GORGON GAS PROJECT GETS FEDERAL ENVIRONMENTAL GO AHEAD

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SENSITIVE
SIPDIS

STATE FOR EEP MONOSSON
DOE FOR JEFF SKEER
USDOC FOR 3132/USFCS/OIO/EAP/JRULAND
USDOC FOR 4530/MAC/EAP/OPB/GPAINE

E.O. 12958: N/A
TAGS: ENRG EINV SENV AS
SUBJECT: GORGON GAS PROJECT GETS FEDERAL ENVIRONMENTAL GO AHEAD

REF: PERTH 38

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THIS MESSAGE IS SENSITIVE BUT UNCLASSIFIED.




1. (U) SUMMARY: Australian Federal Environment Minister Peter
Garrett granted conditional environmental approval August 26 for
the proposed A$50 billion (US$40 billion) three-train Gorgon
liquefied natural gas (LNG) Project in Western Australia (WA).
The approval comes with 28 conditions to mitigate and manage the
impact of the massive project on the native flatback turtle
population and other endangered species which live on the
project site on Barrow Island, a protected nature reserve. The
federal environmental approval was widely anticipated following
Federal Resource Minister Martin Ferguson's visit to Beijing for
ExxonMobil's historic LNG deal signed with PetroChina last week.
The federal approval paves the way for partners Chevron,
ExxonMobil and Shell to make a final investment decision on the
project, expected to be announced in mid-September. End Summary.



Conditional Federal Environmental Approval




2. (U) Garrett's decision, announced ahead of the government's
September 8 deadline, gives conditional approval for the
three-LNG-train (expanded from the original two-train) Gorgon
Gas project to go ahead (Septel). The approval imposes strict
environmental conditions to protect, manage and monitor
endangered terrestrial fauna, such as the spectacled
hare-wallaby, burrowing bettong and golden bandicoot, along with
measures to monitor and limit the impact of light and noise on
the flatback turtle population that nests on the island.
Chevron, which is leading the Gorgon development, will have to
contribute A$62.5 million (US$ 50 million) over the life of the
project to a flatback turtle conservation program. The federal
decision follows the assessment and conditions imposed by the WA
Government, which granted environmental approval August 10.



Partners Welcome Decision




3. (SBU) Chevron officials have welcomed the federal decision,
but have been careful not to overplay its significance. Chevron
Australia's Managing Director Roy Krzywosinski said in a
statement Wednesday the company is keen to move the project
forward. "The Gorgon project is globally and nationally
significant with a resource base of more than 40 trillion cubic
feet of gas and an estimated economic life of at least 40 years
from the time of start-up." Krzywosinki added "we appreciate
the support shown by the Federal and State Governments as we
move the Gorgon Project towards a final investment decision."
Chevron's Gorgon project head Colin Beckett told the media that
"although the conditions imposed on the project are rigorous,
the company had been working on many of them for awhile." A
senior Chevron official told the Consul General privately that
the federal decision was positive, but "there is still some
water under the bridge yet" before the final investment
decision, expected by mid-September. ExxonMobil has already
shored up A$75 billion (US$60 billion) worth of contracts to
supply India and China with LNG from the Barrow Island project
(Ref).



Comment: Critics Say It Was A Done Deal




4. (SBU) Environmentalists and other critics of the Gorgon
project say Garrett's decision was signaled a week ago when
Federal Resources Minister Martin Ferguson flew to Beijing for

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the signing of ExxonMobil and PetroChina's historic A$50 billion
(US$40 billion) 30-year LNG deal. The federal government's
presence there, critics say, implies that the environmental
approval was either already decided or just an exercise in
rubberstamping the admittedly strong business case for the
project, which promises up to 10,000 jobs and billions of
dollars worth of local procurement and federal government
royalties. Chevron officials confided to us before the decision
that while they "could not take federal approval for granted, in
practice, the federal government usually takes it lead from the
states." In WA's case, state environment officials recommended
against locating the Gorgon project on a protected nature
reserve, but were overridden by support for the project from the
state's top political leaders, both Labor and Liberal. Sources
close to Garrett point out that he has a very specific role
under Australia's environmental protection laws, and that the
Minister works in a "strategic partnership" with state
authorities to reach a comprehensive outcome. Garrett's
approval extends an existing decision to allow economic
exploitation of Barrow Island. The approval is consistent with
Garrett's record of sticking close to the legislative mandate on
controversial approvals; public criticism springs from his
record as an activist before he joined government, not his
institutional role under environmental protection laws. End
Comment.




5. This cable was prepared jointly with Embassy Canberra.



CHERN