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Environment and Communications References Committee
Oil and gas exploration and production in the Beetaloo Basin

BENNETT, Ms Helen, Head of Division, Climate Change Division, Department of Industry, Science, Energy and Resources

CALHOUN, Ms Kylie, Assistant Secretary, Environment Assessments West (NT/SA/WA) Branch, Department of Agriculture, Water and the Environment

FARRANT, Ms Kim, Acting First Assistant Secretary, Environment Approvals Division, Department of Agriculture, Water and the Environment

HEAP, Dr Andrew, Chief, Minerals, Energy and Groundwater Division, Geoscience Australia

QUINN, Mr Dan, General Manager, Resources Strategy Branch, Resources Division, Department of Industry, Science, Energy and Resources

ROBINSON, Dr David, Branch Head, Basin Systems Branch, Geoscience Australia

TROTMAN, Mr Paul, Head of Division, Resources Division, Department of Industry, Science, Energy and Resources

CHAIR: I now welcome representatives from the Department of Industry, Science, Energy and Resources, Geoscience Australia and the Department of Agriculture, Water and the Environment. I understand that information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. I remind senators that the Senate has resolved that an officer of a department of Commonwealth or a state shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions asked of an officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy. It does not preclude questions asking for explanations of policies or factual questions about when and how policies were adopted. Would either department like to make an opening statement?

Mr Trotman : Yes. I begin by acknowledging the traditional custodians on the land on which we meet and pay our respects to elders, past, present and emerging. I extend that respect to Aboriginal and Torres Strait Islander peoples here or attending online today. Thank you for the opportunity to provide evidence to today's hearing.

As part of Australia's gas fired recovery the Australian government has committed to boost the east coast gas market across the entire supply chain, and this will be done in three areas: by unlocking supply, by delivering an efficient pipeline and transportation market and by empowering gas customers. Affordable and plentiful gas will play a central role in strengthening the economy as the government secures Australia's recovery from COVID-19.

The Beetaloo has the potential to be a world-class gas province within the Northern Territory. The Beetaloo's strategic location means the resource may have the potential to supply both the Northern Territory and the east coast gas market as both an energy source and feedstock for manufacturing. However, given we're in the early stage of exploration, it is too early to accurately forecast gas quantities, costs or destinations for final products.

Because of the potential the Beetaloo province holds, the Australian government introduced it as its first location under the strategic basins program. The $126 million Beetaloo Strategic Plan includes (1) an accelerated appraisal of gas resources through the new $50 million Beetaloo Cooperative Drilling Program, which was launched on 18 March 2021; (2) the facilitation of enabling infrastructure, including by providing $173.6 million of Commonwealth funding for a renewed Roads of Strategic Importance corridor, supporting the Northern Territory Gas Industry Roads Upgrades; (3) delivering more efficient and effective regulatory processes, including enhanced baseline data collection, analysis and application; and (4) $2.2 million for the Northern Land Council to support their work with local communities to ensure that benefits from development are realised locally. The full strategic basin plan for the Beetaloo can be found on the Department of Industry, Science, Energy and Resources's website.

Exploration in the Beetaloo is expected to occur over the next two to three years, followed by four years of appraisal. The Beetaloo plan aims to accelerate these activities, allowing Beetaloo to be considered alongside other potential options to secure gas supply from 2025. The Beetaloo Cooperative Drilling Program was launched on 18 March 2021 with the intent of providing an incentive for companies to accelerate their exploration phases of the sub-basin. The program provides grants of between $750,000 and $7.5 million, up to 25 per cent of project costs per well, and companies are only able to receive grants for a maximum of three wells.

Since this inquiry was called, the Environment Centre Northern Territory has applied to the Federal Court seeking review of the minister's decision to prescribe the Beetaloo Cooperative Drilling Program and awards grants under the program. The application was only served last week on Thursday, and we are urgently working to understand the application, which sets out the applicant's position in general terms, but we expect these issues between the parties to crystallise as the case progresses. So as a result I'm mindful that many of the questions that you could ask could directly touch on issues for the court to decide. We will aim to provide you with as much information as we can, but while the proceedings are at such an early stage I'm cautious to ensure that we do not inadvertently prejudice the Commonwealth's response to the application or the court's consideration of the issues.

The application seeks review of the Minister for Resources and Water's decision to (1) prescribe the Beetaloo Cooperative Drilling Program under section 33 of the Industry Research and Development Act 1986 and (2) award grants valued at $21 million under the program. To support its application, the applicant makes a number of assertions about what the minister knew or ought to have reasonably known when he made these decisions, specifically on the topics of climate and climate science and the Paris agreement. I will table a copy of the originating application at the conclusion of these opening remarks so you can consider the application. I'm also happy to table them now, if you would like.

CHAIR: That would be helpful. Thanks, Mr Trotman.

Mr Trotman : There are two copies there. While the application may make it difficult for us to answer all of your questions about the Beetaloo Cooperative Drilling Program, we can talk about the other three key aspects of the Beetaloo strategic basin plan. The Australian government's regulatory approach is underpinned by a collection of regulatory data and facilitation services designed to deliver robust and efficient regulatory processes. These activities include those undertaken by the Gas Industry Social and Environmental Research Alliance, GISERA, to which the Australian government has committed an additional $13.7 million for new research into the impacts of onshore gas developments across Australia. The $35.4 million Geological and Bioregional Assessment Program managed by the Department of Agriculture, Water and the Environment is assessing the potential environmental impacts of shale and tight gas development to inform regulatory frameworks and approaches. In the Beetaloo, approximately $15 million has been committed to collect and collate baseline data and conduct impact assessments.

