The green legal action that could halt Woodside’s $US11.4B Scarborough LNG
Woodside wants to sanction its $US11.4 billion Scarborough LNG project in 2021, but a legal challenge to regulatory approval for years of carbon emissions could put it in a two-year legal limbo.
December 23, 2020, was a big day for the WA gas industry as years of negotiations to open up Woodside's giant North West Shelf LNG plant were finalised just before Christmas.
The deal allowed gas from Pluto next door and the Waitsia gas field in the Perth Basin to be processed at the NWS plant after 30 years of it only taking gas from fields owned by the NWS joint venture.
The NWS joint venture's partners – Woodside as operator and BHP, BP, Chevron, Shell and Japan Australia LNG – had to agree to the deal, as did Waitsia owners Beach Energy and Mitsui.
The next day Premier Mark McGowan announced the execution of agreements with Waitsia.
"Gas will continue to be an important part of the WA economy, as the State continues to be one of the world's largest producers of LNG," McGowan said.
If only it were that simple.
None of the self-congratulatory press releases mentioned that two days before the Conservation Council of WA served Woodside notice of a legal action that removed regulatory certainty from all of Woodside's LNG plans.
Peter Milne
The CCWA is disputing two decisions the WA Environment Protection Authority quietly made in mid-2019 to allow the NWS and Pluto LNG plants to take gas from other fields. The EPA was also served a notice.
Flow from the gas fields currently supplying the NWS plant start to decline as early as this year and Pluto production will begin to taper mid-decade.
The production declines opened up capacity at the NWS plant for gas from other fields to be exported without having to build a processing plant. It was a huge economic opportunity that hinged on the EPA's approval.
The two EPA's decisions added decades to the permitted operational lives of the NWS and Pluto LNG plants.
At stake is Waitsia's plan to sell LNG for five years under an exemption the WA Premier granted from the ban on the export of onshore gas.
Peter Milne
Woodside could lose the opportunity to process Pluto gas into LNG now rather than later this decade that is has valued as a $US1.8 billion ($2.3 billion) acceleration of revenue.
Waitsia could switch to sell to the WA market, and the Pluto gas will be produced eventually.
However, there is no alternative destination for gas from the Woodside's $US11.4 billion ($14.7 billion) Scarborough project. Regulatory approval for the use of Pluto is a must.
A 2019 regulatory shortcut
The EPA used section 45C of the Environmental Protection Act that allows certain changes to be approved without a full public assessment process to open up access to the LNG plants.
Environmental Defenders Office managing lawyer Tim Macknay, who represents the CCWA, said he argues that the approvals were not made in accordance with the law and therefore they are not valid.
"The actual test is…whether the decision might lead to a significant detrimental impact on the environment that is different from or additional to the original proposal," Macknay said.
"It's a fairly tight test, that power should not be used if there is any likelihood there might be anything significant that is different,
"Ultimately, larger quantities of gas will be processed through the plant in its lifetime, and that will result in a significantly greater quantity of greenhouse gas emissions."
The CCWA and EDO think additional decades of production from LNG plants that produce millions of tonnes of greenhouse gases each year is not an insignificant environmental negative.
"We think there are good prospects for success," Macknay said.
While Macknay is confident, there are no certainties in law, especially when there are few precedents. The provision used by the EPA has only been tested in court once: 20 years ago concerning a quarry in the Perth hills.
Macknay said a decision from the Supreme Court could take six to 12 months. A directions hearing listed for 24 February may give a better definition of the timeline.
If the CCWA action is successful, Macknay expects the EPA to put the two decisions through its full appraisal process. That includes public submissions and possible appeals.
Those EPA processes could take more than a year.
Woodside wants to approve the Scarborough project in the second half of 2021, but the EPA's recommendation may not land on Environment Minister Stephen Dawson's desk until early 2023.
A dangerous delay
Ultimately, the CCWA action cannot stop Dawson approving the two LNG plants' opening up to more supply, but the Minister cannot do so until he receives the EPA report.
A delay could be death to a project in the competitive LNG market as other projects move forward and grab market share.
When the action was launched Woodside chief executive Peter Coleman said that the company at all times complied with regulatory requirements in seeking and receiving approvals.
"We intend to vigorously defend our position," Coleman said.
"The CCWA is resorting to a legal challenge a year and a half after the approvals were granted."
Macknay said the CCWA did not know of the decisions for some time as notifications were not published. The CCWA then proposed the EPA address their concerns by putting the two decisions through its full referral process.
Machnay said the EPA told the CCWA it would not do this in November 2020 and then it was clear a legal action was required.
Coleman told investment analysts after the release on full-year results on Thursday that the CCWA was challenging "a minor administrative approval."
"We believe the EPA is on very strong ground with respect to the process, but nonetheless we'll flag that," Coleman said.
Coleman flagged another approval issue faced by the Scarborough project: possible aboriginal heritage concerns on the seabed where the pipeline from Scarborough approached the Pluto LNG plant.
Peter Milne
"The study work on that has been completed and the technical expert reports have been finalized at the moment," Coleman said.
"Again, we don't believe that will have a material impact on the project at all, but I just flagged that there are unresolved issues at this point."
A Beach Energy spokesperson said Beach and Mitsui are continuing to progress Waitsia, which remains on schedule.
"No delays to the project are forecast as a result of the suggested action by CCWA," the Beach spokesperson said.
In a footnote to its half-yearly results this week Beach said the Waitsia conditional final investment decision on 23 December 2020 became unconditional on 12 February 2021.
A Mitsui spokesperson said the company remained committed to the project, subject to relevant government and regulatory approvals.
Woodside's final investment decision for Scarborough remained subject to commercial arrangements and joint venture and regulatory approvals, a company spokesperson said.
Update 8:45AM 19 February 2021: Peter Coleman comments added
Main image: WA Supreme Court building in Perth. Source: kju, CC BY 2.0 via Wikimedia Commons
