Investor briefing: Shareholder Resolutions to Origin Energy on FPIC and lobbying

Ordinary Resolution on Cultural Heritage Protection

Background

This is the third consecutive year that ACCR and co-filing shareholders raise the concerns of affected Native Title holders and claimants for consideration at Origin’s Annual General Meeting (AGM). Native Title holders affected by Origin’s exploration permits expressed their concerns directly to Origin’s Chairman at the 2018^[1] and 2019^[2] AGMs. These concerns have persisted, despite Origin’s assertions that it enjoys the consent of Native Title holders and claimants^[3]. Aboriginal communities in the Beetaloo Sub-Basin continue to resist Origin’s planned hydraulic fracturing (Fracking) activities in the region.

Free, Prior and Informed Consent (FPIC) should be fundamental to the relationship between companies and First Nations peoples on whose land they intend to operate. Shareholders need only look to Rio Tinto’s destruction of Juukan Gorge for iron ore mining to observe the serious consequences that can result from failing to respect the human rights of First Nations peoples. Rio Tinto has faced sustained scrutiny and criticism from the public, media, the Australian Parliament, and its shareholders since the detonation of significant sites in May 2020, against the wishes of Native Title holders^[4],^[5].

Origin has stated that “[its] activities will be guided by” the United Nations’ Guiding Principles on Business and Human Rights (UNGPs) as well as the UN Declaration on the Rights of Indigenous Peoples (UNDRIP)”^[6]. FPIC is central to the UNDRIP and is recognised in international law. The lack of FPIC or any of its elements poses significant risks to Origin. Human rights commitments must be matched with action, even - or perhaps especially - when that action is inconvenient.

We are concerned that Origin’s commitments are not borne out in relation to Origin's proposed Fracking activities on Aboriginal land in the Northern Territory, exposing Origin to significant risks. In the present context, a cautious and diligent approach is warranted.

Concerns about Fracking in the Beetaloo Sub-Basin

We are concerned that Origin continues to state that Native Title holders have consented to Fracking activities on their land, in the face of persistent, consistent objections by affected Native Title holders and claimants.

Origin did not itself negotiate consent agreements with affected Native Title holders (Agreements) for the grant of the Permits that it now holds in the Beetaloo Sub-Basin (Permits). Rather, Origin acquired its interest in the Permits (most likely negotiated in the early 2000s, and granted around 2005) from either or both of Sweetpea Pty Ltd and Falcon Oil & Gas Ltd.

The circumstances in which Sweetpea/Falcon obtained the Agreements carry risks that should have been the subject of careful due diligence before Origin acquired its interest in the Permits. In particular, confirmation of Native Title holders’ and claimants’ informed consent under the Agreements to the range of Fracking and related activities now proposed by Origin should have been, and should now be, a matter of the highest importance to Origin.

The involvement of the Northern Land Council (NLC) in consultations and agreement-making does not, of itself, demonstrate that consent has been achieved. This is especially so in light of the consistent, public objections by affected Native Title holders and claimants over the last three years.

A recent review of publicly available information about consent processes in the Northern Territory^[7] - including the findings of the Hawke^[8] and Pepper^[9] inquiries - raises the concerning prospect that many petroleum exploration permits in the Northern Territory that enable Fracking have been issued without FPIC.

Native title holders’ concerns about fracking in the Beetaloo Basin again emerged into public view on Friday, 25 September 2020 when it was reported that Native Title holders affected by Origin’s exploration permits have taken steps to replace the NLC as their representative in their dealings with Origin, because they do not believe that NLC is representing their concerns about and objections to Fracking.

In these circumstances our request for an independent review is reasonable and proportionate to the magnitude of both the risks at hand and the capital expenditure planned on Fracking activities in the Beetaloo Sub-Basin.

Ordinary Resolution on Lobbying Relating to COVID-19 Recovery

Lobbying Impact

We welcome Origin’s support for a goal of net zero emissions by 2050 or earlier in the national electricity market^[10]. However in order to limit the worst impacts of climate change, the entire economy (including the gas industry) must reach net-zero by 2050 or earlier^[11].