The Northern Territory government has accepted the recommendation of the scientific inquiry into hydraulic fracturing in the Northern Territory, the Pepper review, to seek to ensure that there is no net increase in the lifecycle greenhouse gas emissions emitted in Australia from any onshore shale gas produced in the Northern Territory. The government has said it will work with the NT government to manage greenhouse gas emissions from onshore shale gas development in the NT. Enabling infrastructure for the development of the Beetaloo province has been identified as a high-priority initiative on Infrastructure Australia's 2021 infrastructure priority list. This includes support for road upgrades through the Roads of Strategic Importance program and gas infrastructure through the national gas infrastructure plan, NGIP, and the future gas infrastructure investment framework.

It is important that the benefits of the development in the Beetaloo province are shared across the region. The Beetaloo plan leverages the existing initiatives in the region such as the Barkly Regional Deal, including $2.2 million to establish a Barkly business hub.

One other matter I wish to draw to your attention is two typographical errors in the joint submission from DISER and Geoscience Australia, submission 47. As I said earlier, applications for the Beetaloo Cooperative Drilling Program opened on 18 March 2021. On pages 11 and 12 of our submission there are references to the program commencing on 18 May. This should read 18 March 2021. We are happy to write to the committee to formally advise that these are typographical errors. Finally, on behalf of DISER and Geoscience Australia officials here, thank you for the opportunity to provide evidence here in person.

CHAIR: Thank you. I know we have a number of senators online and there will be a variety of questions. Just in relation to the legal application that's been made, Mr Trotman, that you've referred to from the Environment Centre of the Northern Territory, where's your advice coming from in relation to that? You said you are urgently trying to get across it and work out what the response is. Is this just in house in the department or has it been progressed to the Attorney-General's Department or the Government Solicitor? Where are we at?

Mr Trotman : We sought advice from internal counsel within the department. We then reached out to the Australian Government Solicitor for advice as well.

CHAIR: Has there been any time frame at all yet, given by the court, in relation to—

Mr Trotman : No, not at this stage.

CHAIR: Obviously, that plays into a lot of the things that we're talking about, so we will see how we go. Firstly, in relation to the $50 million grant, $21 million of which has been committed, I just want to make sure our figures are correct; is it the case that $21 million has been committed, with the remaining money yet to be decided?

Mr Trotman : That's right: up to $21 million.

CHAIR: And that's all gone to Empire Energy?

Mr Trotman : Yes, through the application made by Imperial, which is a subsidiary to Empire.

CHAIR: And that was three separate grants?

Mr Trotman : That's right, for three wells.

CHAIR: Three wells—so a grant per well. And is that the process—that it has to be per project rather than the company? Just explain to me—

Mr Trotman : I might hand over to my colleague Mr Quinn, because I can hear him; he is keen to provide the answer!

Mr Quinn : Thank you, Mr Trotman. Senator, yes, you're correct; it has to be one application per well.

CHAIR: Per well? Okay.

Mr Trotman : And up to three wells per company.

CHAIR: Aha! So that's the maximum that they—

Mr Trotman : That's right.

CHAIR: They've gone for as much as they can get?

Mr Trotman : So, 750 is the minimum, up to $7½ million, and it's up to $21 million. So three applications could correspond to $22½ million, as far as the three applications that have been made; they reach $21 million.

CHAIR: What was the decision for that limit in relation to the $21 million and the three applications? What was the thinking behind that?

Mr Quinn : I think we're possibly getting into an area here where we're talking about the decision in a fair bit of detail. I'd probably prefer to take this on notice so I can get advice from my legal counsel and provide that information to you.

CHAIR: What? I'm not asking about the merits of the decision that was made by the minister—though we can get to that. I'm asking: what was the process for deciding that there are limits around the $21 million and a maximum of three wells per company? Surely there must be some rationale for that?

Mr Trotman : I think it's fair to say that, when we looked at developing this program, we looked at other programs of a similar nature and programs that had been developed in New South Wales and also programs that had been developed in South Australia. So we were very much looking at the existing framework that has been put to other jurisdictions.

CHAIR: Could you take on notice what the argument or the rationale is for those limits?

Mr Trotman : Certainly.

CHAIR: You must have something written down in relation to that.

Mr Trotman : Yes, we can do that.

CHAIR: So that leaves $39 million in the kitty.

Mr Trotman : No, $29 million.

CHAIR: Twenty-nine million; sorry—that leaves $29 million in the kitty. Are there applications on foot for that? Are there grant applications in? Is that yet to be decided?

Mr Trotman : The way that the scheme and the program are being developed, it's on a first in, first served basis. So we anticipate that there will be a number of programs that come in over the course of the next few months. We do have some applications that are currently at the pre-assessment stage. But, again, as Mr Quinn said, we're probably now leaning into the area of the court case, where we can't actually talk about where those applications are up to. But, that said, I think we can take your question on notice and provide you with as much information as we can. I note that, to previous witnesses, you've said we can provide information by 6 August. We'll certainly work towards that time frame.

CHAIR: Okay. Just to be clear what the question is: I'd like to know how many other applications are live, and of course I'm interested in knowing how many wells and what value they're bidding for and whether this is up to the remaining $29 million ceiling.

Mr Trotman : Thanks, Senator. We'll very much do our best to get back to you.

CHAIR: What's the rationale for deciding to hand the money out on a first in, first served basis?

Mr Trotman : I think it's mainly around accelerating development in the region. Typically, this area is affected by the wet season. So the idea is that the government wants to accelerate as much exploration in the region as soon as possible, and we're working against the prospects of a wet season that comes roughly around November-December and carries on through to March. Also, behind the scheme, as we've detailed in our submission, is that if we, as the government, can accelerate exploration through the scheme by the order of about one to two years, that's what we're aiming for as part of the package.

