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Beetaloo Basin fracking grants ruled invalid, 'legally unreasonable' in court challenge brought by environment groups

ABC Business logoABC Business 23/12/2021
a view of a mountain: Gas company Empire Energy won the funding to fast-track exploration in the Beetaloo Basin. (Supplied: Empire Energy) © Provided by ABC Business Gas company Empire Energy won the funding to fast-track exploration in the Beetaloo Basin. (Supplied: Empire Energy)

A judge has ruled a $21 million grant to speed up fracking in the Beetaloo Basin invalid because of the federal government's "unreasonable" move to quietly award the money while a court challenge was underway.

Gas company Empire Energy entered a trading halt just before Thursday morning's decision about the grant, awarded as part of the Coalition's $50 million subsidy program to fast-track development of the basin.

Lawyers for the Environment Centre NT (ECNT) had argued Resources Minister Keith Pitt failed to consider the climate risks associated with his decision to award Imperial Oil and Gas, which is fully owned by Empire Energy, three grants totalling $21 million in July this year. 

Justice John Griffiths declared the contracts invalid and void because of the minister's decision to suddenly execute the grant agreement in September while the court challenge was underway and without notifying the ECNT.

He said the environment group had made repeated requests for an undertaking from the minister that no agreement would be signed until the case was finalised and that it was "reasonable" for them to expect a response. 

Justice Griffiths said the minister's decision deprived the ECNT of the "opportunity and right" to seek an injunction.

He said the Commonwealth "apparently … took a considered forensic decision" not to give evidence about the reasons for the move and he was not prepared to infer that it had tried to "stymie" the court challenge.

"No evident and intelligible justification is evident for the Commonwealth's decision to enter into the Imperial Contracts on 9 September, 2021," Justice Griffith's wrote in his judgement.

"I find that, having regard to the circumstances and context in which it occurred, the Commonwealth's decision to enter into the [contracts] was unreasonable in the legal sense."

But Justice Griffiths rejected the ECNT's challenge to the validity of the grants program as a whole, which means the grants can be remade and further funding awarded.

He also found there was no requirement for the minister to consider the potential climate impacts of exploration of the basin in this case.

He said this was because there was no evidence the exploration and appraisal activities related to the grants would "contribute to climate change risks, of the kind identified by the applicant".

Both sides claim victory in court decision

ECNT co-director Kirsty Howey said even though the climate change grounds were refused, the decision left the door open for future legal challenges on fossil fuel grants.

"It's really a win for the rule of law," she said.

"The court was frankly scathing, that the conduct of the minister in these proceedings was unacceptable.

"Fossil fuel subsidies are not a reasonable use of public money. Under Australia's commitment to the global Glasgow climate pact, we need to phase out funding of new oil, gas and coal projects."

In a statement issued after the decision was handed down, Mr Pitt's office said the ruling gave a "green light to Beetaloo Basin gas development."

The statement did not acknowledge the findings relating to the government's conduct or the contracts signed with Empire Energy.

"The instrument under which the grant program was written and the approval decision to award grants to Imperial Oil and Gas were both valid and we welcome that decision so that we can move forward with the program," Mr Pitt said.

"The Beetaloo Basin has enormous potential to deliver the gas Australia needs for the future. Our resources and energy sector are vitally important to the Australian economy and are forecast to generate a record $379 billion this financial year."

Empire Energy to negotiate 'replacement' grants

A spokesperson for Empire Energy said the decision would not impact its work program, which has already paused for the Top End wet season.

The spokesperson said the company would work with the Commonwealth to negotiate "replacement agreements".

Imperial had joined the legal proceedings as a party to argue it should be granted financial assistance if the contracts were found to be invalid, given that it was not responsible for the way the Commonwealth conducted itself during the lawsuit.

Under the now invalid contracts, the first government payment was scheduled for December 31.

Justice Griffiths said he had some sympathy for Imperial's position but said the company was aware of the lawsuit and had entered into the contracts while being aware of the commercial risk.

He found "the public interest in ensuring that the Commonwealth is properly accountable for its executive conduct and actions," was most important in this case.

"I consider that compelling private interests would be necessary to outweigh that central public interest … I am not persuaded that Imperial's private interests reach that level," he said.

The parties have been ordered to negotiate about costs.

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