DERHAM, Ms Peta, Acting Head, Energy Security Taskforce, Department of Climate Change, Energy, the Environment and Water FOSTER, Mr John, Branch Head, Great Barrier Reef Branch, International Environment, Reef and Oceans Division, Department of Climate Change, Energy, the Environment and Water HLADENKI, Mr Stefan, Director, Capacity Investment Scheme Tender Delivery, Department of Climate Change, Energy, the Environment and Water MITCHELL, Ms Nicole, Acting Head, Climate Change Policy, Adaptation and Risk Division, Department of Climate Change, Energy, the Environment and Water RAYNOR, Ms Jackie, Branch Head, Biodiversity Programs Branch, Department of Climate Change, Energy, the Environment and Water SOUTHWELL, Mr Malcolm, Head, Water Infrastructure and Investment Division, Department of Climate Change, Energy, the Environment and Water Committee met at 11 :0 5 CHAIR ( Mrs Phillips ): I now declare open this public hearing of the Standing Committee on Regional Development, Infrastructure and Transport's inquiry into local government funding and fiscal sustainability. I'd like to acknowledge the traditional custodians of the lands on which we meet today, and I pay my respects to their ancestors and their elders, past, present and future. I extend this respect to all Aboriginal and Torres Strait Islander peoples in their cultural and spiritual connections to Australia's lands and waters. In accordance with the committee's resolution of 28 August 2025, this hearing will be broadcast on the parliament's website, and the proof and official transcripts of proceedings will be published on the inquiry website. I remind members of the media who may be present or listening on the web of the need to fairly and accurately report the proceedings of the committee. I now welcome representatives of the Department of Climate Change, Energy, the Environment and Water to give evidence today. Do you have any comments to make about the capacity in which you appear? Mr Foster : I look after the Commonwealth's policies and programs to do with the protection of the Great Barrier Reef. Ms Derham: I'm currently responsible for the government's response in securing Australia's fuel security and resilience moving forward. CHAIR: Although the committee does not require you to give evidence under oath, I should advise you that this hearing is a legal proceeding of the parliament and therefore has the same standing as proceedings of the respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. The evidence given today will be recorded by Hansard and attracts parliamentary privilege. I also remind members of the committee and anyone listening of the terms of reference for this inquiry that is into local government funding and fiscal sustainability. I now invite you to make a brief opening statement before we proceed to discussion. Mr Southwell : We have no opening statement, Chair. We were here on the 23 May. I know you had a number of questions for other parts of the portfolio, so we brought a range of colleagues who represented a breadth of the portfolio to hopefully answer your questions. CHAIR: Thank you very much, and thank you so much for coming back as well. When your officials last appeared, we were dealing with a pretty serious global fuel shock. A lot of the questions then were immediate and practical, such as what happens to councils when fuel is short, expensive or uncertain and they still need to keep roads maintained, bins collected, emergency responses running and services delivered. We're not in that same acute moment now, but councils' reliance on fuel has not gone away. So this feels like a useful chance to step back and ask: what have we learnt, where are councils still exposed, and what practical options are there to build more resilience before the next shock? Ms Derham : Absolutely correct—National Cabinet met on 26 August and declared that we will remain at level 2 of the National Fuel Security Plan. So you're right; we're still on heightened alert, but we certainly haven't moved into any emergency arrangements that would be required under level 3 or 4 of that particular plan. However, we are still working in a very volatile and uncertain fuel supply global circumstance. That being said, as part of that initial shock and the uptick in fuel purchases that we saw that did lead to some regional fuel supply disruptions back in March, the government has taken some actions that did see the easing of the pressure on the mobility and distribution of fuel in Australia. One of the options that they took at that time was to reduce the minimum stockholding obligations by 20 percent, which meant that our major fuel corporations could release more fuel and then were able to see that fuel distributed out to regional areas to overcome that bottleneck at that time. I think that that's a lesson on how the government was able to respond. It was one of several actions taken. There is a report coming back to the government later this calendar year that the Prime Minister's fuel taskforce is leading, to go through some of the lessons associated with the policy actions taken as part of the initial response to the crisis. So there'll be more information coming forward about a reflection of those policy choices made. But that was just one I wanted to share with the committee today, because I know that that was one that really alleviated the distribution of fuel, particularly to our regional centres, at that critical time. That being said, the government is also