Queensland's green hydrogen regulation - Consultation Paper

What you need to do

Monitor further anticipated reform in this space, read the consultation paper and consider providing feedback before the consultation closes.

We prefaced last year in our overview on the Queensland Energy and Jobs Plan (QEJP) that the Queensland Government has committed to supporting the regulation of hydrogen development and use in Queensland. Click here to read the article.

Since that article, new legislation has paved the way for hydrogen projects in Queensland and the previously anticipated consultation paper on developing an effective regulatory framework for Queensland's green hydrogen industry (Consultation Paper).

In this article, we cover what you need to know and how to submit feedback on the Consultation Paper.

Overview of the Consultation Paper

The Consultation Paper sets out the:

1. current regulatory framework applicable to green hydrogen project development;
2. potential barriers, issues, and opportunities for the effective regulation of green hydrogen project development; and
3. potential options for reform (including maintaining the status quo) to support the effective regulation of the green hydrogen industry as it continues to mature.

Stakeholders are encouraged to provide their feedback on key areas of reform to foster regulatory settings which support the development of a green hydrogen industry in Queensland. Access the feedback form is here.

The scope of the Consultation Paper does not extend to brown, grey or blue hydrogen (which involve hydrogen generated through natural gas or fossil fuels, including such fuels with carbon capture). The Consultation Paper instead focuses on green hydrogen (being hydrogen generated from renewable energy sources such as solar, hydro and wind).

Current regulatory environment applicable to green hydrogen project development

The Consultation Paper recognises the increased global interest in green hydrogen and the opportunities for Queensland's hydrogen industry.
Presently, Queensland's green hydrogen sector is largely regulated by existing regulatory frameworks pertaining to planning, renewable energy, pipelines, common user infrastructure, water, safety and the environment.

The Consultation Paper recognises that the interplay between the forementioned regulatory frameworks and their application to green hydrogen projects may be difficult for proponents to navigate in this new and emerging industry.

As such, a key objective of the proposed reform is to provide a clear regulatory pathway for green hydrogen proponents to attract investment and ensure the safe, transparent, and sustainable development of a green hydrogen sector in Queensland.

Regulatory issues, opportunities and options for reform The Consultation Paper identifies the following key areas for the regulation of green hydrogen projects:

• Planning
• Renewable energy
• Pipelines
• Common user infrastructure
• Water
• Safety
• Environment
• Community impacts and benefits
• Hydrogen storage in geological formations

Interestingly, the Consultation Paper is otherwise silent on the potential regulation of these projects within existing mining leases.

Planning framework

The Planning Act 2016 (Qld) (Planning Act) provides a system for land use planning, development assessment and related matters in Queensland. The requirements applicable to a green hydrogen project under this framework will largely depend on the location, nature, and scale of development, and applications will be assessed against a range of relevant matters including environmental impacts, water access, cultural heritage, workplace health and safety and land use requirements.

The Consultation Paper is inviting feedback from stakeholders with respect to the following potential reform options:

• Status Quo (Option 1): Maintaining the current planning framework so that all development proposals for green hydrogen projects are subject to the existing assessment framework. This option contemplates updated guidance materials being provided to support proponents in navigating the framework.
• Introduction of State-assessed thresholds (Option 2): Establishing a threshold based on the scale of the project (e.g. energy load) for assessment by the State, potentially including a State Code prescribing assessment benchmarks for green hydrogen projects. This option is intended to provide greater certainty about whether a green hydrogen project will be assessed by a local government or the State.

Interestingly, the State appears to be proposing a different approach for the regulation for green hydrogen than it has taken for other renewable sectors. Specifically, while the existing framework generally requires wind farms to be assessed by the State without applying a threshold, the Consultation Paper does not include this as a separate reform option.

Renewable energy

Green hydrogen projects are energy intensive, where electricity input prices are a material contributor to the cost of production of green hydrogen.

This means that green hydrogen projects require access to affordable large scale renewable energy, which will naturally compete with the demands of households and commercial and industrial users.

