Source: Allens Insights (legal sector)
Given the geographical scale and requirements for PHES projects, appropriate sites are often situated on or near to culturally significant sites and/or land subject to Indigenous claims. This means PHES developments are particularly susceptible to legal challenge to licences and approvals, on the basis that developers have failed to adequately consult with Indigenous stakeholders in satisfaction of domestic ESG regulations. This risk can materialise as a result of activism by public interest groups, formal complaints to regulators and/or judicial review proceedings. Efforts to address complaints by Indigenous stakeholders and consequent litigation will not only lead to inflated costs, but also likely disrupt the project or halt progress entirely.
Developers are also subject to stakeholder scrutiny for compliance with their own ESG policies, voluntary commitments and published representations, which may go further than domestic ESG regulations. Increasingly, stakeholders, shareholders and activists expect companies to align with both international laws and voluntary soft law standards like the UN Guiding Principles on Business and Human Rights (UNGPs).
In addition to project, legal and cost consequences, failure (or perceived failure) to comply with ESG policies and commitments can lead to reputational damage and loss of social license (ie support from the community).
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Case study: Queensland Hydro Project The project area for the Borumba PHES project holds significant cultural importance for the Kabi Kabi people, the traditional landowners. The developer is reported to be in negotiations with the Kabi Kabi people, which may lead to the need to downsize the project to avoid sensitive sites. As part of these negotiations, an Indigenous Land Use Agreement (ILUA) has been agreed between the Kabi Kabi people and the developer to allow exploratory works to be carried out.12 |
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Case study: Barossa Gas Project (Northern Territory, Australia) In 2022, Tiwi Island traditional owners filed a lawsuit against the developer and the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA). They argued that the developer had failed to adequately consult them about the project’s potential risks to their food sources and spiritual connection to the sea. In September 2022, the Federal Court ruled in favour of the traditional owners, invalidating the developer’s drilling approval and ordering the cessation of drilling activities.13 The developer was required to resubmit fresh approvals and was only able to recommence in early 2024 after almost 16 months of delay and another round of litigation with the Tiwi Island traditional owners.14 |
Contracts should be clear around who bears the cost and time risks associated with any legal challenges. In order to mitigate against time and cost implications of potential challenges, it is essential that parties consult traditional owners early and transparently, and engage compliance policies to ensure ESG regulations and internal ESG policies and commitments are met.
One strategy to achieve this is to design robust complaints and grievance mechanisms and deploy them as early as possible in the project. These mechanisms should allow traditional owners and other stakeholders to lodge complaints prior to design and development. This allows developers to make changes and negotiate agreements while it is still reasonably quick and inexpensive to do so.
In 2024, the Clean Energy Council published a best practice guide for the renewable energy industry to support their engagement with First Nations. This included discussion of key principles of best practice for renewables projects with First Nations peoples, including respectful engagement, preservation of cultural heritage, ensuring economic and social benefits are shared and embedding land stewardship and cultural competency. The guide is a useful source of discussion on minimum and best practices around PHES projects.