CHAIR: So there's no assessment as to whether one project is perhaps better than the other, though—one's got more benefit to a community, one has more community support, one is less divisive? If it's a first in, first served basis, it doesn't seem to be the most effective use of $50 million of taxpayers' money.

Mr Trotman : I might get Mr Quinn to elaborate. But, again, when I say first in, first served, there are also criteria that the applicants need to meet. If they don't meet those criteria in terms of having the respective exploration licences and so forth, then they won't meet the eligibility criteria as set out in the guidelines.

CHAIR: Have you got anything burning to add to that, Mr Quinn?

Mr Quinn : I was going to expand a little bit on the first come, first served basis. The thinking behind that is that the Beetaloo region is largely unexplored, and there are a range of exploration activities that could lead to the understanding that we require of the commerciality of the resource. So it was difficult to distinguish between different locations on that basis. The idea was, as Mr Trotman outlined, to accelerate activity. The time limited nature of the grants and the fact we require companies to bring forward their activities as part of the application or the eligibility process meant that we are looking to create new exploration activity as soon as possible.

CHAIR: One of the biggest concerns that has been raised with us thus far by a variety of witnesses is a lack of consultation with local people and local communities in relation to these projects. And it seems to me that the government's process of first in, first served works against proper consultation; it's actually a disincentive to consult properly and thoroughly, paid for by the taxpayer. Accelerate, accelerate, accelerate. Meanwhile, you've got communities who are saying: 'We don't understand what this means for us. What does this mean for our water? What does this mean for our community? What do we get out of this?' So I think the first in, first served is problematic.

Mr Trotman : Just to respond to that very briefly, I guess not every particular potential drilling well will be the same as other wells, and some companies are more advanced than other companies. You took evidence from Empire Energy last week. They held a number of consultation sessions with the traditional owners on the land. I think Empire Energy provided evidence that they had had up to 30 different consultation processes and meetings with the local community.

CHAIR: That is disputed. You talk about criteria that these grants are being assessed against. Does that include the dodgy tax arrangements of these companies? What kind of due diligence are you doing to make sure this isn't just money that's being frittered away in tax havens?

Mr Trotman : I might just ask Mr Quinn to address that question, but, while he's just getting his thoughts together, the idea of the program, as we said, is to accelerate production in the basin. We are certainly not looking to provide shortcuts in terms of companies receiving their appropriate approvals. We do have mechanisms in place through other departments like Treasury and others that go to the veracity of particular applicants, and we also have conflict-of-interest provisions in the guidelines which also point to the suitability of particular applicants. I would say we are probably really up against the border as far as we can go in terms of the court case that's currently at its early stage. But I'll hand over to Mr Quinn.

Mr Quinn : I will just note additionally to Mr Trotman's comments that in the eligibility criteria of the program applicants are required to hold an Australian business number, which subjects them to a number of regulatory processes around tax. I will probably stop there, but there's a range of other eligibility criteria.

CHAIR: What about having major shareholders that have sanctions from foreign companies against them—is that a criteria you've looked at?

Mr Quinn : One of the criteria goes to a company's ability to conduct the activities in the jurisdiction, so that would pick up some of those broader regulatory approaches from other agencies around whether that person could hold those approvals.

CHAIR: Is there any concern with Falcon Oil & Gas being related to this project?

Mr Trotman : Again, I think that sort of goes to where the court case is heading. I'll do my best to answer your question on notice if that's possible.

CHAIR: Has the department considered the concerns or any issues or the due diligence of Falcon Oil & Gas?

Mr Trotman : Again, it goes to the heart of, I think, where the application to the Federal Court is up to, so I don't really want to prejudice—

CHAIR: I understand that, but it's a very simple question. I don't understand how you can argue not to answer that question because of the court case.

Mr Trotman : Sorry, Senator, I'll ask Mr Quinn to cover that aspect.

Mr Quinn : Falcon Oil & Gas is not involved in the—

CHAIR: They have links with Empire Energy, don't they?

Mr Quinn : I'd have to take that on notice, but I think that they're in some joint projects with Origin.

CHAIR: Yes. Has Origin got any applications on foot for access to this money?

Mr Quinn : Again, that's one we're going to have to take on notice.

CHAIR: But do you know the answer to that?

Mr Quinn : Yes, I do.

CHAIR: But you won't tell us.

Mr Quinn : This is, again, going into the area with the court case. We've very happy to provide as much information—

CHAIR: So do they have an application before the department?

Mr Trotman : We'd like to take that on notice. Between now and the end of the week we can get back to you with a thorough answer on this one. It's just because the court case is at such an early stage, we're just trying to get our heads around the scope and where it may go and what we can provide today. But we certainly want to provide as much information as possible. If we could do that on notice, that would be very much appreciated.

CHAIR: You talked about conflict of interest. Is it a conflict of interest for members of the board—that is, the chairperson of Empire Energy—to donate $400,000 to the Liberal Party? Do you think that might be a conflict of interest?

Mr Trotman : Again, I think that goes to the court case in terms of the clear direction of where the court case is leaning.

CHAIR: It's going to be a very interesting court case!

Mr Trotman : If we can take it on notice, we will attempt to get back to you and answer that question before the end of the week.

CHAIR: Mr Trotman, were you aware that the chairperson of Empire Energy had donated such a significant amount of money to the Liberal Party?

Mr Trotman : I personally wasn't aware of any donations until the media articles became public.

CHAIR: So what kind of due diligence have you been doing then?

