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- AEP says government has not listened to facts
- Says government has overlooked continued warnings
- Industry says proposal is just another short-term price intervention
- CME wants certainty regarding WA reservation levels
Australia’s petroleum industry has hit out at the release of the Federal government’s proposed domestic reservation scheme – saying it is just a short-term knee jerk reaction.
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Lobby group, Australian Energy Producers (AEP) said the government has missed an opportunity to address fundamental flaws in its proposed domestic gas reservation scheme, with legislation introduced today retaining key provisions that risk undermining investment, competition and Australia’s long-term energy security.
Under the proposed reservation requirement, LNG exporters must supply gas to the domestic market equivalent to 20% of their annual export volumes.
AEP chief executive, Samantha McCulloch, said despite repeated warnings from industry, the legislation continues to pursue an artificial oversupply of the east coast gas market that will weaken investment signals and crowd out smaller, domestic-focused producers.
Ms McCulloch said the proposed “must sell” requirement compounds these risks by potentially forcing producers to sell gas below cost or on non-commercial terms.
“This is another short-term price intervention rather than a sustainable policy to encourage investment in new gas supply and deliver long-term certainty for gas producers and users,” Ms McCulloch said.
“Artificially oversupplying the market might deliver a short-term sugar hit, but it risks driving domestic-focused producers out of the market, reducing competition and ultimately putting upward pressure on prices and increasing the risk of future shortfalls.
“The government’s own analysis finds the policy could reduce gas production and investment relative to the status quo, while increasing the regulatory burden on industry by $75 million
“The government cannot expect industry to invest billions of dollars in new gas supply while introducing policies that fundamentally undermine the commercial viability of those investments.
Ms McCulloch said the AEP supports a well-designed, prospective reservation policy linked to new supply that provides long-term certainty for gas users and producers.
“With the legislation now before Parliament, there is still time for the government to work with the Coalition to address these critical flaws and deliver a sustainable framework that ensures Australian households and businesses have access to reliable and affordable gas over the long term.”
States with an existing domestic gas reservation must be consulted before they are included in the proposed Commonwealth scheme in an important concession to the Domestic Gas Reservation Bill 2026 introduced to Federal Parliament today.
Elsewhere, the Chamber of Minerals and Energy WA (CME) says an amendment in the proposal introduces a legal requirement for the effectiveness of WA’s longstanding domestic gas policy to be considered before the new Commonwealth obligations are applied.
WA operates its own longstanding 15% gas reservation system of independently of the east coast, though it faces potential overlap under the federal Domestic Gas Reservation Bill 2026
CME CEO, Aaron Morey, said the provision recognised WA was not facing the same supply challenges as the east coast gas market.
“We raised this directly with the Commonwealth and, to its credit, it listened,” Mr Morey said.
“The WA Government had the foresight to implement a domestic gas reservation two decades ago which has shielded our State from the issues this legislation seeks to address.
“The flexibility in that scheme has delivered a balanced WA gas market – with prices consistently well below those on the eastern seaboard – while continuing to incentivise the development of new projects that are critical to safeguarding future supply.
“As Premier Roger Cook has highlighted, the volume of gas delivered into WA’s domestic market last year exceeded 20 per cent of LNG exports.
“WA’s gas reservation has a 20-year track record of successfully addressing the very challenges this Bill was designed to solve.
“Requiring the Commonwealth to consider that track record before applying an east coast solution to WA is a sensible provision that CME strongly welcomes.”
While welcoming amendments to more explicitly exempt WA, the CME said it remains concerned about the level of ministerial discretion in the Bill as well as ambiguity over whether any carve-out for WA will apply to new projects.
“Those powers of discretion create a high degree of uncertainty, which is why our preference remains for WA’s exemption from the national reservation scheme to be directly enshrined in law,” Mr Morey said.
“The Bill also appears to hand the Energy Minister wide-ranging veto powers over decisions that rightly rest with the Resources Minister, while introducing unnecessary ministerial veto powers over merger and acquisition activity and the transfer of LNG export licences.
“These provisions appear unnecessary to meet the objectives of the Bill – to protect domestic gas supplies – and duplicate existing powers that the Federal Government already holds over investment and foreign ownership.
“Another issue that must be addressed is the legislation’s ambiguity about how a carve-out for WA would apply to future projects.
“These are fixable problems. We’ll be working with the government and the senate to address them before the Bill passes.”
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