Minister's refusal to grant an Offshore Wind Feasibility Licence overturned

What you need to know

• The Federal Court of Australia has decided that the Federal Minister for Climate Change and Energy may lawfully grant a feasibility licence for an offshore wind farm development over a smaller area than applied for by the applicant (Seadragon Offshore Wind Pty Ltd v Minister for Climate Change and Energy [2024] FCA 1290).
• Seadragon Offshore Wind Pty Ltd applied for a feasibility licence in the Gippsland declared zone. The application area overlapped with the area of more meritorious feasibility licence applications. The Offshore Electricity Infrastructure Regulations 2022 (Cth) are silent on the issue of overlapping claims of unequal merit.
• The Minister's decision to refuse Seadragon's application on the basis that section 33(1) of the Offshore Electricity Infrastructure Act 2021 (Cth) did not permit him to grant a licence over an area smaller than the application area was set aside. The Minister must redetermine the application according to law.

What you need to do

• Consider the impact of this decision on future overlapping feasibility licence applications, including the impact of increased competition.
• Depending on the Minister's decision when re-considering Seadragon's application, it may result in unsuccessful applicants retesting their feasibility licence applications if their rejection was on similar grounds to Seadragon's rejection.
• Monitor the potential introduction of regulations to deal with overlapping feasibility licence applications of unequal merit.

Seadragon's offshore wind feasibility licence application overlapped with other applications

Seadragon Offshore Wind Pty Ltd, a subsidiary of Flotation Energy backed by the Japanese giant Tokyo Electric Power Company (TEPCO), applied for a feasibility licence for an offshore wind project off the Victorian coast in the Gippsland Declared Zone.

On 22 December 2023, the Minister for Climate Change and Energy' issued a ‘Notice of Intention Not to Grant a Feasibility Licence’ to Seadragon (and a number of other applicants). The Minister indicated to Seadragon that he was contemplating not granting the licence because the application area overlapped with other licence applications of greater merit.

Seadragon submitted that the Minister should grant a licence over a reduced area from which the overlapping parts had been excised. Instead, the Minister refused Seadragon’s application on the basis that section 33(1) of the Offshore Electricity Infrastructure Act 2021 (Cth) did not permit him to grant Seadragon a licence over a reduced area.

Seadragon brought proceedings challenging the Minister's construction of section 33(1) of the Act.

Key issue was the Minister's power under the Offshore Electricity Infrastructure Act to grant an application over an area smaller than the application area

Section 33(1) of the Act is outlined below:

33 Grant of a feasibility licence

(1) The Minister may, by written notice, grant a feasibility licence in respect of an area to an eligible person if:

(a) the eligible person applies for the licence under the licensing scheme; and

(b) the area is a declared area, or a part of a declared area, under a declaration at the time the licence is granted; and

(c) the Minister is satisfied that granting the licence would be consistent with any conditions that apply to the declaration; and

(d) the area meets the requirements in subsection (4); and

(e) the Minister is satisfied that the licence meets the merit criteria; and

(f) any other requirements prescribed by the licensing scheme are met.

The Act is accompanied by the Offshore Electricity Infrastructure Regulations 2022 (Cth) that provide guidance to the Minister on how to handle overlapping application of ‘equal merit’.

There was no dispute that the Seadragon feasibility licence application was not of equal merit with other overlapping applications (due to technical and financial capability and suitability). However, the Act and Regulations are silent on how the Minister should handle this situation.

Seadragon successful - Federal Court found that the Minister did have power to grant a feasibility licence over a smaller area than the application area

The Federal Court rejected the Minister's construction of section 33(1) and held that the Minister may lawfully grant a feasibility licence for a smaller area than originally stated in the application.

The Court noted that the licensing scheme does not deal with overlapping claims which are not of equal merit. Perram J stated that "the topic of overlapping claims of unequal merit needs to be regulated".

Perram J suggested that this gap in the licensing scheme should be filled by the Minister considering the practical consequences of Seadragon being awarded a licence under the Act. His Honour questioned "what good is served by refusing an entire application just because it overlaps to a small extent with a more meritorious application?".

Perram J held that the Minister’s original decision on the Seadragon feasibility licence application dated 26 April 2023 be set aside and redetermined according to law. The Minister was ordered to pay Seadragon's costs of the proceeding.

Implications of this decision

Seadragon Offshore Wind Pty Ltd v Minister for Climate Change and Energy [2024] FCA 1290 assists in situations where the Minister is faced with overlapping feasibility licence applications of unequal 'merit'. It clarifies that the Minister may lawfully grant a feasibility licence for a smaller area than originally specified in the application.

This decision may result in:

• (where time limits have not already expired) applicants who received a ‘Notice of Intention Not to Grant a Feasibility Licence’ applying to retest their unsuccessful applications; and/or
• the introduction of new regulations to deal with overlapping feasibility licences applications of unequal merit – these regulations would apply to all future applications.

Each scenario could result in the Minister increasing the number of feasibility licences being issued. 

Want to know more?

• Where next for floating wind? (30 October 2024)
• Feasibility Licences for Offshore Wind Projects (9 November 2023)
• Offshore Wind: What you need to know when applying for an offshore electricity infrastructure licence (18 November 2022)

Authors: Murray Wheater, Partner; Bree Miechel, Partner; Leonie Flynn, Expertise Counsel and Gerard McGookin, Associate.