Mr Trotman : Again, it goes to the court case. If we can take that on notice—

CHAIR: I might go to Senator McCarthy.

Senator McCARTHY: Mr Trotman, I might just follow up on a couple of questions by the chair. In your submission on page 12, with regard to eligibility criteria, it says:

The applicant must hold the relevant exploration permit, or retention permit, as well as having commenced all relevant approval processes to commence onshore petroleum exploration in the Northern Territory.

Mr Trotman : Yes, that's correct.

Senator McCARTHY: Yet Empire Energy has not received an approval process from the Northern Territory government, so how does it meet that criterion?

Mr Trotman : I think I might let Mr Quinn answer that question if that's okay.

Mr Quinn : The requirement is that you hold an exploration permit, which Empire does, and that you've commenced all relevant regulatory approvals, which Empire has.

Senator McCARTHY: The minister announced the grant program in early December. When was the program first proposed internally?

Mr Trotman : I might have to take that on notice. It was roughly late last year, but I'd need to come back to you on that one.

Senator McCARTHY: Okay. And did the minister propose it?

Mr Trotman : Again, I think I'd have to come back to you on that one if we can take that on notice.

Senator McCARTHY: If the minister did propose it, on what date did the minister propose it?

Mr Trotman : Thank you, yes. We'll take it on notice and, as I said to the chair, we'll endeavour to get that advice back to you before the end of the week.

Senator McCARTHY: Through January, freedom of information has shown there was communication with Empire. There was also deliberation about Empire Energy which the government has blocked under FOI. What was that deliberation about?

Mr Trotman : I'm not sure. I'm not aware of that. But again, if I can take that on notice, we'll certainly investigate and do our very best to address that question.

Senator McCARTHY: Thank you, Mr Trotman. Can we have the document tabled unredacted, please?

Mr Trotman : Which document are you referring to? The FOI application?

Senator McCARTHY: The document I talked about in my previous question, which you have taken on notice.

Mr Trotman : Again, we'll do our level best for that once we find the document. Yes, we'll do our absolute best.

Senator McCARTHY: We understand that on 10 March Empire Energy had a face-to-face meeting with Minister Taylor. Who was at that meeting?

Mr Trotman : I'm not really across that myself. Again, we'd probably have to take that on notice. We can make some inquiries of Minister Taylor's office.

CHAIR: Let's just be clear: we need to know whether there were any representatives from the department in that meeting, including anyone in the department liaison capacity with the minister's office, and whether there was anybody there from the minister's office.

Mr Trotman : Okay, Chair. We'll definitely investigate that and we'll come back to you on notice.

Senator McCARTHY: Mr Trotman, this was evidence provided last week to the inquiry by Empire Energy. Why is it that you've come unprepared for questions on this particular meeting?

Mr Trotman : Senator, sorry. We have been a bit preoccupied with the court case that's currently underway.

CHAIR: That's not our concern.

Senator McCARTHY: But there's no court case at the moment. You said you still have to get information on it.

Mr Trotman : No, the application has been made to the Federal Court in New South Wales. And, as I said, we've been working to identify what we can and can't say in relation to that. In relation to the meeting between Empire and Minister Taylor that you refer to, I'm sorry: I didn't bring any information with me on that, and I'd have to talk to Minister Taylor's office to confirm. Of course, we can also do an interrogation of records within the department as to whether any briefing was provided for that meeting. So we can look at that.

CHAIR: Sorry, Senator McCarthy. We might just get clarification here. Mr Quinn, were you aware of the meeting that Senator McCarthy is referring to?

Mr Quinn : No.

CHAIR: Did you watch the hearings or read the Hansard from last week?

Mr Quinn : Yes.

CHAIR: So you would be aware it was the subject of a number of questions?

Mr Quinn : Apologies, I thought you meant at the time of the meeting. Yes, we are aware of that. One point I would like to make on this is that Minister Pitt is the decision-maker under this program, not Minister Taylor. I don't have any more details, and I don't want to mislead the Senate.

CHAIR: Senator McCarthy.

Senator McCARTHY: Thank you, Chair. So you're taking questions on notice as to who was at that meeting and also, following requests by the chair, in terms of departmental involvement. Could you also explain what that meeting was about?

Mr Trotman : Certainly, Senator. We'll take that on notice and come back to you on that.

Senator McCARTHY: In April, grants guidelines are publicly released and applications received and in May regulation is finally made. Is it normal for grants to be advertised and applications received before they are even legal?

Mr Quinn : Again, our apologies for the incorrect statement in our submission about 18 May—18 March was when the program was launched.

Senator McCARTHY: On 7 July, Minister Pitt chose Empire out of many companies. How many companies were passed over?

Mr Trotman : Again, Senator, I think that goes to deliberations that are around the court case, but we will do our very best to be able to provide you with an answer before the end of the week, as per my answers to previous questions around how the scheme is administered.

Senator McCARTHY: Can you please provide the assessment of Empire against the guidelines?

Mr Trotman : Sorry, Senator, I didn't hear the first part of your question.

Senator McCARTHY: Could you please provide your assessment of Empire against your guidelines?

Mr Trotman : We'll do our very best, Senator. Again, it could be that it's part of the legal proceedings, but, as I said, we will do our very best to provide you with that information before the end of the week.

Senator McCARTHY: Is it correct that today the grant agreement is still not signed and Empire Energy still does not have approval for the drilling operations?

Mr Quinn : Yes, that's correct.

Senator McCARTHY: So when did Empire apply to the Northern Territory government for approval for these drilling operations?

Mr Quinn : Approvals of the NT government are not something that I have in front of me today in terms of the dates. However, we do consult with the Northern Territory government around the approvals process and where various applications are up to.