The Consultation Paper seeks feedback from stakeholders on the management of these competing demands and the following proposed reform options:

• Status Quo (Option 1): Under the Electricity Act, there is currently no specific requirement for green hydrogen proponents to demonstrate that they have sourced sufficient renewable energy to meet the operational need of their projects (whether than be through an 'in front of meter', 'behind the meter' or hybrid approach). As noted above, the rationale behind maintaining the status quo is to maintain a level playing field across all industries.
• Require a hydrogen generation licence for renewable hydrogen production (Option 2): Introducing the requirement for green hydrogen proponents to obtain a hydrogen generation licence (HGL) under the Electricity Act. If the requirement of a HGL is introduced, a threshold will likely be introduced to exempt smaller projects. Whether the requirement for a HGL is better dealt with under the Electricity Act or a new stand-alone statute also needs to be considered.
• Leverage the proposed Renewable Energy Zone framework to support hydrogen projects (Option 3): The Renewable Energy Zone (REZ) framework is currently being developed through the Energy (Renewable Transformation and Jobs) Bill 2023 (Qld). This option considers introducing a hydrogen-specific REZ (H2REZ) to enable the use of certain identified areas with renewable energy potential for hydrogen projects (which are not relied on for domestic decarbonisation).

Pipelines

The Consultation Paper recognises that pipelines are critical infrastructure for transporting hydrogen products to other markets or facilities. The current regulatory framework for pipelines in Queensland is the Petroleum and Gas (Production and Safety) Act 2004 (Qld) (Petroleum and Gas Act) and the recently introduced Gas Supply and Other Legislation (Hydrogen Industry Development) Amendment Bill 2023 (which authorises hydrogen transport pursuant to pipeline licences subject to certain safety requirements) (which we cover in our previous article here.

While no further amendments are proposed to the existing regulatory framework for pipelines, the Consultation Paper seeks feedback on whether there are further pipeline related issues relating to green hydrogen production and transportation that need to be considered.

Common user infrastructure

The Consultation Paper recognises that that development of a green hydrogen project will involve investment in large-scale new or expanded infrastructure, which is typically a capital intensive endeavour and may be a barrier for developers. The government recognises that this expenditure may be attenuated by Government support in the development of common user infrastructure, noting that there are existing policies and frameworks for developing common user infrastructure. The Government is undertaking studies in relation to the infrastructure (using a whole of industry approach) required to meet green hydrogen industry requirements.

While the Consultation Paper does not outline options for reform in this area, it is inviting feedback on any specific amendments to the existing regulatory frameworks that may required on matters relating to common user infrastructure specific to green hydrogen.

Water

The Water Act 2000 (Qld) (the Water Act) sets out the existing regulatory framework for water management in Queensland. While the Consultation Paper states that the Water Act is currently sufficient for green hydrogen project development, this is likely to change as more water sources are required for an increasing number of large scale green hydrogen projects in Queensland. Planning activities are underway by the Queensland Government to ensure that water needs can be met for green hydrogen projects in Queensland.

While the Consultation Paper does not outline options for reform on this area, it invites feedback on any specific amendments to the existing regulatory framework that may be required on matters relating to water infrastructure and supply.

Safety

Safety considerations are a key element to be woven into the regulatory framework to support a green hydrogen industry in Queensland. Consistent with the gas and mining industries the Office of Industrial Relations will administer the Work Health and Safety Act 2011 (Qld) and Electrical Safety Act 2002 (Qld) and Resources Safety and Health Queensland will administer Petroleum and Gas Act to facilitate safety regulations and requirements for green hydrogen project development and operation.

The Consultation Paper seeks feedback on whether:

• the current approach is proportionate to the safety risks presented by green hydrogen;
• standalone statute is required; and
• changes are required to the applicable thresholds for Major Hazard Facilities.

Environment

Evaluating and assessing the potential environmental impacts of green hydrogen project development and production is an important part of the environmental approval process. The Consultation Paper notes that these assessments will occur under existing regulatory frameworks, such as the Environmental Protection Act 1994 (Qld) (EPA) and the Environment Protection and Biodiversity Conservation Act 1999 (Cth).

While the Consultation Paper does not propose amendments to these existing processes – stating that they are "considered fit for purpose" - it does seek feedback on:

• specific amendments, or any other process innovation or improvements, needed to help green hydrogen proponents identify and navigate the necessary environmental approvals processes; and
• any risks with the development and production of green hydrogen that are not adequately covered by existing environmentally relevant activity processes.

