Our organisations disagree on many issues. But on gas reservation we are united, because a well-designed reservation serves the interests of Australia's workers, businesses, households and environment.
Our design principles for the reservation advance the national interest. They can deliver lower domestic gas prices, supply certainty and fair and equal treatment of producers and users. They can also support us to better manage our existing resources: making best use of gas for Australia's needs while investing in efficiency, electrification and fuel switching where feasible supports Australia's resilience, prosperity and climate progress.
Not all support this outcome. Positions advanced by some major actors would come at the expense of many impacted by the reservation if ultimately adopted. These parties claim that only a reservation providing carve-outs, leave passes and favourable treatment to some gas producers and some trading partners can work. We say the opposite is true. Only a reservation that delivers for all sides in the national interest can succeed and endure.
Our organisations may see other aspects of the gas debate differently, but a successful reservation is too important to let division win. That is why we have united around these principles.
We urge the Albanese Government and Parliament to adopt our principles in the reservation to be finalised in the coming months. Only then will there be confidence that government has delivered a fair and effective gas reservation for all.
GAS RESERVATION DESIGN PRINCIPLES:
- The reservation must promote a meaningful and consistent decoupling of domestic and international gas prices, and downward pressure on domestic gas prices, as its primary policy objectives.
- To the fullest extent practicable, the reservation must limit the scope for any exporter to be granted an exemption from domestic supply obligations (DSOs) on the basis of Ministerial discretion. The scheme must apply equitably and consistently to all exporters.
- DSOs mandated under the reservation must require exporters to actually deliver gas or equivalents to domestic users, not just offer it. The scheme's design must support market conditions where domestic demand is met.
- The reservation must not count investment in (or other facilitation of) future gas supply towards a DSO in an earlier compliance year.
- DSOs under the reservation should be calculated and communicated to exporters, with compliance plans lodged and approved, well prior to the relevant compliance period. This helps ensure all compliance options are exhausted before any exemption is granted.
- The reservation should require the AER to publish an indicative DSO for each regulated exporter for the forthcoming five years – but afford the regulator discretion to vary the final DSOs imposed as the market may require.
- Where meeting projected domestic gas demand would require an exporter to supply less than 20% of its export volumes, the reservation should require that DSOs are calculated to meet projected demand (plus a modest oversupply).
- Wherever a producer is granted an exemption to its DSO, the reservation should record the exempted volume as accrued (or 'banked'), rather than written down or forgiven. The rules regarding governance and drawdown of this 'bank' should safeguard domestic supply, promote fairness between gas exporters, and avoid ongoing banking by any exporter.
- The reservation should allow exporters to invest in durable and additional demand-side gas efficiency and/or electrification as an alternative DSO compliance option. This should complement the Commonwealth's intent to permit supply of renewable gas to satisfy a DSO, and the enabling provisions in legislation should be drafted to provide scope for subsequent regulations addressing both. Development of a demand-side gas reduction option must not delay the reservation's planned commencement.
