The federal government released exposure draft legislation for a national gas reservation scheme on Thursday, keeping a requirement that liquefied natural gas exporters actually sell gas into the domestic market rather than simply offer it, and pushing the start of that obligation back to 1 January 2028.
The three bills were published on the Department of Industry, Science and Resources consultation site on 10 September. Submissions close at 11:59pm on 24 September, a window of 14 days. The government's own explainer states that because of drafting and parliamentary timelines it cannot grant any extension beyond that date.
The package is the Domestic Gas Reservation Bill 2026, a consequential amendments bill and a levy bill. Under the draft, every LNG exporter would need an export licence running 20 to 50 years, and meeting a domestic supply obligation would be a condition of holding one. The Australian Energy Regulator would administer the scheme, and the existing Australian Domestic Gas Security Mechanism would be repealed.
The obligation is set at up to 20 per cent of a licence holder's covered exports, measured separately across two markets: Western Australia, and the east coast grouped with the Northern Territory. Section 23 of the draft lets the minister set a lower figure for either market, which must be less than 20 per cent and at or above zero.
Section 18 settles the question the gas industry had been pressing all week. A qualifying supply requires both a binding contract with a buyer and the physical delivery of the gas. An offer that nobody takes up acquits nothing. The government's explainer lists the rule under a heading reading "What we've kept", with the text: "LNG exporters must sell up to 20% of their exports to domestic buyers, calibrated to domestic demand."
Santos managing director Kevin Gallagher had used a National Press Club address in Canberra the previous day to ask for the opposite. "The practical solution here is to replace the must-sell provision with must-offer on commercial terms, the same as the Western Australian reservation," he said on 9 September.
Australian Workers Union national secretary Paul Farrow rejected that on the same day. "Santos insisting that any reservation only requires them to 'offer' gas to domestic users, rather than actually supply it, is code for retaining the failed status quo," Farrow said. "Current regulation already includes a 'must offer' requirement and all it has delivered is high prices, supply uncertainty and lost jobs."
Resources Minister Madeleine King said the scheme was being built because "Australian households and businesses, quite rightly, expect to have access to affordable Australian gas". Climate Change and Energy Minister Chris Bowen said Australia had been "in the perverse situation where despite being one of the world's largest gas producers we had shortages and prices shocks at home". Industry Minister Tim Ayres said reservation gives manufacturers and heavy industry the energy they need to invest and produce.
The timing has moved. Licence applications open from 1 January 2027, but the supply obligation itself does not bite until 1 January 2028, which the government says matches industry contracting cycles. The department's published design in May put that date at 1 July 2027. After more than 140 submissions, the obligation now arrives six months later than the settings the government consulted on.
Penalties in the draft are substantial. A body corporate that fails to meet its obligation faces the greatest of 50,000 penalty units, three times the benefit derived, or 10 per cent of annual turnover, with that final limb capped at 2.5 million penalty units. Executive officers can be personally liable under section 95.
The companies with the most at stake are also political donors. Australian Electoral Commission disclosures for 2024-25 record Santos giving $165,800 to political parties, split $63,200 to Labor branches and $102,600 to Coalition parties. Woodside Energy Group disclosed $102,715 and the sector's peak body, Australian Energy Producers, disclosed $210,689. The register does not yet cover 2025-26, the year the scheme was designed.
The government's release says the scheme could deliver up to 200 petajoules a year to the domestic market, against what it describes as AEMO forecast shortfalls of up to 140 petajoules. AEMO's own 2026 Gas Statement of Opportunities, published 26 March, puts peak-day supply risk in southern Australia from 2029 and a need for additional supply in most scenarios from 2030. Its central Step Change case gives southern annual gaps of up to 12.2 petajoules in 2030, widening to between 54.1 and 106.2 petajoules by 2035.
Domestic prices have already moved without the scheme. AEMO recorded an east coast spot average of $9.08 a gigajoule across its markets in the June quarter, the lowest quarterly average since mid-2021. The ACCC's netback series put the August 2026 export-parity price at $20.47 a gigajoule.
Consultation on the draft closes on 24 September. The government says it will introduce the bills to parliament later this year, with the detailed rules setting each market's obligation to be consulted on separately in 2027.