In recent years, national policy to reduce emissions in Australia has stalled or regressed. Origin’s lobbying on climate and energy policy continues to have a far greater impact on Australia’s national emissions trajectory than any reduction in emissions Origin can achieve on its own.

Origin has been telling shareholders for at least two years that it should remain a member of obstructive lobby groups in order to affect change from within. Despite these commitments, many of Origin’s industry associations continue to promote fossil fuel expansion and obstruct effective climate policy. In its most recent report on Australian industry associations, InfluenceMap identified that most of Origin’s key associations have a negative impact on climate and energy policy:

Origin’s retrospective process of industry association reviews has failed to address the most problematic advocacy, and where it has identified misalignments, this occurred after the damage was done. Support for Kyoto carryover credits by APPEA and the Business Council of Australia (BCA) during the Australian federal election in early 2019^[12],^[13] provides the starkest example. Not only did that advocacy impact the election, but the Australian government then used its position on Kyoto carryover credits to obstruct the global climate talks in Madrid in December 2019^[14].

While the BCA may have “softened its position”^[15] on Kyoto carryover credits, it is yet to retract its support entirely, and has suggested Australia use them only if necessary. APPEA’s position on Kyoto carryover credits remains unclear.

The COVID-19 pandemic has had an unprecedented impact on the global economy. Unfortunately, the advocacy by some of Origin’s industry associations throughout the COVID-19 pandemic can only be described as predatory, calling for policies that are fundamentally inconsistent with the goals of the Paris Agreement. This includes demands for making new acreage available for gas exploration, government subsidies and tax relief for new fossil fuel projects, fast-tracked approvals for new coal and gas developments, and aggressive deregulation.

If Australia is to meet its Nationally Determined Commitment (NDC) under the Paris Agreement, it cannot materially increase fossil fuel production. According to Climate Analytics, Australian government and industry plans for growth in fossil fuel production (as at July 2019) were not consistent with the global energy transition required to meet the Paris Agreement goals^[16]. Origin's industry associations have exacerbated this situation by their advocacy during COVID-19.

Gas-led Recovery

The Australian government is actively pursuing a “gas-led recovery” from the economic impact of the COVID-19 pandemic, including subsidies for new gas infrastructure, fast-tracking of project approvals, potential underwriting of new developments and aggressive deregulation^[17]. On 15 September, Australian Prime Minister Scott Morrison announced that his government would fund plans to develop a minimum of five new gas basins, including the Beetaloo Basin^[18].

Origin is currently conducting an exploration program in the Beetaloo Basin in the Northern Territory. As a direct result of lobbying by Origin and APPEA, the Australian federal government has included a “Beetaloo Basin Development Strategy” in its “Fair Deal on Energy” policy^[19]. The Australian federal government will provide $8.4 million “to accelerate the development of the Beetaloo Basin in the Northern Territory”^[20], and government financial support for a pipeline connecting the Beetaloo Basin to Australia’s east coast gas network has also been proposed^[21].

APPEA and the QRC have also used the 10-yearly review of Australia’s Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) to argue that weaker environmental laws were necessary for recovery. In their submissions to EPBC Act Review, APPEA and the QRC argued that the EPBC Act should not consider greenhouse gas (GHG) emissions in new project assessments^[22].

Australian Petroleum Production and Exploration Association (APPEA)

Throughout 2020, APPEA has repeatedly called for further oil and gas exploration^[23], welcomed government subsidies^[24], and lobbied for weaker environmental regulation^[25].

On 8 May, APPEA published a report calling for government support to develop “uneconomic or stranded” gas resources in order to extend the economic life of existing gas infrastructure^[26].

Throughout August 2020, APPEA advertised heavily through the Northern Territory election, in which fracking development was a key issue. While it is unclear how much money APPEA spent, the campaign included full-page newspaper advertisements (see examples below), and radio and TV commercials.

