Australian offshore wind gets kickstart with first feasibility licences and draft regulations

In its announcement, the Australian government said a further six licences will follow, subject to First Nations consultation.

Federal energy minister Chris Bowen said the feasibility licences “will allow developers to undertake detailed environmental assessments, geotechnical surveys, obtain approvals and undertake further consultation on their proposed projects”. This means the successful project proponents will now be able to move from concept to reality, with investment in this sector expected to accelerate significantly.

The announcement follows the release of an exposure draft of the Offshore Electricity Infrastructure Amendment Regulations 2024 (the Draft Regulations) by the Department of Climate Change, Energy, the Environment and Water. The Draft Regulations are intended to fully operationalise the Offshore Electricity Infrastructure Act 2021 (OEI Act) – the relevant legislation which governs licencing and operation of offshore wind farms in Australia – by setting out the operational requirements for offshore wind farms in Australia.

The Draft Regulations, as currently proposed, are demanding and complex. Some of the current drafting introduces uncertainty which we hope will be addressed in the final version. It will be important for developers to understand their obligations, including financial obligations, under the Regulations.

The Draft Regulations set out arrangements for:

• management plans;
• a design modification scheme;
• financial securities;
• safety and protection zones;
• work health and safety;
• record keeping; and
• fees.

Management plan – consultation requirements

The holder of a feasibility licence, a research and demonstration licence, or a transmission licence and infrastructure licence, may apply to the Offshore Infrastructure Regulator to approve a management plan for the licence. 

Consultation processes in relation to environmental plans for offshore petroleum and greenhouse gas storage has been fraught with uncertainty and ambiguity and the subject of highly mediatised court cases, including the case between Santos NA Barossa Pty Ltd and Tipakalippa, the case between Cooper and National Offshore Petroleum Safety and Environmental Management Authority (known as the Woodside case), and the case between Munkara and Santos NA Barossa Pty Ltd. This led to the release of a consultation paper on the Offshore Petroleum and Greenhouse Gas Storage (Environment) Regulations 2023 (Cth) in January 2024.

Who to consult

The Draft Regulations provides more clarity, in section 57, in relation to who should be consulted – a list of stakeholders to consult is set out, which is welcome. However, one of the groups listed in this section is described as ‘communities that the licence holder reasonably considers may be affected by the activities subject to consultation’. It is unclear what ‘being affected’ means and what it would mean to ‘reasonably consider’. This introduces some room for interpretation and therefore potential challenge as to the breadth of consultation required.

While it is hoped that ambiguity will be remedied before the Draft Regulations are finalised, some guiding principles provided in case law can be of assistance.

In Woodside, the judge stated that the “regulatory requirements as to consultation are directed to ensuring that all those with a relevant interest are given a reasonable opportunity to provide details that enable an understanding to be formed”.   

Tipakalippa highlighted the importance of identifying all affected persons – in that case, the project proponent was found to have not consulted with each person it was required to consult with. Identifying relevant groups will therefore be of critical importance.

When it comes to consultation with Traditional Owners, consideration of which groups have the appropriate cultural authority was considered by the case of Munkara. Cultural authority refers to who is able to speak for Country and therefore identifying those persons will be an important step in understanding what the required parameters of consultation are.

How to consult

The manner in which consultation is to be conducted under section 58 of the Draft Regulations largely mirrors that relating to offshore petroleum and gas activities, with licence holders required to:

• provide the person or group with sufficient information to make informed assessment of possible consequences; and
• provide sufficient time to undertake the consultation.

One key difference between the offshore petroleum and gas regulations and the Draft Regulations is the timeframes for decision making. The timeframe in the Draft Regulations for a management plan is 90 days as opposed to the 60 day period provided for in the offshore petroleum and gas regulations.

The Draft Regulations also require licence holders to describe a ‘stakeholder engagement strategy’ (section 76) in their management plans, which explains how the licence holder will consult on an ongoing basis throughout the project. The requirement of licence holders to consult before and during effect of the management plan is designed to provide the regulator with oversight across the consultation landscape as it relates to the project.

Revision of management plan and timeframe for decision

Section 53 of the Draft Regulations sets out the many circumstances in which a management plan is to be revised and how a revised management plan is to be approved. The list is long and could lead to uncertainty as revised plans are likely to be required very often, arguably in more circumstances than for oil and gas environmental management plans.

Of note is the requirement that a revised plan be prepared if obligations under the Environment Protection and Biodiversity Act 1999 (EPBC Act) start applying or if there is a material change to such an obligation. The phrase ‘material change’ is open to interpretation, which again could lead to uncertainty. From an administrative perspective, it will be important to monitor changes to regulations and requirements under the EPBC Act, including listing events as they are introduced.

