Taxpayers face $500m clean-up bill for Chevron's Barrow Island oil and gas project

Australia Broadcast Center

5 days ago

Taxpayers face a potential $500 million bill to clean up aging oil and gas infrastructure left by Chevron off Western Australia's Pilbara, newly released state government documents reveal.
The oil and gas giant is preparing to decommission its "WA Oil" project on Barrow Island, 50 kilometres north-west of Karratha, which ceased production in May after 60 years of operation.
The process requires Chevron to cap 900 oil wells and rehabilitate the areas of the island impacted by the project.
The exact cost of safely closing down the facility was previously unclear.
But documents released after a Freedom of Information request by independent energy and climate journalist Peter Milne, and seen by the ABC, indicate state and federal governments will contribute at least half a billion dollars of the estimated $2.3 billion bill.
The growing taxpayer liability stems from a 1985 agreement, allowing Chevron to be refunded royalties to cover 40 per cent of the cost of the first four years of decommissioning the project.
Since operations began at Barrow Island in 1967, Chevron has paid more than $1 billion in royalties to the federal and WA governments, in a 75/25 per cent split.
Milne's request led to the release of several 2022 emails from within WA's Department of Mines, Petroleum and Exploration (DMPE), as well as briefing notes to then-mines and petroleum minister Bill Johnston.
All of the documents have been heavily redacted.
One email revealed that total clean-up and rehabilitation costs at Barrow Island were expected to surpass $2.3 billion.
But a separate email showed the department had not calculated how much of that WA would have to pay, and only made efforts to do so after being alerted to the situation by media reports.
In 2022, Milne reported that an internal Chevron document put the cost of the first four years of the Barrow Island clean-up — which the company is eligible to be compensated for — at $1.3 billion.
It is this figure that the department referenced in the email.
"[The department] intends to approach Chevron directly to request cost estimates," the email read.
"Until we are able to glean such details, we only have what has been reported in the media.
"Based on that, the 'refund' from the State govt is: $1.29 billion x 0.4 x 0.25 = $129 million."
Under the 75/25 split between the federal and state governments spelled out in the 1985 agreement, the Commonwealth would be required to refund $387 million to Chevron.
Shadow Mines and Petroleum Minister Shane Love has questioned the fairness of the deal.
"You'd have to question the intergenerational fairness of a government of the day taking the royalties and then asking the generation of the future to pay for the share of the cost of the rehabilitation," Mr Love said.
The criticism was echoed by progressive think tank The Australia Institute.
Principal advisor Mark Ogge said it was an outrage Chevron could access state and federal funding to meet its environmental liabilities.
"It's a massive giveaway of Australian taxpayers' money to a company that's already on an unbelievably good deal," Mr Ogge said.
A spokesperson for the Department of Mines, Petroleum and Exploration said it still did not know the total cost the state government may need to pay in the decommissioning process."The total amount of any potential refund will not be known until West Australian Petroleum Pty Ltd submits its final royalty returns and the department has reviewed and audited the company's rehabilitation and decommissioning costs," the statement said.
Chevron declined to be interviewed but provided a statement.
"Under relevant state legislation, which has been in place for the past four decades, costs for eligible WA Oil decommissioning activities can be partially refunded from previously paid royalties," the statement read.
"While costs may be partially refunded, Chevron Australian and its WA Oil joint venture partners will continue to pay the vast majority of the decommissioning costs, given the strict rules outlined in the legislation.
"We will continue to engage with state and federal governments in relation to the WA Oil decommissioning project and the administration of the royalty regime."