to the East Arm precinct which is the natural location for the expansion of industry’.
2.73The decision of the NT Government to focus on the Middle Arm Peninsula rather than East Arm or other locations in the NT was discussed in Chapter 1.
Availability of public information and consultation
2.74Several inquiry participants criticised the lack of public information about the proposed precinct. For example, the ECNT argued that the public and media have ‘been forced to perform the role of watchdog, engaging in a detective hunt to ascertain the true nature of the developments proposed at Middle Arm and their likely impacts’.
2.75While some information about the precinct has been released by the NTGovernment following Freedom of Information requests and subsequently referred to in media articles, this information was not publicly available until published by this committee in April 2024. This included the Stage 2 submission from the NT Government to Infrastructure Australia, which was provided to the committee on request.
2.76Additionally, several inquiry participants criticised the NT Government for a lack of genuine consultation with stakeholders. Most concerns related to consultation with First Nations people which is canvassed in Chapter 5 of this report, while others, such as the Australian Education Union NT, argued that the NT community more broadly had ‘not received adequate consultation to date’.
Use of CCS technology
2.77Several inquiry participants expressed criticism over the proposed use of CCS technology at Middle Arm, arguing there are several issues associated with CCS projects, including underperformance, cost-effectiveness, and human health and safety risks.
Underperformance
2.78The Australia Institute referred to the technology’s ‘long history of failure’, arguing that CCS is ‘widely considered greenwashing to enable new fossil projects that would otherwise be unacceptable’. While not provided as evidence to this inquiry, the IEA stated in its Net Zero Roadmap that ‘the history of CCS has largely been one of underperformance’ and ‘unmet expectations’.
2.79Indeed, in its submission to this inquiry, the IEEFA noted that the gas portion of the proposed development would rely on CCS to offset emissions arising from the development. However, IEEFA gave evidence that it had ‘reviewed 13 flagship CCS projects globally and found that three projects failed or were suspended, five projects materially underperformed their targets, and only three projects were considered successful’. IEEFA had ‘investigated two of the successful projects in depth, and found that they faced unexpected geological challenges… [which calls] into question the financial case for Tamboran Resources’ proposed NTLNG facility’.
2.80On a similar note, the Centre for International Environmental Law (CIEL) explained that the majority of CCS projects operating today were developed to make use of CO2 ‘to pump [more] oil out of the ground’ rather than to prevent pollution. The CIEL submitted that offshore CCS technology is not widely used, with two projects off the coast of Norway ‘often cited as proof of concept’, but which had experienced significant problems.
2.81The CIEL further questioned the proposed Middle Arm CCS hub’s ambitious 90per cent capture target, arguing that this has rarely been achieved in other projects. The CIEL highlighted that the IEA had downgraded its estimates of CCS’s contribution to net zero ‘by around 40 per cent compared to the agency’s 2021 roadmap scenario’.
2.82The CIEL argued that:
Given the repeated failure of CCS projects to deliver promised capture rates, and the additional risks and impacts they entail, new fossil fuel industrial facilities and supply projects should not be approved in reliance on CCS.
2.83In a similar vein, Climate Analytics advised that Chevron’s Gorgon CCS facility off the Western Australian coast, ‘has sequestered only a third of what Chevron has managed to sequester’, and that CCS plants ‘are only supposed to capture small subsets of emissions from their energy facility’ with the Gorgon CCS facility ‘capturing less than four per cent of the total emissions from the Gorgon energy projects’. Submitters highlighted that the Gorgon CCS facility is still only sequestering between 30 and 50 per cent of what Chevron originally projected and ‘a far smaller percentage of the project’s total emissions’.
2.84Similarly, Parents for Climate Darwin expressed strong concerns over the use of CCS technology:
It is nothing more than a complicated, expensive, and faulty technology, designed to create the illusion of mitigating climate change. This is classic greenwashing and is a huge threat to true climate action.
2.85Likewise, the Australian Marine Sciences Association argued that ‘the Australian Government’s continued focus on CCS as a viable option to achieve net zero emissions is ineffective’.
Cost-effectiveness, health and safety risks
2.86Some submitters expressed concern about the cost-effectiveness, health and safety risks associated with CCS technology.
