Gas companies will be forced to set aside 20% of exports for domestic users under a reservation scheme that the industry has condemned as a “heavy-handed intervention” that could undermine Australia’s status as a reliable trading partner.
The federal government announced the final model for the east coast reserve on Thursday, promising “downward pressure” on prices for households and businesses.
While gas-dependent manufacturers welcomed the announcement, green groups dismissed it as a “distraction” from Labor’s resistance to a 25% tax on gas export revenue.
The government declined to endorse a new gas tax in a Senate inquiry report tabled just hours after the reservation policy was announced, providing further proof that Anthony Albanese will not adopt the idea in next week’s federal budget.
But Labor has left the door open to future changes, with government members of the inquiry calling for a review of gas tax options once the international oil shock sparked by the Middle East conflict has passed.
Under the new reservation policy, which will start on 1 July 2027, the three big Queensland-based gas exporters would be forced to preserve 20% of export volumes for east coast customers.
The companies would need to prove to the federal resources minister that their domestic supply obligations have been met to secure a permit to sell to the overseas spot market.
The 20% mandate sits in the middle of the 15%-25% range that the government canvassed with industry after announcing its commitment to a gas reservation on 22 December.
The obligations under the new reserve – which will replace the so-called “gas trigger” as the mechanism to secure domestic supplies – will not apply to contracts signed before that date.
The government criticised the Coalition’s proposal for an east coast gas reserve ahead of last year’s election before embracing the idea.
The climate change and energy minister, Chris Bowen, said the legislative requirement would deliver a “modest oversupply” of gas into the east coast, helping to avert forecast shortages and put “downward pressure” on prices.
The start of LNG exports out of the east coast a decade ago linked the domestic market to the international market, leading to a tripling of prices and leaving Australian customers exposed to overseas shocks – such as Russia’s war in Ukraine.
“Our gas market will no longer be hostage to international markets,” said the resources minister, Madeleine King.
Manufacturing Australia, which represents major gas users including BlueScope steel and Tomago Aluminium, said the announcement was the “most significant structural reform” to the gas market in a generation.
“A national 20% gas reservation scheme will help underpin manufacturing investment, energy transition and energy security for future generations,” the organisation’s chief executive, Ben Eade, said.
Australian Energy Producers, which represents the gas giants, was prepared to support a reservation scheme if it was tied to opening up new supplies.
The peak body’s chief executive, Samantha McCulloch, criticised the final model as an unjustified, “heavy handed intervention” that would crowd out smaller producers competing in the domestic market and risk future investment.
McCulloch said the scheme could risk Australia’s reputation as a reliable trading partner, undermining the main argument Albanese is using to secure fuel supplies from across Asia amid the Middle East crisis.
The prime minister’s reluctance to provoke Asian suppliers of fuel – including Japan and South Korea – has been a factor in the government’s resistance to a new tax on gas exporters.
The final report from the Senate’s gas tax inquiry was tabled on Thursday afternoon without any formal recommendations due to a lack of agreement from committee members.
In additional comments to the report, the Greens and the independent senator, David Pocock, reiterated support for a 25% tax on export revenue to replace the petroleum resource rent tax (PRRT).
The Greens resources spokesperson and inquiry chair, Steph Hodgins-May, said: “The time is now. The experts say we need it. The public wants it. The government should cut the crap and just do it.”
In its response to the inquiry, the Labor committee members said “issues” with the PRRT and the “relatively low” levels of tax collected from the resources warranted further examination.
The Labor senators, Varun Ghosh and Lisa Darmanin, recommended that once the international oil crisis has passed, the Treasury and the Productivity Commission should examine the various tax proposals raised in the inquiry.
Bowen said while gas usage was declining, the fossil fuel would remain an important fuel source for industry and to support the renewables transition.
But the Climate Council’s energy expert, Joel Gilmore, said the reservation scheme must be an “exit ramp” for Australia’s reliance on gas and “a tool for a managed gas exit, not a lifeline for more drilling”.