currently consulting on a package of measures that aims to further strengthen Australia's fuel security and resilience. Consultation remains open until 15 September. What we are consulting on, in particular, is the Australian government holding and owning its own fuel reserve—a strategic reserve. That'll be a billion litres of fuel. That will be primarily diesel and jet. We are consulting on, at the moment, if petrol should be considered as part of that mix, but, at the moment, the consultation paper has put forward diesel and jet as the main fuels for that strategic reserve. We are also consulting on increasing our minimum stockholding obligation days by 10 for each of the fuel types—all three products: diesel, petrol and aviation fuel. Again, what both of those two combined measures will do is that we'll see in the order of an additional 2.5 billion litres of fuel held here in Australia moving forward, so that will help build up that resilience and security of product here on Australian soil or coastal zones. There are other aspects of that package. We're also looking at ongoing policy support for our two refining facilities—one in Geelong and one in Brisbane—supporting them, ongoing, into the future as well. We are hopeful of being able to take a package back to government before the end of this year on the outcomes of that consultation, again, specifically targeting the question you asked about how we are looking at building up that ongoing security and resilience of fuel here in Australia. CHAIR: Deputy Chair. Ms PENFOLD: My first question relates to climate risk and adaptation. The Commonwealth tells councils they need to plan for climate risk and adapt their roads, drainage, coastlines and community infrastructure. We've heard a lot of evidence, repeatedly, from councils that they don't have the financial capacity to do so. Could you provide—and be very specific—predictable, recurrent, block-type funding from the Commonwealth to councils specifically to assist them with climate adaptation responsibilities that councils are being asked to carry? Ms Mitchell : The roles and responsibilities for the Commonwealth, states and territories and local government with regard to climate adaptation were agreed by COAG in an intergovernmental agreement in 2012. That sets out those roles and responsibilities for the Commonwealth. That role is around providing science and information, and providing leadership and coordination. The states also have a role around providing science—that's at the more localised level—as well as looking after their own programs. For local governments, there's a delivery role. That means the role the Commonwealth has taken is a leadership and coordination role. Primarily that's through the Energy and Climate Change Ministerial Council; local government is an observer on that council. They also participate in officials-level working groups underneath the council on decarbonisation and adaptation. In terms of that specific question about local governments, local governments are under pressure to deal with climate risks. The role the Commonwealth has been providing is in assisting with that climate science and information. The release of the national climate risk assessment last year was a big step forward. It includes information at the equivalent of the local level. In addition, earlier this year, in June, there was a release of some guidance that helps local councils to assess their risks and, as well as that, a digital tool for local government. That guidance and tools include webinars, FAQs, fact sheets and L&D. The role the Commonwealth is playing in this space is an enabling role, supporting the states and local government. Ms PENFOLD: Are there any intergovernmental taskforces between your department and the Office of Local Government or NEMA? Councils are saying to us they are being told to do things and they don't have the funding to do them. If you're providing information, who's providing them with the funding to assist them with the task? Ms Mitchell : ALGA is an observer on the Energy and Climate Change Ministerial Council and a participant in those officials-level working groups. CHAIR: Dr Haines. Dr HAINES: Further to local government's capacity to pay for more and more activities and more and more infrastructure in regard to, as the member for Lyne has talked about, the consequences of natural disaster: we've been asking questions of council about own-source revenue and where they can achieve greater inputs to their bottom line. One of the potential opportunities is around the transition to renewable energy and the grid-scale projects that are right across rural and regional Australia. Many local governments have raised issues relating to the inability to receive rate revenue from energy and mining projects. There are haphazard community benefit funds scattered across the country. I'm curious about whether the department has any oversight of the policies that exempt energy and mining projects from being rated. If so, why is the rate exemption still in place, and what would your views be on a broader community benefit framework that gives us some consistency, some certainty for investors and some certainty around own-source revenue for local government? Mr Hladenki : In terms of the oversight of or involvement in exemptions for rate setting, I can't comment on that. In terms of the approach to consistency or application of community benefits, I'm responsible for overseeing the delivery of the tenders