Senator McCARTHY: What was the response from the Northern Territory government?

Mr Quinn : That Empire was essentially where they needed to be in that process.

Senator McCARTHY: On what date did that conversation occur?

Mr Trotman : I think we will again take that one on notice, Senator. I think we should be able to provide you with that, but we just don't have that information with us, given that the Northern Territory government is the key decision-maker in relation to that approval.

Senator McCARTHY: It's just that Mr Quinn said he'd had a conversation or the department had had a conversation. I'm sure you would know when you had a conversation with someone.

Mr Quinn : I think I can provide that date.

Senator McCARTHY: Thank you.

Mr Quinn : We would have had that conversation on 24 May.

Senator McCARTHY: And that was between yourself and the Territory government?

Mr Quinn : That's correct.

Senator McCARTHY: Turning to the actual regulation, it doesn't explain what the program is and how much money is involved. Is that normal?

Mr Trotman : Senator, you're referring to the Industry Research and Development (Beetaloo Cooperative Drilling Program) Instrument 2021?

Senator McCARTHY: That's correct.

Mr Trotman : That was registered on 14 May. Are you able to answer that question?

Mr Quinn : I'm not sure if there is information in that notification around the quantity of money associated with the program, but I would note that the government has made several announcements around the program that are quite clear around the amount of money involved.

Senator McCARTHY: Mr Quinn, did you get legal advice on using a regulation that doesn't explain the program it enables?

Mr Quinn : I'd have to take that on notice. We follow a range of legal procedures in the department, so—

Mr Trotman : My understanding, Senator, is that section 33 of the Industry Research and Development Act 1996 provides a mechanism for the minister to prescribe programs in relation to industry, innovation, science and research, including in relation to expenditure of Commonwealth money under such programs, and the instrument that was made and registered on 14 May provides the legislative authority for Commonwealth spending under the Beetaloo Cooperative Drilling Program.

Senator McCARTHY: So how can you be confident in your legal authority to spend under that regulation?

Mr Trotman : I'm trying to understand what you're actually asking, Senator. If the regulation was made, we're quite confident that there is a legislative underpinning for the program. That said, though, again this goes to the direction of where the court case is heading. If I can take that question on notice, again, we will do our very best to come back to you before the end of the week.

Senator McCARTHY: Can you clarify the legal power that authorised this injection of funds?

Mr Trotman : Again, we will take that on notice. It goes to the heart of the court case, and we will certainly provide as much information as we can on notice.

Senator McCARTHY: Would that be the constitutional head of power?

Mr Trotman : I'm not sure, Senator. Again, I'll take that on notice.

Mr Quinn : I think, Senator, we're on relatively safe ground because it's on the public record. I think it's section 122 of the Constitution: the territories power.

Senator McCARTHY: Thank you, Mr Quinn. In October 2020, Minister Angus Taylor visited the Beetaloo Basin and announced that negotiations were underway for a bilateral emissions reduction agreement with the Northern Territory. Where are these negotiations up to and when is agreement expected to be signed?

Ms Bennett : The draft agreement text is still under negotiation with the Northern Territory government. Like the other agreements—so we've had bilateral arrangements with New South Wales, South Australia and Tasmania—the NT agreement is going to be a high-level document focusing on areas of mutual interest. So, in the broad, it will cover energy and emissions reduction. But those negotiations are still ongoing, and I haven't been given a time frame for when that will be finalised.

Senator McCARTHY: In October 2020, Empire Energy flew Minister Taylor and staff to the Northern Territory where they had dinner and attended a CLP fundraiser. Empire chair, Mr Paul Espie, was on that flight; is that correct?

Mr Trotman : Evidence was provided last week, as I understand it, by Empire Energy to that effect, but I have no personal knowledge of that. I would have to confer with Minister Taylor's office to absolutely say that that was correct. But, given the evidence that was provided last week, it would appear that that would be the case.

Senator McCARTHY: Was the department aware that Mr Espie and Mr Elphinstone are major Liberal Party donors and members?

Mr Trotman : I think I went to that question earlier. I personally did not have an understanding of that. But, again, I'll take that on notice because I can't speak for every member of the department. So, Senator, if you'll allow me to take that on notice, I'd be very grateful.

Senator McCARTHY: Thanks, Mr Trotman. Did the department advise the minister of a possible conflict of interest?

Mr Trotman : I'm not aware. Again, I'll take that on notice.

Senator McCARTHY: Was the department aware that the second-largest shareholding of Empire Energy is owned by Mr Tang, the man facing an arrest warrant for insider dealing in Hong Kong?

Mr Trotman : I will take that on notice.

Senator McCARTHY: Did the department advise the minister of concerns in relation to this information?

Mr Trotman : Minister Pitt is the designated minister who is the decision-maker for the program. I'm not aware of what advice may or may not have been provided to Minister Taylor. Again, if I can take that on notice we'll do an interrogation of the available records we have and come back to you.

Senator McCARTHY: Can you clarify: regulations were in May and guidelines were in March?

Mr Quinn : Yes, that's correct. On 18 March the program opened. On 14 May the instrument was registered.

Mr Trotman : Then it was 17 June when the first grants were approved.

Senator McCARTHY: You're able to advertise grants before they're legal, though? I'm just trying to understand this. It wasn't registered until 14 May, yet you had already advertised it. Is that a normal process?

Mr Quinn : As part of the development of the program and the broader policy suite, we are required to seek both a constitutional risk assessment and a legislative risk assessment to look at the way in which the program would be formulated. Typically, when those are low, it is not uncommon for the grant guidelines to be released and the program to be open while the instrument is being registered.

