Darwin Harbour Middle Arm expansion plan slammed by critics as ‘extraordinary fossil fuel subsidy’

Internal government documents reveal the federal government is considering paying for a carbon capture and storage facility near Darwin Harbour as part of a development that will help unlock fossil fuel expansions and cost more than $3.5 billion — more than double the amount earmarked ahead of the 2022 election.

The documents, shared with the ABC, show the taxpayer investment would only barely be made back from fees charged to industry, with a $1.06 return for every dollar spent.

Critics say the funding for the Middle Arm Sustainable Development Precinct represents an “extraordinary” fossil fuel subsidy.

The documents show the two preferred options for the development would cost between $3.5 billion and $3.6 billion, laying out a second-stage business case developed by the Northern Territory government and submitted to Infrastructure Australia.

Both options include government funding to build a controversial Carbon Capture and Storage (CCS) facility, export facilities that would open the fracked gas from the Beetaloo Basin to the international market, and infrastructure to help make products from fossil fuel gas — including plastics and “blue” hydrogen.

The stage two business case was successfully accepted by Infrastructure Australia and has proceeded to a more detailed analysis in the third stage of the process. It is a pitch for federal funding by the NT government.

“It’s a fossil fuel subsidy of an absolutely extraordinary size,” said Kirsty Howey from the Northern Territory Environment Centre, who obtained the documents under Freedom of Information laws.

“To call it anything else is greenwashing, pure and simple.”

The government has denied the accusation, pointing out the development would also help critical minerals industries, and include renewable energy generation, as well as green hydrogen and other industry infrastructure. It did not specifically address the cost increase to taxpayers.

The billions spent on the project — and billions more being proposed — are also raising concerns among some of Australia’s Pacific Island neighbours, whose countries are threatened by climate change.

The finance and climate minister of Tuvalu, Seve Paeniu, told the ABC he was “very concerned” about what he says are subsidies for fossil fuels, and his country would raise those concerns with the federal government under a new treaty between the nations.

Election promise balloons

Government money was first promised for the Middle Arm port development in Darwin Harbour by the Morrison government in March 2022, ahead of the election that year.

The Coalition reportedly hoped to win nearby seats off Labor, and promised $1.5 billion to develop the port, which would be used by both military and private industry.

The Albanese government immediately matched the promise, putting $1.5 billion in its first budget in October 2022.

The development was described as a “new gas demand centre” by the NT government in its first submission to Infrastructure Australia. 

The ABC can now reveal the scale of the government subsidy required for the project to proceed, as well as what the NT government says it will achieve.

Carbon capture’s poor record

In its “stage two business case” submitted to Infrastructure Australia, the NT government examines a range of project plans. As an internal document, it was secret until released under FOI laws, with some material redacted, including some that was commercial-in-confidence.

The two preferred options would cost between $3.5 and $3.6 billion, according to the government submission.

Both proposals would include “common user” CCS facilities, as well as common-use port facilities, which would be used by a variety of companies that would be charged a fee.

The business case says a government subsidy was needed to ensure the facilities were “common user” rather than built for the exclusive use of the company that paid for them.

CCS technology has been widely touted by fossil fuel industries as a way to continue burning coal, oil and gas.

But critics have pointed out that large-scale CCS has not so far worked in Australia. The largest attempt to capture and store carbon in the world belongs to Chevron’s Gorgon project off Western Australia. It was required to inject 80 per cent of the CO2 from its gas fields — a commitment it has never met.

After coming to power, the Albanese government walked back hundreds of millions of dollars worth of subsidies for CCS, committed under the Coalition. About $500 million earmarked for CCS from the Clean Energy Finance Corporation was directed elsewhere, and $263.7 million put towards the CCUS Hubs and Technologies Program was cancelled.

Ms Howey said such a subsidy would be “a major policy backflip”.

“It’s extremely concerning that what appears to be the case is that the Australian government is proposing to fund the full solution of carbon capture and storage,” she said.

The government insists Middle Arm is not a fossil fuel project, but the new business case shows the project is heavily geared towards fossil gas and gas products like plastic manufacturing, as well as CCS.

In addition, the development would assist rare earth mineral industries and hydrogen industries — including hydrogen that relies on gas as well as renewables.

The business case reveals that about 10 per cent of the cost of the project — more than $300 million — would go towards CCS technology, which the submission says is necessary to reduce emissions from the project by about two-thirds.

A spokeswoman for Minister for Infrastructure Catherine King said federal government funding “will go towards infrastructure that supports a range of industries”, and highlighted green hydrogen, ammonia production, critical minerals for use in batteries, as well as the manufacture of batteries.

“A lower emission liquefied natural gas export facility is also one of the proposals,” she said.

The Northern Territory Department of Infrastructure, Planning and Logistics acknowledged that more money will be needed beyond the $1.5 billion committed by the federal government.

“There will be significant need for other infrastructure such as road upgrades, connections to power, water and telecommunications as well as proponent-led and funded infrastructure,” a spokesperson said.

Worried Tuvalu points to treaty

In November, Australia and Tuvalu signed a treaty called the Australia-Tuvalu Falepili Union treaty.

It committed Australia to allowing climate refugees from the small island nation, which faces an existential risk from rising sea levels.

But it was underpinned by the concept of “Falepili”, which includes the value of “duty of care”, and bound Australia to help the citizens of Tuvalu to “stay in their homes with safety and dignity”.

“Australia has recognised that climate change is an existential threat to Tuvalu, and that it would do all it could to help save Tuvalu,” the climate and finance minister of Tuvalu, Seve Paeniu, said.

“That would imply that Australia would need to seriously address the root cause of climate change,” he said.

Stopping government subsidies of fossil fuels has been a major demand of Pacific Island leaders. In March this year, Tuvalu and five other Pacific Island nations signed the Port Villa Call, which included a demand for nations to end fossil fuel subsidies — an agreement not signed by Australia.

Mr Paeniu said the fact the Middle Arm development would be used by other industries too, didn’t make him feel any better about the subsidy.

“So long as it would unlock further exploration and production — whether that’s oil or gas — that still falls within the category of subsidising fossil fuel,” he said.

“So that is deeply concerning and worrying. It is something that Tuvalu and other Pacific Island countries would be raising their concern with the government of Australia,” Mr Paeniu said.

The office of Australia’s Minister for Climate and Energy Chris Bowen did not respond to a request for comment.