for the Capacity Investment Scheme, which is the government's key underwriting scheme for renewable energy. The first thing to say is that any project that applies and is successful through the CIS needs to still get all the necessary approvals under state based planning and environment laws, and, if required, under the EPBC laws. Some of those approvals go to issues of local impact and how they must be addressed. To the other thing that the Capacity Investment Scheme does: there are five merit criteria that projects are assessed against. One of those is community benefit and local content; that accounts for 12.5 per cent of the overall assessment of projects. We don't prescribe what those local benefits plans or local content need to look like—we leave that to the proponents to consider what works best for the communities they're operating in—but we provide in the guidelines some examples of what would be a high-merit project or submission under that merit criteria. That guidance goes towards things like making sure that you're working with the local community, that you're looking at plans put out by the local government or local communities and looking to work with them where possible. Where that's demonstrated through the bid, they're likely to be assessed as higher merit under that community benefit and local content merit criteria. Dr HAINES: In reviewing the outcomes of the Capacity Investment Scheme, where 12.5 per cent of weighting goes to community benefit, what are you seeing? Are you seeing money come through to increase the prosperity of rural and regional Australia? Are you seeing examples whereby the companies who are receiving taxpayer funds through the CIS are significantly and meaningfully moving the dial, in particular in local government areas? Is there some best practice that we can point to? Mr Hladenki : We've run nine tenders now, and 109 projects have been announced as successful under the scheme—so we are starting to get a good evidence base of the types of things that are coming through. The other thing we think is important is that the commitments they make through the tender process, that they're assessed on, are contractually enforced. They go into the Capacity Investment Scheme agreements as a schedule and are then part of the contract. That goes into our usual contract management to make sure that the commitments made are enforced, which I think is an important control on commitments that are made. So far in the scheme, we've seen about $1.7 billion in shared community benefits committed to by projects in local communities. Those community benefits include the setting up of general community funds that communities can apply for and seek disbursements from. We've seen energy rebates for locals committed to some financial support for biodiversity and revegetation projects. We've seen partnerships with local TAFE and schools. We've seen some commitments to fund and improve capacity for local firefighting brigades, to improve their capacity to deal with the different types of incidents that might occur from a renewable energy project to what they're typically used to dealing with. We're seeing those sorts of things come through in the commitments. Dr HAINES: Thank you. CHAIR: Ms Landry. Ms LANDRY: I just want to ask about councils that have major infrastructure damage like roads, particularly, because of national energy infrastructure projects like the wind farms and the solar fields. How does the department consider the need for maintenance and remediation in these cases? I've had some in my electorate, particularly between Rockhampton and Mackay, and they've caused major damage to the road network, and often they seem very reluctant to make repairs to it. It's quite dangerous for families that travel on those roads, particularly when they're more country rural roads than the major highways. Do you guys have anything to do with that? Mr Hladenki : The department doesn't directly have anything to do with mandating that sort of thing, other than assessing the commitments that proponents funded through the Capacity Investment Scheme make and providing a rating on that. The department doesn't have a direct role, as far as I'm aware, in mandating those sorts of things. Ms LANDRY: So that would go back to the states, probably— Mr Hladenki : Yes, under the state planning— Ms LANDRY: with the road, and the sign-off of the approval process would be part of that. Mr Hladenki : Yes, that's right. CHAIR: Ms Jordan-Baird. Ms JORDAN-BAIRD: Thank you so much for coming back and appearing again before our committee. My question picks up on a line of questioning from our chair around the fuel crisis we've seen earlier this year. If we want to help councils be less exposed to the next fuel shock, are the existing Commonwealth funding mechanisms we already have enough, or, in your view, is there a case for more targeted, longer term supports for local government? Ms Derham : I'll attempt to answer the question as fully as I can. I think one of the things that we have learned as part of the process of this Middle East crisis is where our understanding of that demand for liquid fuels has been and where some of those pressure points might be. In the norm, our fuel market services and maintains and distributes fuel efficiently and effectively. But, as I spoke about, we're looking at measures that will see more fuel held in Australia, building up security and resilience. As part of the reflection and as we are thinking through