The Queensland Government's legislative review to support the regulation of renewable hydrogen development and use in Queensland is underway and as part of this, it announced on 6 March draft legislation to provide certainty regarding the regulation of the transportation of hydrogen via pipelines.
The draft Gas Supply and Other Legislation (Hydrogen Industry Development) Amendment Bill 2023 places the regulation of these pipelines centre stage in the State's development of a hydrogen industry. Interested stakeholders are invited to comment on the provisions which propose to extend the existing pipeline regulatory framework to hydrogen. If you would like to make a submission, you have until 5:00PM AEST on Friday 3 April 2023 to do so.
A regulatory review for all components of the hydrogen value chain is planned for 2023.
Why hydrogen pipelines need new regulation
Currently there is no specific regime in Queensland for granting a licence or authority for the construction and operation of pipelines for transporting hydrogen. This has been perceived as a looming regulatory barrier to the development of a green hydrogen industry in Queensland.
The Queensland Government is proposing to bring the licensing and development of pipelines transporting hydrogen, biomethane and other renewable gas within the purview of the Gas Supply Act 2003 (Qld) (GS Act) and the Petroleum and Gas (Production and Safety Act) 2004 (Qld) (PAG Act).
These legislative instruments are relevant in the regulation of gas pipelines because:
- the GS Act is the principal piece of legislation regulating gas distribution pipelines (ie., those transporting gas from transmission pipelines to gas users); and
- the PAG Act is the principal piece of legislation regulating gas transmission pipelines (ie., those that transport gas from processing and storage facilities over long distances to distribution networks or large-scale gas users).
This follows amendments to the National Gas Law and National Gas Rules which are presently before Parliament are aimed at ensuring market bodies may exercise their functions and powers in relation to hydrogen and other covered gases. It is expected those amendments will pass later this year.
Proposed changes to the GS Act: Gas Distribution Pipelines
The GS Act and the Gas Supply Regulation 2007 regulate the supply and sale of gas through distribution pipelines in Queensland. The GS Act makes provision for:
- a licensing regime for distributors of natural gas, including approving, amending, suspending and cancelling distribution authorities;
- regulation of the installation, operation and maintenance of gas infrastructure on public places such as distribution pipelines, customer connection services, and meters;
- supply of gas to customers, including on-supply and particular pricing powers;
- powers to ensure the sufficient supply of gas to essential services and other priority customers in the event of a shortage of natural gas supply to an area; and
- protecting the interests of customers through the development and approval of industry codes, such as the Gas Distribution Network Code, which is administered by the Queensland Competition Authority.
The Bill will expand the application of the GS Act to "covered gas", defined to include not only processed natural gas (which is currently covered by the GS Act) but also hydrogen and other renewable gases, such as biomethane and synthetic methane. These amendments will enable Queensland regulators to make decisions relating to the distribution of a more expansive list of gaseous substances under the regulatory regime that is already in place under the GS Act.
Proposed changes to the PAG Act: Gas Transmission Pipelines
The PAG Act is the principal piece of legislation governing the tenure and safety of petroleum and gas exploration and production activities and infrastructure development in Queensland. Importantly, it encompasses the licencing and registration regimes for gas transmission pipelines in Queensland.
The PAG Act currently deals with hydrogen only where it is a "fuel gas" (ie., it is used or intended to be used as fuel rather than as, for example, an ingredient in the production of a substance such as ammonia). This means that there is no clear licensing or approvals pathway for transmission pipelines proposed to carry hydrogen for these non-fuel gas purposes.
The pipeline licence regime will be expanded to include pipelines for the transportation of "regulated hydrogen" – being hydrogen, hydrogen blends and other gases similar to hydrogen such as methanol and ammonia.
Interestingly, the amendments stop of short of expanding the petroleum facility licence regime to capture hydrogen facilities in the same manner. This will be one to watch for as the Queensland Government's legislation review progresses.
What would these proposed changes mean for …
… pipeline operators, prospective proponents of hydrogen projects?
The proposed changes will provide a clearer regulatory pathway for the construction and operation of hydrogen gas pipelines – including proponents being able to avail themselves to the existing regimes for land access under the PAG Act. Incumbent pipeline operators familiar with the current licensing and approval regimes will be relieved to know that these pipelines will be regulated in largely the same manner as natural gas pipelines. Further, such pipeline operators may be able to take advantage of the footprint of their existing pipelines (either by expanding or conducting parallel hydrogen pipelines).
Retailers should note that their pre-existing distribution authorities will not automatically be deemed to refer to this new concept of "covered gas". They would need to apply for such an amendment per the new chapter 2, part 1, division 2 of the GS Act.