2.87For example, in relation to cost-effectiveness, Climate Action Network Australia submitted that ‘carbon capture is extremely expensive. Coal or gas with carbon capture costs six times more than wind plus battery storage’. Similarly, Climate Analytics argued that ‘the claimed costs and scale of CCS storage are underestimated’. Climate Analytics drew the committee’s attention to the Gorgon CCS facility in Western Australia, arguing that the facility ‘has cost billions of dollars and is still not working properly after five years’.
2.88Other submitters raised concerns about health and safety risks for residents in surrounding suburbs, highlighting the uncertainty over risks associated with the long-term storage of carbon.
2.89On a similar note, the ECNT argued the proposed CCS hub at Middle Arm is ‘unprecedented in Australia, if not the world’, cautioning that CO2 pipelines can degrade due to severe weather, and that this degradation can lead to ruptures or leaks. To illustrate this, the ECNT noted the CO2 pipeline rupture in Satartia, Mississippi, which released more than 30 000 barrels of CO2 and resulted in a mass poisoning of residents, ‘asphyxiating people who were driving in their cars nearby…hospitalising 46 people…[and] requiring the evacuation of hundreds more’. The ECNT further noted that ‘emergency responders…were not prepared to effectively manage the impacts of a CO2 pipeline rupture’.
2.90According to ECNT, the pipeline in Satartia was made of ‘stronger grade of steel than the Bayu-Undan pipeline and was designed to better transport CO2’.
2.91The Australian Conservation Foundation (ACF) argued that CCS should be reserved for ‘genuinely difficult and…hard-to-abate sectors in the economy…such as cement manufacturing’, where both the energy input and manufacturing emissions are high. According to the ACF, to allow CCS ‘for the construction and deployment of new fossil fuel projects is completely inappropriate…it breaches our obligations under the Paris Agreement’.
2.92Conversely, the Department of Industry, Science & Resources (DISR) advised in its submission that CCS may support emitters to meet their emission reduction obligations under the Australian Government’s Safeguard Mechanism. The Department also noted that CCS would be not proceed unregulated:
Offshore geological storage components of CCS projects in Commonwealth waters in the Northern Territory’s Bonaparte basin will be underpinned by the regulatory framework of the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (the OPGGS Act).
2.93The Department of Industry, Science & Resources quoted the 2023 Net Zero Australia study which predicts that to reach net zero by 2050, Australia will require the development of large-scale CCS capabilities. DISR’s submission quoted the 2023 Net Zero Australia study as saying:
The study’s modelled scenarios indicate that the CCS industry would need to store between 98 and 788 Mt of carbon dioxide (CO2) per year by 2050 to meet net zero targets. The Northern Territory is anticipated to host a significant component of this required CO2 use and storage, between 19 and 276 millions of tonnes per annum (Mtpa) by 2050, with opportunities available for industries to utilise captured carbon, with the remaining CO2 to be geologically stored deep in the sea bed in Commonwealth Waters, offshore Darwin.
2.94The Department of Industry, Science & Resources in their submission also argued there was a link between the development of a CCS industrial hub and future investment attraction to the Middle Arm precinct. DISR stated that ‘as the economy decarbonises in coming decades, development of industrial hubs such as Middle Arm could attract a range of industries including renewable energy, critical minerals, low-to-zero emissions fuels and products needed for Australian supply chain security, and advanced manufacturing’.
Use of emissions offsets
2.95More broadly, environmental groups expressed concerns about the proposed development’s intention to use emissions offsets. For example, Climate Analytics explained that carbon offsets are problematic for various reasons:
…Tamboran will consume a lot of offsets… offsets are not a replacement for actual emissions reductions, for many reasons. The first is that the majority of land sector offsets fail to deliver genuine or additional emissions reduction. The second one is that the projects underpinning land sector offsets are, by design, not permanent, meaning that it's likely that much of the carbon sequestered will eventually be launched back into the atmosphere. We also have recent academic papers showing that a lot of the sequestration would not have happened without the money provided by the sale of offsets, so a lot of offsets are being sold on Australian markets for sequestration that will not happen... Finally, every tonne of carbon emitted from the fossil fuel industry in fossil fuel projects like Beetaloo or Middle Arm will stay in the atmosphere for far longer than the life of an offsetting project in Australia. Even if we assume that an offsetting project in Australia will operate for 50 years, CO2 can stay in the atmosphere for up to 10,000 years. That's why the framing of producing gas in a net zero way [via the use of offsets] is deeply flawed and deeply problematic.
