Former prime minister Scott Morrison’s government was warned it could be exposed to a legal challenge and potential damages if it refused to extend the permit of a company controversially exploring for gas off the NSW coastline, court documents have revealed.

The government denied the extension of the permit despite the advice and is now being sued in the Federal Court by private company Asset Energy. The company was exploring part of a vast gas field that stretches in area from Sydney to Newcastle.

Prime Minister Scott Morrison with Resources Minister Keith Pitt in June 2020.Credit:Alex Ellinghausen

The gas field, known as PEP-11, had been a point of tension within the Morrison government, with strong public opposition to its exploration and development ahead of the federal election, particularly in conservative-voting electorates along the NSW coastline.

The gas exploration area, located no further than 50 kilometres from the NSW coast, had run parallel to the state’s pristine beaches, popular tourist destinations, and past some of the country’s most expensive residential real estate.

Morrison had also been at loggerheads with his then resources minister Keith Pitt over the exploration of part of the field, despite their government pushing an economic recovery plan centred around developing new and existing gas fields.

In March 2021, Pitt said he had not made a decision regarding Asset Energy’s permit but would consider advice from the National Offshore Petroleum Titles Administrator (NOPTA). Court documents show the federal and NSW governments had received advice from NOPTA in April 2020, recommending that the Asset Energy application be granted.

In April 2021, Morrison secretly appointed himself as resource minister without advising Pitt. By December that year, Morrison called a press conference announcing that his government had refused Asset Energy’s application to alter the conditions of its permit, which would have allowed it to suspend some work and extend the time frame for it to drill an exploration well.

The decision was supported by the NSW government, which had originally stated its objection to Asset Energy’s application in February 2021. While both governments have responsibility for offshore gas projects, the federal government is the ultimate decision-maker.

More court documents show that the Morrison government was advised of the legal risk in refusing Asset Energy’s application. In those documents, a 2019 legal case is cited involving a company called Pathfinder Energy. The Commonwealth was challenged in court on its decision to deny a suspension and extension application relating to Pathfinder Energy’s exploration permits, and the Morrison government was told that case took “nearly one year to settle and at significant cost”.

Asset Energy’s case against the federal government will be heard next March in Perth’s Federal Court. The company claims that Morrison and the government “breached requirement for procedural fairness” by pre-determining the application and that the then-prime minister’s decision was infected by “bias”.

The federal and state governments had said they were not satisfied that Asset Energy and its joint venture partner Bounty Oil & Gas had “access to adequate financial resources to fulfil obligations under the title conditions”, which the company has disputed.

Both governments also considered public opposition to the project, while also rejecting Asset Energy’s request that a force majeure clause in the title contract be allowed as a reason for an extension to its permit, because of an internal board dispute and a dispute with one of its parent companies MEC Resources.

In other tendered court documents, David Breeze, an Asset Energy director, said the company and investors had been in joint venture discussions as late as October 2021 with global energy giant ConocoPhillips to develop a well it intended to drill at the gas field known as PEP-11.

A ConocoPhillips spokesperson said: “ConocoPhillips Australia regularly reviews exploration opportunities as a matter of its core business, and made an early decision not to progress with PEP-11.”

In another document, Breeze also wrote to the National Offshore Petroleum Titles Administrator in January 2021 advising them of a potential agreement with Snowy Hydro. “Snowy Hydro has now confirmed its engaging specialist consultants for the 21PJ [petajoules] gas pre-purchase transaction”.

A Snowy Hydro spokesperson said: “Snowy Hydro is not a party to the legal proceedings and did not at any stage enter into an agreement to purchase gas from Advent Energy.”

Breeze declined to comment as the matter is before the court.

Advent Energy is the operator of the permit through Asset Energy. Breeze said discussions had also been held with east coast manufacturers, including Orica, Brickworks, Incitec Pivot, Boral and Visy about becoming potential gas customers.

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