Senator McCARTHY: What other examples have there been of this sort of situation, where you advertise before it's registered?

Mr Quinn : I would have to get a list of examples for you. I note that the instrument we're referring to is used fairly regularly for grant programs from our department. I will consult with the Business Grants Hub, and I can provide you with a fairly substantial list.

Senator McCARTHY: This may be a question for the department of environment and water; I'll ask it and see how we go. Recommendation 9.8 of the Pepper inquiry recommended that the NT and the federal government seek to ensure there is no net increase in greenhouse gas emissions from any onshore shale gas produced in the NT. Is it the department's view that Beetaloo projects will have a net increase in the NT's greenhouse gas emissions?

Ms Bennett : I think some of those matters fall within the scope of the court proceedings. I would need to take on notice what information or what advice we can provide on that.

Mr Trotman : As I said in my opening statement, the government has said it will work with the NT government to manage greenhouse gas emissions from onshore shale gas development in the Northern Territory. We can come back to you with more clear advice, if we're allowed to take that on notice.

Senator McCARTHY: How much of a net increase, and would these increases be difficult to offset?

Ms Bennett : That goes to the court inquiry. Just in general, in terms of offsets, we have the Emissions Reduction Fund, which is effectively a market for offsets. The government has been putting a number of policies in place to ensure that the ERF can expand, including improving some regulatory arrangements out of the fund. There are a number of new methods that are currently under development. So the offsets market is certainly growing in Australia.

Senator McCARTHY: Does the department have plans to expand the water trigger in the Environment Protection and Biodiversity Conservation Act to cover shale gas, as recommended by the Pepper inquiry?

Mr Trotman : We might ask our colleagues from the Department of Agriculture, Water and the Environment to respond to that.

Ms Calhoun : I look after environmental assessments for the Northern Territory, Western Australia and South Australia. We have not yet received any referrals in relation to unconventional gas developments in the Beetaloo. However, the water trigger only applies in relation to the coal seam gas and large coalmining developments—so it would not apply in the case of this.

CHAIR: That wasn't Senator McCarthy's question. Her question was in relation to the Pepper report and its recommendations.

Ms Farrant : Perhaps I can help. Senator, you would be aware that the EPBC Act is currently under review at the moment. The officers who are responsible for that matter aren't available today and aren't with us. In a general sense, the outcome of the Samuel review indicated that the government's first port of call in terms of reviewing the EPBC Act was to keep MNES as protected matters under the act the same. At this stage the water trigger is not the subject of that review.

Senator McCARTHY: This is the recommendation, however, by the Pepper inquiry. Have there been any steps taken whatsoever since those recommendations came down in relation to the water trigger in the EPBC Act?

Ms Farrant : We will need to take that on notice. As I said, any amendments to the EPBC Act will reflect the current requirements for MNES, and any change to that would be a matter for the government.

Senator McCARTHY: Thank you.

Senator McMAHON: In relation to the grants, what are the requirements? The applications have to have an EP already in place—is that correct?

Mr Trotman : That's correct.

Senator McMAHON: And, therefore, to have an EP already in place, all of the required consultation process has already been finalised; is that correct?

Mr Quinn : The consultation processes required for an exploration permit have been finalised, yes.

Senator McMAHON: So there would be no requirement for any extra consultation to do with the grants process?

Mr Trotman : It depends on the individual company that is making the application. In some instances, some companies may not have all their approvals in place. That's something we would certainly interrogate as part of the application process. Those environmental approvals would be provided by the Northern Territory government, so it would be up to the assessment committee to liaise with officials from the Northern Territory government.

Senator McMAHON: I was asking more about the consultation process with the native title holders and traditional owners. That would have already been done, and the grants are not contingent upon further consultations being undertaken; is that correct?

Mr Quinn : That's correct.

Senator McMAHON: Do these grants have to be acquitted so that there's clear and transparent expenditure of money, and what the money was expended on, back to the department?

Mr Quinn : Indeed. There are a range of processes that the department undertakes in that realm. Evidence of expenditure needs to be provided. We also make clear in all our contracts that we can conduct a spot audit at any point in time. There are a range of other measures that the Business Grants Hub undertakes to ensure that public funds are spent efficiently.

Senator McMAHON: So you would have complete oversight of how all the money from those grants was spent?

Mr Quinn : Yes, that's correct. Under the grant guidelines there are also provisions for the Commonwealth to seek repayment of any moneys that are unspent.

Senator McMAHON: There was evidence given by Mr Nicholas Fitzpatrick, who said in his written submission:

There are corrosive bacteria down in the Earth already that can eat through steel and concrete in a matter of years. This is a scientific fact. So it’s just a matter of time before these well casings fail and seep gas oil and chemicals into our sacred water tables.

Is that a correct assertion?

Mr Trotman : I'm not aware of that, but I might hand over to Dr Andrew Heap from Geoscience Australia.

Dr Heap : Thanks for the question. That's not an area that we can provide an answer on today. It's an engineering question, rather than necessarily about the geology. However, we can take it on notice and provide advice back to you by 6 August.

Senator McMAHON: Following on from that, since hydraulic fracturing has been undertaken in the Northern Territory, has there been any record of watertable contamination?

Dr Heap : I'm personally not aware, but I might ask my colleague to come forward.

Mr Quinn : While my colleague is coming to the table, I will note that in the Pepper inquiry a number of sources of evidence that were reviewed on well integrity found, essentially, that two barriers were required to be broken for a well to fail as a result of the corrosive chemicals that you describe and that this is a very low risk—less than 0.1 per cent. This is based on the thousands of wells in Queensland, where the well failure rate was zero, and over a thousand wells in Western Australia, where there was no evidence of failure.

