The Business Council of Australia (BCA) welcomes the opportunity to provide feedback on the Department’s exposure draft legislative package that will establish and implement the Domestic Gas Reservation Scheme.
Throughout the development of this policy the BCA has supported a well designed reservation scheme that is consistent with the Government’s Future Gas Strategy principles and priorities and balances the needs of Australia’s energy sector, manufacturers and the broader Australian economy’s transition to net zero.
The BCA acknowledges the Government’s considerable efforts in consulting with stakeholders over recent months on what is a critical and complex policy to design.
The BCA welcomes improvements to some elements of the policy’s architecture since the draft design framework was released and consulted on in May/June 2026.
- A staged commencement of the scheme from 1 January 2027 to 1 January 2028 supports a more orderly transition to the new regulatory framework.
- The granting of long term export licences for 20 to 50 years provides greater regulatory, investment and contracting certainty to the gas sector.
- A domestic supply obligation (DSO) that is calibrated to forecast domestic demand plus a buffer, rather than strictly requiring licence holders to supply gas equivalent to 20 per cent of their LNG exports, is more aligned with achieving the policy’s objectives.
- A degree of flexibility in meeting DSOs, with less than 100 per cent being delivered each year, is more aligned with operational, commercial and market circumstances.
- Consequential amendments that effectively repeal the existing marketing code price caps, the Australian Domestic Gas Security Mechanism and the Heads of Agreement reduce redundant regulatory intervention in the gas sector.
The BCA notes that there are several areas in the legislative package that need further improvement, clarification and possible amendment, particularly where there are inconsistencies and drafting errors. Thematically, these areas include the following.
- There is a critical inconsistency between how the 110 per cent demand calibration is described in the Exposure Draft versus how it is described in the Explanatory Memorandum and this needs to be clarified.
- How will significant domestic demand forecasting variances be accommodated, including unexpected seasonal conditions, demand or prospective industrial growth that may not be captured in the Gas Statement of Opportunities because projects are uneconomic at prevailing gas prices, creating a circular risk of lower forecast demand and lower reservation volumes?
- How will adjustments to DSOs in recognition of infrastructure constraints be verified and defined in terms of duration and how will industry be engaged to resolve possible infrastructure constraints?
- Further clarification about how the ‘reasonableness test’ will apply to adjustments to DSOs in recognition of existing contractual obligations, is required.
- It needs to be made clear that DSO exemptions and adjustments for one licence holder are not effectively loaded into the DSOs of other licence holders, that is, above their proportional LNG export share.
- Given the requirement to deliver at least 90 per cent of the DSO each year, how will DSO quantities that are surplus to domestic market demand be addressed for compliance purposes, particularly in circumstances where ‘carry forward’ DSOs accumulate in aggregate?
- How does the policy mechanism address the potential risk of chronic oversupply in the absence of an export release mechanism of some description?
- Whether the requirement on licence holders to supply the domestic market (according to their DSO quantity) will force pricing outcomes below the costs of production, and, if so, how this risk is avoided.
- Greater clarity is required on how credits for exceeding DSOs in a given year will be treated / carried forward, symmetrically with DSO shortfalls.
- Ministerial discretion associated with the scheme is too wide and clearly defined guidelines to assist multiple ministers in their decision making power (and future ministers with respect to consistency over time) would add greatly to the scheme’s stability and investor certainty more broadly.
- While the reporting and compliance burden associated with the scheme is very high there is little clarity on how administrative law and arbitration would operate to balance this burden.
- The Australian Energy Regulator’s role is integral to the schemes functioning and detailed guidelines are needed on how the regulator will fulfil on its functions.
- The ACCC Gas Market Inquiry and its reporting requirements have not been included in the set of measures being repealed and we urge the Government to assess the merits or otherwise of continuing this Inquiry.