On 27 August 2020, the Australian government introduced legislation to parliament to amend the Clean Energy Finance Corporation’s (CEFC) definition of low-emissions technology to include “certain types of gas-fired electricity generation”^[27]. The CEFC was originally created to co-invest in profit-making renewable energy projects with the private sector. This amendment to the CEFC’s mandate was a specific demand from APPEA in a submission to the Finkel review of the electricity market in March 2017^[28].

On 14 September 2020, APPEA published a report called “Powering Australia’s Recovery”, that outlined six asks of government to promote economic recovery^[29]:

1. Cut corporate and petroleum taxes
2. Reduce environmental regulation
3. Promote oil and gas exploration
4. Fast-track approvals for new projects
5. No changes to domestic gas reservation
6. Promote the export of Australian gas

On 15 September 2020, APPEA welcomed the federal government’s announcement of a support package for the gas industry, including plans to construct new gas-fired generation^[30].

Queensland Resources Council (QRC)

On 14 May, the QRC welcomed the Queensland government’s release of 6,700 square kilometres of land for further gas exploration^[31].

On 28 May, the QRC said the resources sector was key to economic recovery, confirming that it had already “secured some interim relief for exploration companies that are the key to the new coal, metal, gas and oil discoveries”^[32].

On 23 June, the QRC welcomed government subsidies of $125 million for fossil fuel exploration^[33].

On 26 July, the QRC called for government subsidies for coal and gas exploration, and for fast-tracked approvals of coal mining projects^[34].

On 13 August, the QRC published a report that called for government support of $500 million for new gas pipeline infrastructure, incentives for further coal and gas exploration, amnesties from changes to royalties and taxes, and significant deregulation of the resources industry^[35].

On 31 August, the QRC launched an “unprecedented” four week advertising campaign ahead of the Queensland state election on 31 October 2020^[36]. The “Count On Us” campaign is designed to address “a lack of awareness about the importance of the mining and gas industry to the Queensland economy”^[37].

On 15 September, the QRC confirmed that it had influenced the Federal government’s announcement of subsidies for the gas industry, including funding plans for five new gas basins and potentially underwriting new gas pipelines^[38].

Origin’s Approach to Industry Associations

To date, Origin has not spoken out against the Australian government's plans for a “gas-led recovery”, nor has it called for economic stimulus to be focused on a “clean” or “sustainable” recovery. The BCA^[39], the Clean Energy Council and the Energy Efficiency Council publicly support “clean” or “sustainable” recovery measures, but these messages have been drowned out by pro-gas lobbying.

Origin’s 2020 review of industry associations “identified a lack of detail in APPEA’s climate change policy”^[40], which was the same finding in its 2019 review^[41]. In two years, Origin has apparently failed to induce any change in APPEA’s climate policy, let alone its advocacy.

Origin’s 2020 review of industry associations also found the QRC had “a stronger position on lowering carbon emissions and less vocal support for new coal-fired power stations”^[42]. This is a very generous summary of the QRC’s progress, given its relentless advocacy for further fossil fuel expansion, including demands for government-subsidised new developments.

Neither APPEA nor the QRC support net zero emissions targets by 2050, and their advocacy for unconstrained gas expansion risks Australia’s chances of delivering its commitments under the Paris Agreement.

Conclusion

Origin has repeatedly told shareholders that it is better to remain a member of obstructive industry associations, claiming that it will improve their advocacy on climate and energy policy. Despite some minor policy improvements, oppositional advocacy by these groups remains as problematic as ever. Origin’s approach has proven to be an utter failure for both the company and its shareholders.

The COVID-19 pandemic has presented a once in a generation opportunity to accelerate decarbonisation through wide-ranging economic policy that can both support economic growth and address the climate challenge. If Origin is unwilling or unable to ensure that its industry associations support that transition, then it should not spend shareholders’ money on membership of such groups.