Domestic Gas Reservation Bill 2026

Milton Dick

The question now is that the amendment circulated by the member for Curtin be agreed to.

Member for Curtin's circulated amendment

(1) Clause 27, page 43 (line 30) to page 44 (line 2), omit subclause (3) (not including the heading), substitute:

(3) The Minister may only make a DSO adjustment determination for a licence holder for a domestic gas market for a regulated period or extended period for the reason set out in paragraph 26(1)(b) if the Minister is satisfied that:

(a) the demand and supply conditions for natural gas in the market over the regulated period or extended period are such that it is appropriate to make the determination; and

(b) there are arrangements in place for the licence holder to supply, or arrange to supply, natural gas to the domestic gas market during the regulated period or extended period in accordance with the existing domestic gas reservation arrangements that apply in relation to the licence holder.

Kate Chaney

This is a modest amendment about the interaction between WA and this national domestic gas scheme. Technically, the domestic gas reservation would apply nationally, but the bill gives the minister the power to carve out facilities covered by an existing scheme. It's clear that the minister's intention is to carve out WA facilities, and I support this. WA has had its own domestic gas reservation policy since 2006, and it makes sense not to simply impose a second overlapping obligation on exporters operating under that scheme.

But the WA scheme has its problems. It generally requires LNG exporters to make the equivalent of 15 per cent of their gas exports available to the domestic market, but the obligation is measured over the life of the project rather than year by year. The terms are negotiated project by project and they're confidential, and there are questions about whether some exporters are delivering what Western Australia needs. The Institute for Energy Economics and Financial Analysis estimates that WA gas producers supplied five to 10 per cent of their production to the domestic market between 2018 and 2024—clearly below the 15 per cent target. The DomGas Alliance, which represents major gas users, including Alcoa, Wesfarmers and Yara, says that since 2017 Woodside's Pluto LNG project has supplied just 3.7 per cent of the gas it's exported to the domestic market. If the Commonwealth is going to rely on the WA scheme as the reason for exempting exporters from the national scheme, we should have some confidence that the WA scheme will be honoured. That's the issue that my amendment addresses.

As the bill currently stands, the minister can reduce an exporter's federal obligation because an existing domestic gas reservation arrangement applies. The minister doesn't have to be satisfied that the exporter has arrangements in place to supply gas under the state scheme. That creates a fairly obvious gap. An exporter could receive relief from its federal obligation because the WA scheme exists without having arrangements in place to provide the gas that the WA scheme is supposed to secure. The exporter gets the benefit of the carve-out, but Western Australians may not get the gas. My amendment adds a simple safeguard; it keeps the government's existing test but requires that the minister be satisfied of one additional thing—that arrangements are in place for the exporter to supply or to arrange to supply gas to the domestic market in accordance with the reservation arrangements that apply to it. Importantly, this does not change the WA scheme. It doesn't remove the WA carve-out and it doesn't impose new obligations on WA exporters. It simply says that, if an exporter is going to receive the benefit of the carve-out, there should be arrangements in place to meet the WA scheme.

I acknowledge that this amendment doesn't solve every problem with the WA scheme; it only tests whether those arrangements are in place. It's a very low hurdle to meet, but that should make it easier to accept. This amendment will become more important as WA's gas market tightens. The Australian Energy Market Operator projects gaps in the WA market from 2030, with those gaps growing in the years that follow. Before projected shortages are used to make the case for new gas developments like Browse, with the significant climate pollution that that would bring, we should make sure exporters are delivering the gas they have already agreed to provide to Western Australians.

This is a modest amendment. If the WA scheme is the reason an exporter receives relief from the national obligation, the minister should at least be satisfied that the arrangements are in place to honour that scheme. I'd hope that this outcome would be supported by both sides of the House as well as the people and government of WA. It tells the gas exporters who are not delivering on their state based obligation that this isn't good enough. This is an improvement that delivers for Western Australians and Western Australia, and I commend the amendment to the House.

Madeleine King

I thank the member for Curtin for her engagement in relation to this package of bills. The domestic gas reservation scheme does apply nationally. Our constitution prevents, quite rightly, the Commonwealth from giving states and territories preferential treatment. This bill defines a domestic gas market as a market and a part of Australia where natural gas is acquired and supplied by means of a physical network of interconnected gas pipelines. Under the legislation, all LNG exporters will be required to hold an export licence regardless of their location.

In practice, as the member will know, the east and west coast markets are physically separate, certainly in terms of those interconnected pipelines, and conditions in one market do not necessarily reflect conditions in the other. The scheme has the flexibility to recognise this, and it is fit for purpose. The legislation does recognise existing reservation arrangements and allows for domestic supply obligations to be adjusted in appropriate circumstances to take into account demand and supply conditions in the market. Domestic supply obligations are linked to the domestic market from which the LNG is exported, meaning exporters continue to supply the market to which they are physically connected.

Western Australia introduced its gas reservation policy many years ago and has largely managed its supply well. I accept too that it has not been perfect, and I acknowledge the comments of others, especially those from Western Australia, about that. However, it does have a system, and it's different to the system we're proposing, with different means of addressing demand over time and their demand calibration. Whilst working not perfectly but largely well, it is wise to let that remain in place. For these reasons the government will not be supporting the amendment, but I thank you for your contribution.

Milton Dick

The question is that the amendment moved by the honourable member for Curtin be agreed to.