Victoria’s Allan government has increased gas exploration permit fees by more than 300%, a move described by gas industry members as a “massive hit” to the sector.
Members criticised the fee hike, saying it sends a “mixed message” at a time when the state is grappling with concerns over future gas shortages.
The updated permit prices, which were gazetted mid-last year, will add tens of thousands of dollars to the cost of identifying new gas resources.
Victorian director of Australian Energy Producers, Peter Kos, expressed his concern, suggesting the increase aligns with broader concerns that the government may be attempting to phase out gas “stealthily” as part of its shift towards a renewable energy-reliant network.
“This fee increase is a massive hit to small exploration companies, and it will drive away investment at a time when Victoria urgently needs more gas supply,” Kos said.
“The Victorian government should remove barriers to gas exploration, not add to them. This only adds to the mixed messages from the Victorian government that only weeks ago promised to fast-track new gas projects in its Growth Economic Statement.”
Is gas being phased out?
In December, Premier Jacinta Allan announced that the state’s accelerated pathway for renewable energy projects would be broadened to encompass all new gas projects, addressing concerns over potential gas shortages.
The announcement followed accusations that Allan had misled the Victorian public about the state’s gas future. Critics pointed to new laws introduced without fanfare, which enable regulators to ban gas connections in existing homes, effectively paving the way for the gradual phase-out of gas in Victorian households.
According to The Herald Sun, the fee increases were introduced to better align with the regulatory costs associated with Victoria’s petroleum, quarrying and mining sectors. They will also reportedly help fund Resources Victoria to regulate the sector.
The move was labelled an assault on the exploration industry by opposition spokesman for energy David Davis.
“Labor’s bizarre war on gas continues with an assault on the exploration sector and production just when Victorians face gas shortages,” Davis said.
“The new jacked-up state government fees can only add to the energy costs of the sector at a time when prices have been surging. Families and businesses can only be forced to pay more.
“These massive fee increases for exploration or production send all the wrong signals just when Victoria needs more gas to deal with declining gas production.”
A Victorian government spokesperson responded to criticism, stating: “David Davis needs a history lesson on his own party’s record — it was the Liberal Party that implemented the moratorium on all onshore gas extraction during its time in government, which we later overturned.”
“We are expediting gas approvals and have approved the only gas application submitted in the past ten years, all while progressing renewable energy projects aimed at reducing energy costs.”
UK scales back gas phase-out policies
The fee structure has surfaced as the United Kingdom (TADAWUL:4280) this week scaled back some of its gas phase-out policies. The move echoes debates surrounding the Allan government’s electrification strategy, which includes a ban on gas connections for new homes.
The United Kingdom previously planned to phase out gas heating by 2035, with proposals to ban the sale of new gas boilers and mandate replacements with heat pumps or other eco-friendly alternatives.
However, the UK government has now scrapped the 2035 ban on gas boilers in new housing standards, marking a shift in its approach.
The Gas Appliance Manufacturers Association of Australia has called on the Allan government to consider a similar course of action.
Shortages looming
According to the Australian Competition and Consumer Commission (ACCC), Victoria is bracing for a gas shortfall this winter, despite forecasts of an east coast supply surplus over the next two years.
The Commission’s latest interim gas report highlights concerns that new gas production is not being developed quickly enough to meet the southern states’ demand as local reserves decline.
To address the shortfall, gas will need to be transported from Queensland and drawn from storage facilities. However, the report cautions that as pipeline and storage capacities are reached, southern states may have to rely on gas imports.
The report projects that Victoria could begin importing gas as early as 2027, describing this as a “cheaper temporary solution” compared to infrastructure upgrades. However, it warns that imports would expose consumers to the volatility of international gas prices.
“Greater domestic supply would offset these effects but there continues to be insufficient investment in new gas supply and infrastructure,” the report states.
“We expect 77–112 petajoules (PJ) of excess production in the east coast over 2025 depending on LNG producers’ uncontracted gas exports.
“In southern states, however, we expect a shortfall of up to 16 PJ.”
The ACCC reports that despite the anticipated gas surplus, prices agreed for 2025 supply are approximately double those negotiated for the 2021 supply year.