Productivity Commission report on resources sector regulation

Mining Oil & Gas

Key findings and recommendations set out in the draft

On 24 March 2020, the Productivity Commission released its draft report on resources sector regulation. The Commission was asked to focus on regulation with a material impact on investment in the resources sector (both oil and gas and mining), identify effective regulatory approaches, and highlight examples of best-practice regulation. The review's scope was vast, particularly as the various states and territories have not adopted a uniform approach to regulation.

If implemented, the Productivity Commission's recommendations would have important implications for the sector. In particular, the report includes a number of recommendations focused on reducing delays in project assessment and approval and removing barriers to investment – without diluting environmental and other regulated outcomes.

In relation to removing barriers to investment, relevantly for the gas sector, the Productivity Commission made various draft findings, including that:

  • domestic gas reservation schemes can reduce investor returns, thereby discouraging investment in exploration and extraction and leading to higher gas consumer prices;
  • bans and moratoria are a response to community uncertainty about the environmental impacts of unconventional gas operations, however, the evidence available suggests that these risks can be managed effectively by consideration on a project-by-project basis; and
  • the water trigger that applies to coal seam gas projects under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) is creating unnecessary regulatory burden.

The Commission also made more general draft findings regarding government policy and investment, including that:

  • abrupt and poorly explained government policy changes, with inadequate consultation and uncertainty regarding climate change and energy policies across jurisdictions, can undermine investor confidence;
  • a lack of clarity in policy objectives can lead to inconsistent applications of regulations across resources projects; and
  • deciding not to approve resources projects on the basis of potential greenhouse gas emissions in destination markets is not an effective way of reducing global emissions.

For further details on the key findings and recommendations set out in the draft report please refer to our full article here.

The Productivity Commission has invited submissions on the draft report, with the intention of releasing a final report by 7 August 2020. With governments likely to be keen to look at initiatives that could kick-start an economic recovery following COVID-19, its recommendations might find a receptive audience.

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