Hot on the heels of Prime Minister Anthony Albanese’s blunt rejection of a popular campaign to ramp up gas company taxes, Labor is set to reveal terms of the first-ever east coast gas reservation policy to force exporters to hold back supply for local users.
Prime Minister Anthony Albanese last week ruled out a new gas tax in next week’s budget, following a prominent campaign spearheaded by independent Senator David Pocock, who pointed out there was more federal tax paid on beer than by gas exporters.
But today the government will reveal the terms of its long-awaited gas reservation policy. During the consultation phase over the past six months, the government proposed a reserve on any new supply contracts that forces companies to hold back up to 25 per cent of their production for the east coast market.
“Australian gas for Australian users as the first priority,” Energy Minister Chris Bowen said in December, when the policy was announced.
The policy will apply to the operators of three giant liquefied natural gas (LNG) export terminals in Queensland as well as offshore producers in the Northern Territory.
The government has argued the reservation would put downward pressure on local gas prices, which rose from $4 a gigajoule before 2015 when east coat exports began, to as high as $12 in recent years. The reservation would also ensure adequate supply for manufacturing needs.
Australia is one of the world’s biggest liquified natural gas (LNG) exporters, yet homes and businesses on the east coast have faced repeated shortfall warnings, raising concerns that too much LNG is shipped offshore from Queensland.
Gas producers have for more than a decade campaigned against a gas reservation on the east coast, singling it out as the most damaging policy proposition for the industry and arguing the local market had always been fully supplied.
The east coast gas reservation the government is set to impose will be similar to the Western Australia scheme that dates to 2006. The two sides of the continent form separate markets and cannot share gas, due to the prohibitive overland distances and lack of shipping import terminals.
The Dutton opposition effectively normalised the policy when it pledged in the 2025 election campaign to impose a reservation.
Since then, the Albanese government has pursued the idea, before Pocock kicked off his export tax campaign that called for a 25 per cent tax on all gas exports. The export tax was forecast to rake in up to $17 billion a year by forcing multinational gas exporters to pay their “fair share” for the nation’s finite resources.
But Australia has been using its gas exports as collateral in high-level talks with the countries that supply Australia with much of its fuel, such as Japan, Malaysia and South Korea. These nations are also major investors in Australia’s huge gas export industry.
Also on Thursday, the Albanese government invited oil and gas companies to bid for exploratory drilling rights across expansive new sections of Commonwealth waters off the coastlines of Victoria and Tasmania.
Federal Resources Minister Madeleine King said the exploration permits would be offered in the Gippsland Basin and Bass Basin.
“Ongoing investment in the nation’s petroleum sector is vital for the economy and meeting the energy needs of Australians,” King said.
The government’s plans to release swaths of Commonwealth waters for new oil and gas drilling have won support from energy producers and major gas users across the manufacturing sector who say unlocking greater supplies of the fossil fuel is needed to head off shortages and price rises on the eastern seaboard.
But they have angered conservation groups worried about the impact that more gas drilling will have on the marine environment, and those who fear that increasing gas supplies will make it harder to combat climate change. Gas is a key source of carbon dioxide and methane emissions, which contribute to dangerous levels of global warming.
King said all new offshore gas projects would be required to meet strict environmental and emissions standards established approval processes, and no exploration could occur without a mandatory 30-day public consultation period.
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Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.
Nick Toscano is a business reporter for The Age and Sydney Morning Herald.Connect via X or email.