2.96Similarly, the Australia Institute pointed out that it has published extensively on ‘the non-viability of offsetting or sequestering emissions from NT gas development proposals’. Likewise, the submission from Professor Melissa Haswell from the University of Sydney, argued ‘there is a serious lack of evidence’ that offsets and CCS ‘will prevent serious climate harms’.
2.97In a similar vein, the Australian Marine Sciences Association pointed out that there are ‘major ongoing concerns by energy experts’ with the national carbon credits and carbon offsets program and there is a need for investigation and major reform.
2.98The ACF told the committee that there was still an unresolved issue with offsetting emissions from the Beetaloo:
…the Pepper review required Beetaloo's emissions to be offset so that it could enter the system at net zero. The federal government met the previous federal government's commitments to deliver that, but has now handballed the problem of Beetaloo's emissions and compliance with the Pepper inquiry to the energy minister's ministerial council to deal with to see if the emissions burden across the Australian economy can be spread to other states, which have since refused to accept responsibility for the emissions caused by Beetaloo.
2.99The ACF highlighted that there ‘is currently no mechanism, at either Territory or national level, to require scope 2 and scope 3 emissions to be offset’.
2.100Several submitters called for the offset methodology for the proposed Middle Arm Industrial Precinct to be peer-reviewed, released to the public for comment, and an offset plan developed in accordance with that methodology.
2.101Separately, Greenpeace called for a thorough climate risk assessment to examine ‘the direct, indirect and cumulative greenhouse gas emissions of the Middle Arm Precinct’ as well as ‘the feasibility of any proposals to mitigate or offset those emissions’. Greenpeace recommended that ‘CCS should only be used as a last resort for hard-to-abate emissions, not to enable and greenwash more fossil fuel emissions’.
2.102The strategic environmental assessment being carried out by the NT Government is expected to examine the precinct’s emissions as part of the approval process required for the development to proceed. This is canvassed in Chapter 4.
NT Government views
2.103The NT Government argued that ‘all development at MASDP [Middle Arm Sustainable Development Precinct] will follow the mitigation hierarchy for reducing greenhouse gas emissions (avoid, mitigate, offset) in accordance with NT offset policy’, and that ‘offsets will be a last resort and a small component of achieving the target’.
2.104The NT Government pointed out that each proponent that is a large emitter (those with over 100 000 tonnes of Scope 1 emissions) will be subject to the requirements of the NT Large Emitters Policy and the Commonwealth’s Safeguard Mechanism. In addition, all individual projects, regardless of size, will be required to prepare and implement a Greenhouse Gas Abatement Plan.
ANAO, Chubb and Climate Change Act review findings
2.105Several reviews have been undertaken in relation to the integrity of ACCUs. For example, in 2024, the ANAO assessed the effectiveness of the Clean Energy Regulator’s (CER) issuing, compliance and contracting activities related to ACCUs. The ANAO found that ‘the CER’s administration of the issuing, compliance and contracting of ACCUs was largely effective’.
2.106In 2023, the Climate Change Authority (CCA) completed its fourth independent review of the Carbon Credits (Carbon Farming Initiative) Act 2011 (CFI Act) and the supporting legislative instruments that establish the ACCU Scheme. The CCA’s review found the ACCU Scheme is ‘fundamentally well designed, with robust governance, compliance and enforcement structures’.
2.107The purpose of the Chubb Review was to ensure that ACCUs and the carbon crediting framework had a strong and credible reputation supported by participants, purchasers and the broader community. In 2022, the review concluded that ‘the ACCU Scheme arrangements are essentially sound, incorporating mechanisms for regular review and improvement, and recommended several changes to clarify governance, improve transparency, facilitate positive project outcomes and co-benefits, and enhance confidence in the integrity and effectiveness of the scheme’.
Next chapter
The following chapter describes the funding commitments associated with the Middle Arm Industrial Precinct by both the Commonwealth and NT Governments, as well as the support and concerns raised regarding its funding.