Australian ruling plugs gap in the offshore power infrastructure regulatory framework

The Court determined that where an application is made for a feasibility licence under the Offshore Electricity Infrastructure Act 2021 (Cth) (the Act) for an area which overlaps with the area of another application which is considered to be of greater merit, the minister for climate change and energy can grant the licence over a lesser area with the overlapping parts excised, so long as the minister is satisfied that the applicant meets the merit criteria under the Act.

The judicial review was brought by Seadragon Offshore Wind Pty Ltd, a wholly-owned subsidiary of UK-based offshore wind projects developer and operator Flotation Energy, under the Administrative Decisions (Judicial Review) Act 1977 (Cth). Seadragon sought to challenge the decision made by the minister under section 33(1) of the Act to refuse its application for a feasibility licence for a proposed offshore wind farm off the coast of Victoria. A feasibility licence allows for a party to assess the feasibility of an offshore infrastructure project in the licence area and apply for a commercial licence for the proposed project if desired. The minister said the reason for the refusal was that Seadragon's application area overlapped with another application of greater merit, and he did not believe the Act enabled him to grant the licence over a reduced area from that of the application.

The court ruled that the minister in this case made a mistake in interpreting a specific provision under the Act, which gives him the power to grant a feasibility licence to an eligible applicant. The ruling is significant, as it has addressed the issue of overlapping applications of unequal merit. The court highlighted that this issue is not explicitly covered by the Act and the accompanying regulations, which instead only deal with overlapping applications of equal merit, and this gap in the regulations contributed to the minister’s misinterpretation.

Florence Riviere, planning and environmental law expert at Pinsent Masons, said: “This case sets important precedent for determining how feasibility licences will be granted where bids of different levels of merit feature overlapping areas, which is likely to be a common occurrence given that offshore wind farms are restricted to declared zones.”

The key issue for the court in this case was whether the minister has the power under section 33(1) of the Act to grant a feasibility licence over an area reduced in size from the area for which the application for the licence was made. In its submission, Seadragon argued that the minister’s decision was “afflicted by an error of law” and he should instead grant it a licence over a reduced area from which the overlapping parts had been excised. The court sided with the applicant, confirming that s 33(1) of the Act does indeed allow the minister to grant a licence for a smaller area than originally applied for, as long as the area meets the necessary requirements.

Lorraine Ng, a legal expert on offshore wind and renewable energy projects at Pinsent Masons, said: “Enabling the minister to grant licences over smaller areas with overlapping parts excised means that more projects will be able to be approved. This should come as welcome news to developers, as offshore wind is likely to be a key part of Australia’s plans for achieving its net-zero target for 2050.”

In its judgment, the court explained that the power in Section 33(1) is to grant a licence “in respect of an area,” which can be any area meeting the requirements of being part of a declared area and meeting the criteria in section 33(4) of the Act. It does not need to be the exact area set out in the application. Therefore, the minister’s refusal was based on the incorrect interpretation that he lacked the power to grant a licence over a reduced area from that of the application. This constituted an error of law. As a result, the court ordered the minister’s original decision to be set aside and for him to reconsider Seadragon's application. The minister was also ordered to pay for Seadragon’s legal costs.

Ng added that the case highlights the difficulties of statutory interpretation when considering multiple sources of law, such as statutes and regulations, particularly where there are gaps in the drafting of the laws. The federal court has identified a gap in the offshore electricity infrastructure regulatory framework and addressed the issue of overlapping applications of unequal merit. It found that while the licensing scheme requires an application for a specific area, the Act itself does not mandate this, meaning the minister was able to grant the license over a reduced area.