Did the government back down on its gas reservation policy? No – most changes make sense

After months of gas industry pushback, the federal government has made sensible changes to its much-vaunted gas reservation policy.

Instead of forcing gas exporters to supply 20% of their export volumes to the domestic market, they will be made to supply “up to” 20%, with the precise amount set each year based on domestic demand.

These details are in the newly released draft legislation .

This has been seen as a concession in the face of an intense industry backlash .

But it’s not a concession at all – this is how the scheme was originally designed to work.

As I argued in July , the 20% figure was always a ceiling, not a floor.

Both supply of and demand for gas will fluctuate over time, and the resources minister needs to be able to respond to that.

The scheme lets the minister decide how much gas to reserve each year, up to the cap, based on the market’s needs.

Even Australia’s gas and oil peak body calls that “ sensible ”.

But there are still big questions over key elements of the design.

Most of Australia’s natural gas is liquefied and exported on tankers.

Suriyapong Thongsawang/Getty A carve-out for one producer? One especially controversial element of the scheme is the minister’s power to reduce domestic gas obligations for individual companies.

This rule has divided the industry because one of the three east-coast exporters – GLNG – is unique in having signed contracts to export vastly more gas than it plans to produce until at least 2036.

Under the proposed law, the minister can reduce obligations on an individual company if meeting their obligations would require them to break their export contracts and if they are taking “active steps” to try to deliver domestic gas.