I rise to speak on the Domestic Gas Reservation Bill and related bills. Overall, I'm supportive of this legislation. The Western Australian gas reservation scheme, which has now been in place for two decades, has shown that gas reservation schemes can be effective in ensuring Australians have abundant access to their own gas for a reasonable price. The east coast has looked enviously at our gas reservation scheme for many years, and it's finally taking action to implement its own. However, another lesson from WA is that the details matter. The gas companies will do whatever they can to exploit the loopholes in the system to prioritise profits over good faith engagement, and there are a range of issues with this Domestic Gas Reservation Bill that remain unresolved and ambiguous, which could form the basis for loopholes that result in more expensive gas for Australians, more emissions or more profits for gas companies.

Let me start with why we're here. Australia is one of the three largest exporters of gas, or LNG, in the world. Yet, despite having abundant reserves of gas in our country, we still often see projected shortages of gas and domestic prices linked to international prices. After Russia invaded Ukraine, wholesale prices went from under $10 a gigajoule to as much as $60. And it's a bit ridiculous that a conflict on the other side of the world can cause the price that Aussies pay for gas to skyrocket, when the gas is sitting here. Of course, the logic for the gas companies is also clear: they make more money by selling the gas overseas, so why wouldn't they? If we want gas to stay at home at a reasonable price for the people who own it, there have to be rules.

And that's why WA took action. Since 2006, through state agreements negotiated project by project, LNG exporters in WA have had to make gas equal to 15 per cent of their exports available to the local market. Now WA sells gas for around $6 to $8 a gigajoule on the domestic market, against $10 to $12 on the east coast. The WA scheme does have some serious problems, which I'll address later, but the basic premise has held up; gas that's kept in WA has been available and cheaper.

With gas prices remaining high on the east coast and with the Australian Energy Market Operator projecting shortfalls towards the end of the decade, the east coast has also decided to act. So what does this bill actually do? In short, this bill makes the right to export LNG depend on holding a licence. The licence comes with an obligation to supply the domestic market with up to 20 per cent of what the exporter sends overseas. Each year, the Australian Energy Regulator works out how much gas the domestic market is likely to need, adds a 10 per cent buffer and divides that amongst the exporters. Exporters have to supply the gas rather than simply offer it. Contracts signed before 25 December are respected, and the minister can reduce an exporter's obligations for those contracts for infrastructure constraints and where a state has its own reservation arrangements, which in practice means WA. Penalties can reach 10 per cent of annual turnover, and a licence can be suspended or cancelled. The companion bills put a levy on licences to cover the cost of the scheme and repeal the existing Domestic Gas Security Mechanism.

I support the principle, because this is Australians' gas. We should not be facing shortages and international prices for something that comes out of the ground here. I also believe the way to deal with a shortage is to put the gas we already have to better use before we go looking for more. New gas fields mean more emissions, and I want to keep new supply to a minimum and get as much as we can from renewables.

There are many specific aspects of this bill which are positives worth highlighting. The requirement that exporters must sell rather than just offer is an important change. It turns this into a buyer's market, where gas exporters must provide gas at prices that buyers will accept, rather than making only unattractive offers. I'm also pleased that exporters can meet their obligation by reducing domestic demand, for example by paying to electrify someone else's gas use. As the bill is drafted, this will depend on rules in the Gas Market Code, which haven't been written yet. But, if they're done well, this could be a positive outcome. Electrification and renewable energy are the long-term solutions as fossil fuels are phased out over time.

I also have a range of concerns with the bill as drafted. They are potential loopholes and ambiguities which threaten to undermine the intent of the legislation. Firstly, I'm concerned that this bill could drive an expansion in gas supply. Exporters want to keep their plants full. If the easiest way to meet a domestic obligation is to develop a new field rather than diverting gas from export, then they'll do that. An expansion of gas fields would not be compatible with our emissions targets and our mission to restore a stable climate for future generations. Secondly, there's a lack of clarity and modelling around how gas prices are actually expected to fall. This is a significant intervention in a major market, and the government is not clear on what's it's expected to do to the market or the prices that people will pay. Thirdly, the bill leaves a great deal in the hands of the minister. The minister can reduce supply obligations, for the whole market, to zero. The minister can adjust the obligation for an individual exporter and can grant extended periods at a reduced percentage. Now, I accept that some discretion is needed because markets change, but anyone trying to plan an investment or sign a supply contract has very little to hold on to. A lot is also still undefined. How additional gas is determined, how the annual demand calibration works and how baselines are set all sit in codes and instruments not before this parliament. Whether the scheme succeeds will depend on getting those right—and we're being asked to vote on the frame without them.

I also want to look at the interaction of this new federal gas reservation scheme with the WA scheme. Technically, this scheme will apply nationwide, but the bill allows the minister to carve out facilities that are already covered by a state scheme. Clearly the intention is to carve out WA facilities, which is the right decision, but there's an opportunity to use this federal scheme to strengthen compliance with the WA scheme. The issue with the WA reservation is that the 15 per cent obligation is measured over the life of the project and not in each year, so an exporter can supply very little for a long time and still say it's on track. The terms are negotiated and confidential. Only about eight per cent of WA gas was supplied domestically in 2023, not 15 per cent. The DomGas Alliance, which represents users such as Alcoa, Wesfarmers and Yara, says the Pluto LNG project has supplied just 3.4 per cent of its production to the local market. Many experts doubt that some facilities will ever reach 15 per cent, so a facility could receive the benefit of a carve-out from the federal reservation, despite not complying with the WA scheme.

There are two further points worth making. Gas reservation is a cost-of-living and energy security policy not a climate policy, and it can have unintended consequences. If it works, gas gets cheaper, and some households and businesses who would have switched to electric could decide to stay on gas. The answer is not a weaker scheme. The answer is to accelerate electrification and renewables alongside it, with help for households, small businesses and industry to get off gas. It also means asking how licences of 20 to 50 years sit alongside our climate targets, given that a licence issued in 2028 could run into the 2070s. We need to stay full steam ahead on net zero, while making sure the lights stay on and stay affordable along the way. Those two aims can work together.

Secondly, this bill is not a substitute for a better tax on gas exports. Gas companies do not pay their fair share for the right to use and sell the gas that belongs to Australians. The PRRT has failed so comprehensively that many gas projects have never paid it and probably never will. Since the invasion of Ukraine, exporters have made windfall profits approaching $100 billion, and the public has seen little of it beyond company tax.

The government has options here. It could fix the PRRT or introduce a targeted windfall profits tax or a two-way cashflow tax that shares both the upside and the downside. Now, I accept that investors need certainty and that sovereign risk is a thing. This calls for a carefully designed tax; it does not justify leaving the problem alone. Reservation and a fair return for the gas are separate questions, and we need an answer for both.

To sum up, I support the Domestic Gas Reservation Scheme. Gas produced here should serve the people who live here, and WA has shown it can work. But the government needs to tell us what it expects this to do to prices. It needs to narrow its own discretion, define additional gas properly, make sure the scheme does not end up producing more gas than the country needs, and then improve the taxation of gas exports. In Western Australia, an exemption from the national scheme should only be earned by delivering in good faith under our state scheme. I'll be introducing amendments to give effect to this so that an exemption is only possible if companies are actually delivering under the state scheme, not just if a state scheme is present. I ask that the government considers these amendments to make the most of this opportunity to make domestic gas reservation work effectively and fairly in every state—even WA. I commend the bill to the chamber.