The Albanese government is set to cut Australia’s greenhouse gas emissions by 43 per cent below 2005 levels by 2030 and will source 82 per cent of the country’s energy supply from renewable sources.

Whilst these new developments, as previously revealed by Lawyers Weekly, resulted in a big 2022 for the energy market, there will be a number of lasting impacts for the legal industry — and new challenges for firms and legal departments to overcome.

Subsequently, “there has never been a more interesting time to be a lawyer in the energy sector,” according to Herbert Smith Freehills partner and Australia head of energy Nick Baker, who said that the volume and type of legal work are also set to be impacted by the growing energy sector.

“The issues affecting the energy sector will continue to impact the legal industry through higher work volumes and more interesting and challenging work,” he said.

“The large, complex, and capital-intensive nature of energy projects has always relied on lawyers with deep sector experience assisting clients to meet the sector’s challenges.”

Decarbonisation will also be a driving factor “across the board”, with private companies, governments and regulators placing increasing importance on ESG considerations.

This, said Gilbert + Tobin partners Adela Smith and Geoff Petersen, will span from boardroom decisions to supply chain considerations and financing.

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“Lawyers across different practice areas and sector expertise will need to become well versed in ESG developments and how to assist clients in navigating these.

“All businesses, from energy companies to those in traditional industries such as mining and even retail, are focusing on how they can reduce their carbon footprint, and the legal industry will need to adapt to guide them through this transition.”

Energy lawyers to face new challenges in 2023

However, the pair also warned of challenges ahead within the sector.

“Global supply chain issues and costs and skilled labour shortages are a challenge [that] we see continuing into 2023, although hopefully, they are not as severe as we have seen in 2022. This, along with a focus on investment returns on projects, will be the key challenges for the next few years. The transmission grid will also need to be built out to allow connection of renewables, with AEMO estimating over 10,000 kilometres of transmission lines required,” Ms Smith and Mr Petersen said.

“On the regulation front, a key challenge will be ensuring that our regulatory frameworks keep up with the pace of industry change. However, we see so much opportunity for transformation in the energy sector and for Australia to be a global powerhouse in renewables — this will require an alignment on policy and objective between Commonwealth and state governments, regulators and the private sector. If we get it right, Australia can be at the forefront of emerging technologies such as hydrogen and attract global investment at an unprecedented scale.”

And whilst “the pace of energy reform” was exponential in 2022, major reforms to the safeguard mechanism and a review into Australian Carbon Credit Units have already been seen within the first few weeks of 2023.

Thomson Geer partner Nicholas Antonas told Lawyers Weekly that this undoubtedly means that “2023 will continue to be an exciting time in the energy sector”.

“Australia’s energy transition story is now well underway, renewable energy is growing as an energy source, and we are seeing a major shift from soft to hard law commitments in the space.

“Having said that, traditional energy sources like oil and gas and coal-fired power generation will still be important for some time, but grappling with rehabilitation and decommissioning liabilities as assets come to the end of their life will pose challenges,” he explained.

“One challenge for lawyers will be keeping track of the multitude of rapid-fire legal changes. Continued uncertainty in the regulation of Australia’s domestic gas industry will also pose challenges. The completely new sector of offshore wind and the exciting prospect of big-ticket energy-driven M&A present real opportunities for 2023.”

Best practice in 2023

When asked about best practice for lawyers in this space moving forward, Mr Antonas said keeping abreast of new regulatory changes should be of the utmost priority.

“The energy transition is changing how energy is produced, stored, transported and consumed, and lawyers need to change with it to service clients’ needs,” he added.   

“Best practice for energy lawyers will require keeping a close eye on changes to the sector, including emerging technologies, and forming a deep understanding quickly so that they can respond to the first-time legal issues that will inevitably land on their desks.”

Lawyers with deeper industry knowledge will also do better as new changes are brought in, added Mr Baker.

“Put simply, lawyers with deep sector experience who understand the interrelated nature of energy markets will provide clients with the best service. The convergence of different client types and new technologies in the sector requires a lot of ‘translation’ of issues and different perspectives into workable legal solutions,” he explained.

“The deeper and broader a lawyer or firm’s experience, the better they will be able to help clients achieve their objectives.”

These types of experienced lawyers — who have experience in the entire life cycle of energy transactions and projects — will be in high demand over the course of 2023.

This experience spans from early-stage planning, development and approvals, through project construction, operation and management, regulatory considerations, financing and corporate and investment strategies, according to Ms Smith and Mr Petersen.

“Clients will demand more than just isolated legal advice on one aspect of a project — they will require commercial and technical understanding of the industry, a deep passion for driving Australia’s decarbonisation and a commitment to their objectives. The lawyers that can deliver these services as trusted advisers to their clients will be at the forefront of the energy sector,” they said.

“Getting the energy mix right as we transition to meet government targets will be critical. We think that the best chance Australia has to meet its targets is to ensure that the government, regulators and the private sector consider all options and how the mix between traditional energy sources, renewables and emerging technologies can work together to make the transition as smooth and cost-efficient for customers as possible. It’s an exciting time and presents Australia with a once-in-a-lifetime opportunity to be a global energy leader.”