First Nations impacts and benefits

Green hydrogen projects, due to their size and nature, are also anticipated to have a number of different impacts on local communities. The Consultation Paper recognises that the assessment and management of community impacts and benefits should be as clear, efficient and effective as possible for green hydrogen proponents and local communities. In particular, the Consultation Paper notes that ensuring First Nations people and communities are not only involved in, but can also benefit from, the hydrogen industry in Queensland is a key priority shared at both the State and Federal levels.

Interestingly, the Consultation Paper states that "all developments need to negotiate for land and water access and these agreements should be transparent to demonstrate the costs and benefits are shared fairly". This shows the Government's expectation with respect to First Nations engagement may be greater than the currently required under State and Commonwealth legislation. This shift may also represent a higher standard of engagement with First Nations people for the hydrogen sector than other industries in Queensland.

The Consultation Paper seeks feedback from stakeholders with respect to the following potential reform options:

• Status Quo (Option 1): The existing environmental impact statement process under either the EPA, State Development and Public Works Organisation Act 1971 (Qld) (SDPWO Act) or Strong Sustainable Resource Communities Act 2017 (Qld) (SSRC Act), means some green hydrogen projects are required to consider social impacts. However, this is not the case for all green hydrogen projects and these assessments may not consider the cumulative impacts of projects.
• Community benefit as a criteria for the grant of a HGL (Option 2): In the event that a HGL is mandated, this option considers including demonstrating community impacts and benefits as a criteria to a HGL being granted. This could also include a requirement to manage engagement with First Nations people and communities, protection of cultural heritage rights and economic opportunities for First Nations communities.
• Extend existing assessment pathways to ensure stakeholders benefit from large-scale green hydrogen projects (Option 3): This option considers extending the social impact and environmental impact statement component of the SSRC Act to green hydrogen projects over a certain threshold (e.g. based on electrical load or number of employees). This is because the SSRC Act currently only applies to resource projects. The Consultation Paper alternatively considers integrating this criteria within the development process of the existing planning framework for green hydrogen projects.

Hydrogen storage in geological formations

The large-scale use of hydrogen presents challenges in relation to storage and managing seasonal fluctuations in demands.

The above ground storage of hydrogen requires approval under the Planning Act 2016 (Qld), and where certain thresholds are met, may also be a Major Hazard Facility under the Work Health and Safety Regulation 2011 (Qld). The Consultation Paper proposes that these regimes are adequate and does not propose any reform.

Instead, the Consultation Paper focuses on the underground storage of green hydrogen (e.g. through underground formations like salt caverns) and invites feedback on the following potential reform options:

• Status Quo (Option 1): The Petroleum and Gas Act and Mineral Resources Act 1989 (Qld) (Mineral Resources Act) currently does not allow or provide a framework for the underground storage of hydrogen in geological formations.
• Underground storage of hydrogen in resources legislation (Option 2): This option considers authorising the storage of hydrogen in a natural underground reservoir by extending the remit of the current resources legislative framework (ie the Mineral Resources Act and Petroleum and Gas Act).
• Create framework in a standalone Hydrogen Act (Option 3): This option contemplates creating a hydrogen storage framework under new stand alone statute. This proposed statute could also then cover the HGL option discussed above. The Consultation Paper notes that interactions with the current resources legislation (e.g. the Mineral Resources Act and Petroleum and Gas Act) would need to be carefully considered as part of this option.

Providing feedback and keeping informed

The Department is inviting feedback on the options described above in this article and any other regulatory issues to support the development of a green hydrogen industry in Queensland.

If you would like to provide feedback, click here to have your say by completing the online survey or uploading a written submission. Consultation closes at 5pm on Friday, 1 March 2024.

We look forward to continuing to work with our clients and other stakeholders on the development of a regulatory framework to support a green hydrogen sector in Queensland.

We encourage you to contact us if you would like to discuss any aspect of this publication.

Authors: Dale Gill, Partner; Tony Denholder, Partner; Paul Wilson, Partner; Libby McKillop, Counsel; Claire Bolton, Senior Associate; and Samirah Delor, Graduate.