Senator McMAHON: You said that in Queensland there have been zero cases of well failure.

Mr Quinn : That's correct.

Dr Robinson : We're also not aware of any cases of groundwater contamination from wells in the Beetaloo Basin.

CHAIR: Have you conducted any inquiries?

Dr Robinson : In partnership with the CSIRO, we have studied extensively over the last four years under the Geological and Bioregional Assessment Program, looking at the potential of impacts on the groundwater systems from unconventional industry in the Beetaloo. We have already completed the first two stages of that work, and that is all publicly available now. The third stage is due for publication very shortly, but the preliminary results are already demonstrating that, given all the ways of causing impact that have been considered, our best scientific opinion is that there is a very low probability of any impact to the groundwater system and that, in fact, all processes can be appropriately mitigated using current regulatory frameworks that exist, particularly if the recommendations of the reviews that have taken place in the Northern Territory are followed.

CHAIR: That's if people follow the regulatory processes.

Dr Robinson : That is correct.

CHAIR: And we're talking about a company that involves somebody who has an arrest warrant out because of insider trading. So, clearly, following regulations isn't part of their suit.

Senator McMAHON: I will just clarify that, in the Northern Territory, you're not aware of any groundwater contamination from any hydraulic fracturing occurring?

Dr Robinson : I am not aware of any, no.

Senator McMAHON: And the scientific opinion is that, using the techniques that are being used, that would be an extremely low risk.

Dr Robinson : A very low risk indeed. I can also state that the geology in that region is such that the targets that the companies are looking for that are of interest from a petroleum prospectivity point of view are really quite deep indeed, and there's quite a vertical separation between those targets and the groundwater systems that are of interest to the community. There are a number of geological structures between the targets and the shallower groundwater system that we do not believe can be penetrated.

Dr Heap : If I can add, the stress regimes in the area don't very easily allow for vertical propagation of any fracks that might happen, so it tends to frack along the seam rather than necessarily between the shallower and deeper sections.

Senator McMAHON: That is horizontally, not vertically?

Dr Heap : That's correct.

Senator McMAHON: We heard evidence last week about the water tables and the basins of the Beetaloo area. It was an opinion of one of our witnesses that that water was connected to East Arnhem Land water tables. Are you aware of any scientific evidence regarding that?

Dr Robinson : I think I'd probably need to take that question on notice.

Dr Heap : Maybe to assist today, there is some connection of the shallow aquifers beyond the Beetaloo itself, so it could be that that's what they're referring to but we'll take it on notice and provide the answer.

Senator McMAHON: Thank you.

Senator STERLE: I'll be quick. I want to follow on with Geoscience Australia, and Senator McMahon was starting along those lines. I don't know if you were listening, but you hear all the fears of the traditional owners and Australia's First Nations people in the area. You said there's no evidence yet of any poisoning of the water or whatever the terminology was. What fears would the traditional owners have from fracking? What chemicals could pose problems? Please explain. I must say this, and I want to be very clear: the industry does itself no favours. The industry doesn't get off its backside and get out there and communicate. Ten years ago I had a similar inquiry in Queensland, through Roma and all that, and here we are 10 years later and they still haven't been able to get out there and use the expertise that you good people bring. What can people fear about fracking?

Dr Robinson : I think in the hearings earlier today you heard from the traditional owners themselves, who expressed some of their fears. It's not really for me to be able to speak to the fears of other people. What I can say is that the program that I referred to earlier, the geological and bioregional assessments, has done a very thorough investigation of the processes that will be involved in developing the unconventional hydrocarbons in the Beetaloo Basin, including consideration of the chemicals that are used in hydraulic stimulation, and the preliminary findings of that work have indicated that, with the appropriate regulatory processes in place, the risks to the groundwater are negligible and can indeed be mitigated. Those findings will be publicly released in the very near future.

Senator STERLE: You lost me when you said you can't speak to other people's fears. Forgive me; I don't know what you mean by that. If people have got fears about water being poisoned, you can talk to that, can't you? You can talk to what chemicals are used—I hope you can. If you can't, there's another doctor or someone. Is there a chance of leakage?

Dr Robinson : I guess what I'm saying is that the findings of our recent studies are that the potential for leakage can be mitigated, and we do not believe that this is a risk in the Beetaloo Basin. If you want to ask questions about the specific chemicals, that is not our forte, but there are other experts that potentially could talk about the chemicals themselves. We're better placed to talk about the geology.

Senator STERLE: Okay, but does anyone from Geoscience know what those chemicals are—or from the department? Sorry if I've got the wrong people. Someone needs to be able to say why we're patting our Aboriginal friends on the head and saying everything's Mickey Mouse—not you, Doctor. Surely someone must be able to. If a senator can't ask the question, no wonder our traditional owners want to spear you—sorry, Doctor.

Dr Robinson : Sorry, I did not mean to suggest that you couldn't ask the question in any way, Senator. In fact, I would encourage you to direct that question to the CSIRO, who conducted the analysis of the chemicals in the Geological and Bioregional Assessment Program.

Senator STERLE: That is great. Thank you very much. I'll put those questions to CSIRO.

CHAIR: I've just got some final questions for the Climate Division. FOI documents released to the ABC in 2020 reveal that the department had warned the minister in relation to the inability for emissions from development of onshore shale gas in the Northern Territory to be offset. Is that still your view as a department? Is that still your advice?

Ms Bennett : Certainly I'm aware of the brief that was provided to the minister then. It was actually before my time in the division. In terms of whether that's still our view, because it relates to offsets associated with the Beetaloo Basin, again it's that grey area and I have some concerns about whether, given the court proceedings, answering that is prejudicing, potentially.

