March 14, 2019 / 1:09 PM / a month ago

First coal, now LNG jolted by climate change measures in Australia: Russell

LAUNCESTON, Australia (Reuters) - The concept that producers of fossil fuel will have to pay for the carbon emissions created by their use is something the industry will no doubt fight tooth and nail, but two recent developments in Australia show the battle may be starting.

FILE PHOTO: The Woodside Petroleum gas plant is seen at sunset in Burrup, in the Pilbarra region of Western Australia, April 18, 2011. REUTERS/Daniel Munoz/File Photo/File Photo

Australian liquefied natural gas (LNG) major Woodside Petroleum reacted angrily to recent moves by the environmental regulator in Western Australia state to require that projects offset their emissions.

The Environment Protection Authority in the state announced new guidelines earlier this month that would mandate projects with more than 100,000 tonnes a year of emissions to offset them through programs aimed at mitigating the impact of climate change.

The proposed measures would add billions of dollars to the costs of operating the six massive LNG plants in the state, which have a combined annual capacity of about 57.8 million tonnes of the super-chilled fuel - more than the annual demand of the world’s number two consumer China.

Woodside Chief Operations Officer Meg O’Neill told a conference in Perth on Wednesday that the proposed rules were “wrong” and would disadvantage Western Australia.

The federal Resources Minister Matt Canavan went further, saying the rules were a “brain explosion” that “defied common sense,” according to a report in the Sydney Morning Herald newspaper.

Canavan called on Western Australia to scrap the proposals, something the state government has indicated it may do.

Even if the measure is scrapped, the mere fact that it was raised in the first place has raised question marks over the future of LNG projects in Western Australia, where Woodside is considering investments of more than $20 billion to build new ventures.

COAL MINE REJECTED

The focus on carbon emissions from LNG comes on the heels of a similar issue for coal mining in Australia, which is the world’s largest supplier of the polluting fuel to the seaborne market.

A proposed coal mine in Australia’s New South Wales was rejected by the state’s Land and Environment Court in February, with the judge citing its potentially “dire” environmental impact as part of his reasoning.

The Rocky Hill mine was proposed by privately held Gloucester Resources, but Judge Brian Preston ruled that burning the mine’s coal would add to greenhouse gas emissions “at a time when what is now urgently needed, in order to meet generally agreed climate targets, is a rapid and deep decrease in GHG emissions.”

The court ruling was viewed by environmentalists as a landmark judgment that put coal miners on notice that they were going to have to account for the emissions caused by the use of their product, even if it was consumed in another country.

However, before popping champagne corks, environmentalists should probably realize that both the decision by the New South Wales court on the coal mine and the proposed offset rules in Western Australia for LNG projects are unlikely to have much practical impact.

The coal mine was likely to fail to proceed on a number of grounds, including its proximity to a residential area, and the judgment doesn’t mean that all future projects will suffer the same fate.

The Western Australia government is likely to reject the advice of its own environmental regulator and not impose carbon emission offset requirements on the state’s economically important LNG sector.

But it is becoming clearer that the next phase in the green battle against fossil fuels is likely to be regulatory, with activists increasingly taking to the courts and putting pressure on governments to take action by imposing rules.

It may take several years, but oil and gas companies, and miners should be prepared to have to add the cost of carbon emissions into their new, and perhaps even their existing, projects.

(The opinions expressed here are those of the author, a columnist for Reuters.)

Editing by Richard Pullin

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