the national fuel plan, if we find ourselves going up through the levels of that plan into level 3 or level 4, we're really starting to move into emergency management arrangements. As we plan and prepare for if that does or doesn't occur here in Australia, we are and have been working with ALGA in particular to understand what some of the local government needs would be were they to find themselves in an emergency situation with fuel shortages and the criticality for essential services like waste pick-up or other. So we are actively working with ALGA on trying to understand and build a picture of that need and demand were we to find ourselves in those emergency arrangements. That's an ongoing process at the moment. If you go and ask for that information, it's hard to gather the intel that is meaningful for planning purposes, so it's an ongoing conversation that we're having, to gather that up at a national level. We work closely with the states and territories, who are also supporting that information gathering as well. So I think your point is quite relevant, and we are doing that work, were we to find ourselves in an emergency situation. But, otherwise, with the other measures that the Australian government is taking and the responses we have been able to see to the crisis thus far, we believe that we'll be in a better position to manage any future fuel shortages once we're able to build up those stockpiles. Ms JORDAN-BAIRD: It's great to hear that work is ongoing. CHAIR: Mr Venning, did you have a question? Mr VENNING: Let me come back to you. CHAIR: Ms Urquhart. Ms URQUHART: Just following on from that and thinking about resilience rather than a crisis response, has DCCEEW looked at practical ways councils could reduce fuel exposure over time—for example, through fleet planning or conversion, alternative fuels, electrification or changes to service delivery? If so, are there examples or case studies showing what savings or risk reductions are realistic for councils? Ms Derham : I don't have all my colleagues here today, so we may very well take it on notice and come back. Ms URQUHART: Yes, sure. Ms Derham : But what I can say here in the committee room is that the Australian government has been doing work with local governments directly for them to think about their energy consumption. In many of our regional centres, sometimes that energy consumption is power generated by diesel generators. Some of it is obviously through the grid. The work that we have been doing is assisting local government to understand their energy consumption needs, where their highest demands are and opportunities for how they might be able to transition that to a renewable or a biofuel alternative. There was the Community Energy Upgrades Fund, which was $100 million. That was allocated out in previous financial years to local governments to support them. We're also doing a grant round at the moment that is open to all sporting facilities to look at how they run their sporting complexes more energy efficiently as well. So there are a number of initiatives that the government has done, working directly with local government for them to consider their energy consumption and demand needs and how they might be able to lower those costs or switch to alternative energy supplies. There's a lot more to do. The fuel crisis has also highlighted some of those other critical service needs that local governments have also turned their mind to as part of how they build their own resilience into their communities. Ms URQUHART: Thank you. I'll leave it at that because I know there are a lot of people, but, if you can give any more information on notice, that'd be great. CHAIR: Ms Briskey, do you have a question? Ms BRISKEY: My apologies for not being here. To be honest, I probably don't have a great question to ask, because I haven't heard what's been said before. Sorry, Chair. CHAIR: That's alright. What is the take-up of those energy-saving programs? Is it something that councils embrace? Ms Derham : 'Oversubscribed' is probably a very good term for it. It's very welcome, and a lot of competitive interests are coming forward and seeking those grants. CHAIR: Great. Mr Venning. Mr VENNING: Obviously, we've got a heavily regulated energy market, and that's how proponents bring new energy sources in, because they look at the demand curve. What's the department's view on the demand curve in Australia as it relates to data centres and the AI arms race that we're seeing, particularly between China and the US? Australia is trying to catch up there. My prediction is that we've completely underbaked the demand curve, and we'll see more instances like we did in the last two months in South Australia, where wholesale energy prices peaked at over $20,000 a megawatt hour. Does the department have a view on energy demands in this country? Ms Derham : I'll take that question, but, again, we might come back on notice from the experts in this field. The rollout of data centres is under active consideration and discussion. National Cabinet has spoken about the role of AI and the influence that will have. The energy and climate ministers are also continuing discussions on how they tackle the data centre issue and how they are powered. It is rightly touted as large energy consumption. There are lots of benefits of having that technology in Australia. How is our energy system able to support and cope with that? We'll take it on notice because there are other people in the department who