CHAIR: How is it prejudicing when it's a simple answer of yes or no or fact as to whether the department believes that the emissions from these projects cannot be offset? You can have your battle in the court, but I'm asking for what the department's understanding, view and advice is right now.

Ms Bennett : I'd need to go back to that original brief because I'd be surprised if the department said they couldn't offset, because you can offset as long as there are another offsets out there. They may have said it would be difficult to offset. That is different to being unable to offset. Going back to my original answer when offsets came up, the government is growing the offset market through the Emissions Reduction Fund. It's a market that's based on supply and demand, so, if demand for offsets increases, the supply will also increase.

CHAIR: What would be the projects that would be used to offset emissions from the three wells from Empire—

Ms Bennett : There's a range of projects that would be available for offset. As I said, we've had discussions with the Northern Territory government at a very high level just around how the Emissions Reduction Fund works and the method development process. But at the moment, for instance, in the Northern Territory there are a number of Savanna fire-burning projects. There are landfill gas projects. There are other projects in various states. There are energy efficiency projects. I think there are 34 methods under the Emissions Reduction Fund.

CHAIR: How many tonnes of carbon would need to be offset from the three grants given?

Ms Bennett : That is very much going to the—

CHAIR: Do you know the answer to that?

Ms Bennett : In terms of the actual development of Beetaloo, they're still working through that process. So, in fact, I don't think there has been any outcome on what the production of those wells would be.

CHAIR: So $21 million of taxpayers' money has been handed over to one gas company. Do we know how much pollution that is going to create?

Ms Bennett : That is all under investigation at the moment through the study. CSIRO and others are working on the associated emissions from that development.

CHAIR: So the money has been given but we don't even know how much pollution it's going to create?

Ms Bennett : Well, I think the money's been given to do the actual work. Is that correct?

Mr Trotman : Yes, that's right. In terms of the sequencing, it's hard to predict what the level of emissions will be until the actual work is undertaken and done. Where my colleague Ms Bennett is coming from also is that some of this is subject to the court case as well. We can potentially take that on notice and come back with a more fulsome answer.

CHAIR: That would be helpful. Thank you. Who will pay for the offsets? Is this something that's funded by the Commonwealth or is it funded by the NT government? Who pays for the offsets?

Ms Bennett : I think all of that is still to be determined. Sometimes it's the companies involved and sometimes it's government. It depends.

CHAIR: Empire Energy, notwithstanding some of the dodgy operators they've got on their books, said to this committee last week that they were in negotiations to finalise the agreement. What's in the agreement? They've already been promised the money.

Ms Bennett : That would be—

Mr Trotman : I might ask Mr Quinn to go into that. Again, it might become subject to the court case, but I'll ask Mr Quinn if he can answer that question.

Mr Quinn : I can speak in general terms. Typically, we receive an application for a grant. That's assessed according to the assessment criteria. Following that, there is a negotiation process around milestone payments around some details of the expenditure—ensuring that they all meet the requirements. They're the sorts of things that go on. I guess it's a contract negotiation process after we've, essentially, indicated an in-principle agreement to the process.

CHAIR: Does that agreement consider who's going to pay for the offsets?

Mr Quinn : I think we're probably in the realm of some specificity—

CHAIR: Either it does or it doesn't. At what point do the offsets get discussed? It obviously isn't before you give them money, because you've done it. So are we in that process now, or is it just something where the can's been kicked down the road?

Mr Quinn : I think that the evidence my colleagues were trying to give earlier was that perhaps it's useful to distinguish that this is for exploration activities. Until the exploration activities are conducted, we can't really know what a commercial amount looks like or what the offsets associated with that process will be.

CHAIR: So we're spending $50 million of taxpayers' money to accelerate fracking in the Northern Territory, and it's, 'Oh yeah, we'll have an offset program,' but we've got no idea—no idea!—when that will even be discussed, let alone when it will kick in.

Ms Bennett : In fairness, it's the Northern Territory government that has committed to offsetting the life cycle emissions from the Beetaloo Basin.

CHAIR: Do you think the taxpayer cares whether it's the Northern Territory government or the Australian government? It's their money. It is Australian taxpayers' money, and it is our climate.

Mr Trotman : I think, as I said in my opening statement, that the Australian government will work with the Northern Territory government to manage greenhouse gas emissions from onshore gas development in the Northern Territory. And I think that is precisely where Ms Bennett was heading in terms of saying once we get to the production phase is when there'll be a better understanding of just what those emissions will be.

CHAIR: As you know, this inquiry is continuing for some time, so we will definitely get you back before us. Hopefully, we can progress some of the other issues we've asked about and you've had to take on notice, or that have been put aside while the court case is underway. Thank you for your time today.

Senator STERLE: Chair, could I just ask something?

CHAIR: Sorry, Senator Sterle.

Senator STERLE: It's more a statement. I'm incredulous at the questions being taken on notice. I just want to share with the committee the minister's foreword to the Beetaloo strategic basin plan. The minister says here:

The Beetaloo Sub-basin in the Northern Territory (NT) has the potential to be a world-class gas province. The gas produced from large-scale Beetaloo development could supply a variety of gas markets, including:

downstream gas industries in the NT

the east coast domestic gas market

potentially LNG exports

Yet they can't even answer your questions. I think that is just disgraceful. They know that much but they can't even face the committee and tell the truth. They hide behind court action.

CHAIR: Thank you, Senator Sterle. I think it is very disappointing that we can't get answers, just because the department has been asked to front up at a court hearing.

Thank you very much.