Waitsia gives McGowan a gas-powered climate dilemma

Premier Mark McGowan may soon have to choose between reversing his past efforts in tackling climate change or potentially crossing WA's dominant media owner months before a State election, thanks to the Waitsia gas field near Dongara.

Mitsui, the operator of Waitsia, wants to expand a small 20 terajoule a day plant now under construction to be able to produce 250 TJ of gas a day, more than 20% of the state's consumption.

Kerry Stokes - chair of Seven West Media, the owner of The West Australian and Channel 7 - has a significant stake in Beach Energy that owns 50% of Waitsia.

Waitsia will force the McGowan Government to revisit an issue it has struggled with in the past: what responsibility the gas industry should take for making WA the only state with rising carbon emissions.

In March 2019, the WA Environmental Protection Authority said it would recommend that new large projects offset all their carbon emissions. Stokes' The West Australian put its weight behind Woodside chief executive Peter Coleman's campaign against the proposal. McGowan voiced his opposition to the requirement the day after it was issued and the EPA withdrew its guidance after just seven days.

Coleman's Scarborough and Browse LNG projects that would also have delivered gas to the WA market are now on the backburner due to plunging oil and gas prices. The uncertainty about when, or if, the Woodside projects proceed could make Perth Basin gas projects unlikely beneficiaries of the dire condition of the international oil and gas industry.

The first project that could fill the void - Waitsia Stage 2 - would emit the equivalent of about 300,000 tonnes a year of carbon dioxide, according to Mitsui's greenhouse gas management plan submitted to the EPA in April.

About 180,000 tonnes a year of emissions will come from carbon dioxide in gas from the reservoir. The combustion of gas to run the processing plant produces most of the other emissions.

Offsetting reservoir CO2 standard in WA

McGowan started what is now a consistent practice of requiring WA gas plants to offset or bury carbon emissions from reservoir gas when he was Minister for Environment in 2006.

McGowan told State Parliament in December 2006 that he had insisted that Chevron's giant Gorgon LNG plant inject underground the CO2 from its reservoir gas.

"That reflects our commitment to doing something very significant about greenhouse gases, which is a world issue," McGowan said.

Chevron and its partners had to install a system that could inject all the Gorgon reservoir CO2 underground and ensure that at least 80% of the greenhouse gas was injected.

Ever since McGowan's decision 14 years ago, all gas projects approved in WA that vent reservoir CO2 to the atmosphere have had to offset those emissions.

In 2007 McGowan's successor Labor Environment Minister David Templeman endorsed the EPA's recommendation that Woodside's Pluto LNG offset its reservoir gas emissions.  Since then Woodside and its partners have paid to have more than 26 million Mallee trees planted and offset more than 500,0000 tonnes of carbon dioxide.

Chevron's Wheatstone LNG project received similar treatment in 2011 when Liberal Environment Minister Bill Marmion implemented the EPA's recommendation that the plant near Onslow offset the reservoir CO2 is released.

The EPA did not require offsets from Santos's Devil Creek gas plant in 2009 and BHP's Macedon Development in 2010 as the amount of carbon dioxide in the gas was so low it was not vented but remained in the gas sold to customers.

Mitsui has not proposed offsetting the 60% of its emissions that come from reservoir gas.

Instead, it plans for Waitsia to reduce or offset 10% of its emissions by 2025 and 26% by 2030. The later target corresponds to Australia's commitment under the Paris Agreement to reduce carbon emissions by 26% to 28% of 2005 levels by 2030.

Under Mitsui's plan, Waitsia Stage 2 would add about 216,000 tonnes of CO2 to WA's 2030 emissions.

A Mitsui spokesperson said it would continually monitor for technological improvements to reduce emissions as well as changes to Federal and State Government policies.

Waitsia is the first gas project to be assessed under the EPA's new greenhouse gas guidance released in April that covers all industries and does not address the treatment of reservoir CO2.

The EPA will request evidence that Mitsui has taken "all reasonable and practicable" measures to reduce carbon emissions.