The timeframe for a decision relating to a management plan is 90 days and can be extended by the regulator a number of times. This is a long timeframe. The risk of multiple extensions at the regulator’s instigation could have significant consequences for developers and impact on a project’s timeline.

Financial security

The OEI Act requires licence holders with a management plan to provide financial security to the Commonwealth. Section 28A of the Draft Regulations provides that the Minister may only grant a licence if financial security requirements are complied with. 

Section 87 of the Draft Regulations describes how the management plan is to address compliance with financial security requirements and sets out the methods to identify and quantify the costs, expenses and liabilities that may arise in connection with the decommissioning of the offshore wind facility.

The financial security regime appears to more onerous than that in place for offshore oil and gas facilities. These requirements could have a chilling effect on investment in the sector.

Other considerations in the Draft Regulations

Design notification scheme and management plans

These provisions are designed to allow the regulator to provide feedback to the licence holder on certain offshore electricity projects before the licence holder submits a management plan application. This process allows early engagement with the regulator but does not constitute a regulatory decision point. This scheme will only apply to transmission and infrastructure licences and commercial licences. Once a licence holder has requested feedback through the scheme, it must address the feedback in the final management scheme. Inconsistency with a design notification scheme is something the regulator may consider in deciding whether to approve a management plan.

This scheme provides an opportunity for positive early engagement with the regulator as well as constructive feedback, but also has the possibility to restrict licence holder flexibility regarding management plan design changes before submission.

Safety zones and protection zones

The OEI Act provides for safety zones and protection zones to be established around offshore wind farms. These zones are designed for the safety of workers and other users of the marine environment, and protect the wind farms from damage from other marine users.

A safety zone is a specified area up to a maximum of 500 metres around eligible infrastructure that would prevent certain vessels from entering or being present in the area without written consent from the Regulator. A protection zone is a longer term specified area around the offshore wind farm to a maximum of 1,852 metres on either side. Certain activities in this area may be restricted or prohibited. These zones are designed to protect offshore wind farms from activities that may pose a risk to infrastructure.

Work health and safety

The Work Health and Safety Act 2011 and Work Health and Safety Regulations 2011 will generally apply to work in the offshore wind industry, with some modifications proposed to reflect the unique offshore environment, specifically in relation to the role of the principal contractor and WHS risks associated with diving work.

Interestingly, the Draft Regulations amend the longstanding requirement that the principal contractor has ‘management and control’ of the worksite to acknowledge the fact that the construction of offshore wind farms require multiple worksites – both onshore and offshore. Traditionally, a construction project will have one principal contractor with management and control of one worksite.

This change ensures that the licence holder can retain the principal contractor role, including coordination of concurrent activities, while delegating the responsibility for managing and controlling individual worksites.

Furthermore, the Draft Regulations address the higher risks associated with deep sea diving during offshore construction and maintenance by imposing obligations on relevant persons to have a diving safety management system (DSMS) and a diving project plan and appointment of diving supervisors who will have specific additional duties.

Record-keeping

Part 8 of the Draft Regulations provide for further and more generalised reporting requirements in addition to those required under Division 2 of Part 1 of Chapter 7 of the OEI Act.

Data management

While not currently included in the Draft Regulations, it is intended that a regulation will be developed to require licence holders to provide to the Australian government geophysical and geotechnical survey data.

Fees

The OEI framework operates on a full cost-recovery basis through fees and levies. The applicable fees are set out in the OEI Act.

Updates to the licencing scheme

Section 3 of the OEI Act requires each licence holder to report annually on a range of information relating to their project. The Draft Regulations add a requirement to report annually on how they are contributing to, or will contribute to, the Australian and local communities, including in relation to the use of Australian goods and services.

What developers need to know

There remain a range of hurdles for the offshore wind industry in Australia: securing supply chains; the development of appropriate port infrastructure; the Victorian state government progressing the Gippsland offshore Wind Transmission Project; and understanding what government support will be available in the form of contracts for different or other support arrangements. However, the issuing of feasibility licences and the Draft Regulations is a positive step to helping deliver a new clean energy industry for Australia. Offshore wind will help futureproof energy security, with it being envisaged that the first 12 projects will deliver capacity to generate 25 GW of power. This is more electricity than the entire state of Victoria generated in 2023.

While the Draft Regulations seek to provide further clarity to project proponents as to the framework they will be operating under as they move through the feasibility licence process through to commercial licences, they raise some concerning issues. The consultation period on the Draft Regulations closed on Sunday 12 May 2024. Hopefully the final regulations will take into account the concerns raised by stakeholders in the offshore wind industry through the consultation process. 

Co-written by EJ Yeoh, Lucy Burt and Georgina Dodd of Pinsent Masons.