CO2 from the reservoir is cheaper to store underground than emissions from gas combusted in the plant as it usually needs to be separated for other reasons before the gas is processed. Separation of CO2 from combustion gas, however, is a significant added cost.

It is understood that the EPA is likely to present its recommendations on Waitsia to Environment Minister Stephen Dawson in July.

Decision time

If the EPA does not recommend that Waitsia offset its reservoir gases, it will have drastically weakened a long-standing stance on climate change just as the science is increasingly adamant that emissions must be reduced urgently.

However, if the EPA remains consistent then Dawson, in consultation with other ministers such as McGowan, will have to decide whether to impose the offset requirement onto Waitsia.

Waitsia will be added to Gorgon and Wheatstone on Dawson's list of difficult decisions to make on gas project emissions, with the added problem that the Waitsia decision cannot be put off.

The EPA recommended in September 2019 that Chevron's responsibility for Gorgon reinjecting its reservoir CO2 start soon after the project began operation, potentially making Gorgon liable to provide offsets for the extra emissions caused by long delays to the storing of CO2. In February 2020 Dawson was still considering the EPA advice and his department said it would not consider the issue until mid-2021.

Dawson asked the EPA in January 2018 to consider whether to reimpose the requirement for Wheatstone to offset its reservoir gas emissions.  The Liberal State Government removed the condition in 2013 on the basis that Federal Labor's now rescinded carbon price addressed the issue. More than two years later the EPA has not posted the advice on its website.

A Mitsui spokesperson said the company and Beach Energy planned to make a final investment decision on Waitsia by September.

If Dawson requires Waitsia to offset its reservoir emissions, there will be a direct financial hit to media mogul Stokes. Stokes owns 61% of Seven Group that owns 28.6% of Beach Energy, that owns 50% of Waitsia. Almost $1 in every $10 spent on offsets would come from Stoke's pocket.

The alternative is for the Labor Government to go into the March 2021 State election having signalled that on climate, one of the community's most concerning issues, it has taken a giant step backwards.

Lifters and leaners

The EPA's 2019 proposal for 100% of new emissions to be offset was widely criticised by industry as a job killer.

However, it is simple maths that for Australia to achieve its Paris Agreement emissions target any increase in emissions has to be countered elsewhere in the economy by offsets, expenditure to cut emissions or reduced economic activity.

If a new project does not offset its emissions the burden shifts to entities not benefitting from the carbon pollution.

Boiling Cold asked Mitsui what comment it had for other sectors of the economy that will bear a greater burden of emission reductions because Waitsia vents its reservoir CO2. Mitsui did not respond.

Conservation Council of WA director Piers Verstegen said he expected Waitsia would be required to offset its reservoir emissions "at an absolute minimum."

"It is disappointing that the proponents have not proposed any meaningful abatement at all for this project," Verstegen said.

Verstegen disputed a common claim by the gas industry that its gas would displace coal and therefore reduce overall emissions.

"The supply of more gas into this market hinders the uptake of renewable energy and slows the transition of industrial energy users into cheaper and cleaner energy sources of the future," Verstegen said.

The outcome on Waitsia will likely also apply to Strike Energy's nearby West Errugulla gas project as both projects have about 6% of CO2 in the reservoir. Mark McGowan this week gave lead agency status to West Erregulla to help the project through the approvals process.

Strike plans to sanction a 50 TJ a day plant this year may later expand it to 250 TJ a day.

Like Waitsia, West Errugulla has influential backers.

Prominent Perth businessman John Poynton chairs Strike Energy and the head of the National COVID-19 Coordination Commission Nev Power is deputy chair.

Power has temporarily "stepped back" from the position to address "perceptions of conflict of interest" after he and other Commission members backed gas as an essential part of Australia's economic recovery.

Correction 30 May: The "common claim by the gas industry that its gas would displace coal" was incorrectly attributed to the Waitsia GHG plan.

Main image: Waitsia Stage 1 under construction. Source: Mitsui E&P Australia