will be able to give you a more fulsome answer, but it is actively being worked through to understand how to balance that. Mr VENNING: Thank you. CHAIR: Dr Haines. Dr HAINES: In your submission to us, you gave information about the Local Environmental Projects Program. It was a targeted, invite-only, non-competitive grant program based on 2025 election commitments. Invitees included local councils, community groups and NGOs. Can you tell me how the invitees were identified and what the selection criteria were to be identified and invited to participate in this program? Can you tell me that? Ms Raynor : The Local Environmental Projects Program was a series of election commitments. When the department received those potential projects, we ran them through an assessment process. I can take you through the assessment criteria. Dr HAINES: I'm aware of that part. I'm most curious about how those invitees were identified and what the selection process and criteria were for the invitation element. I hear the election commitment bit a lot, but I'm curious about what the criteria were, given that I'm sure many local governments would fit broad criteria. I'm just want to know what the criteria were to get an invitation. Ms Raynor : I wouldn't be able to speak to that, because that would be a matter for the governments working on those particular commitments that came together. What I can advise the committee is that the Local Environmental Projects Program actually does have its foundations in a number of other programs. It does pick up on some elements of Saving Native Species, which goes towards targeting 110 threatened species and 20 priority places. It does also have its foundations in the Urban Rivers and Catchments Program, which looks at building healthier waterways and catchment areas. It also does pick up on the Saving Koalas Fund. So what you would see through all of those projects is that they do tend to cover off on a number of those different projects. So, whilst I can't tell you what the criteria were for engaging with the different sort of proponents or the different levels of government in the formation of those projects, I can tell you that the program itself does have its foundations in a number of those different program purpose objectives. Dr HAINES: I'm conscious of time, so I'll maybe put a question in writing later. CHAIR: I've got a question around energy. If the goal is to help councils become less exposed to the next fuel shock, are existing Commonwealth funding mechanisms enough, or is there a case for more targeted, longer term support for local government? Ms Derham : That's a good question. The Australian government doesn't fund, per se, local government in the way that they manage their businesses. What we do is look for opportunities to support them where there's a national impact or opportunity to do so. We work closely with our colleagues in the department of infrastructure in terms of any opportunities that arise for broader local government support. They might be better placed to talk to you more about the holistic opportunities and responses. We will definitely work in partnership with our colleagues as we navigate further opportunities. CHAIR: Deputy Chair. Ms PENFOLD: My question relates to the Capacity Investment Scheme. When the Commonwealth supports a major renewable energy project through the Capacity Investment Scheme, what assessment is made of the financial impact on the host local council? That includes roads, bridges, waste, housing, emergency services and other local infrastructure. In that assessment, what consideration is given to who pays the cost impacts on the community? Mr Hladenki : The Capacity Investment Scheme is a targeted program focused on providing revenue underwriting support for renewable energy development. So it's quite targeted in the support that it seeks to provide. There's a financial assessment of the project and the value for money to government. I've already outlined the ways in which the impact on local community via the local benefits and the local content they're providing is assessed under one of the merit criteria. The assessment of projects eligible for support under the Capacity Investment Scheme, which is a revenue underwriting mechanism, doesn't actively consider the things that you're asking about in terms of the financial impact on local government. Those sorts of things would typically be assessed or considered in the planning and environmental approvals that all projects are required to achieve. For projects that are located in renewable energy zones, which some states have established and are directing renewable energy development towards, there may be additional considerations about impact on local infrastructure as a result of locating in a REZ, but, in terms of the intent of the support provided through the Capacity Investment Scheme, the financial impact on local councils isn't actively assessed. Ms PENFOLD: Do you engage with your state counterparts to understand their processes regarding how they consider the impacts on local government of projects that Australian taxpayers are investing in? Do you have that conversation with the state governments about their processes to understand what they're doing to support and assist local government? Mr Hladenki : We work with state governments to coordinate where investment occurs and those sorts of things. Renewable energy zones are a good example of that, where, for CIS tenders—ultimately where a proponent chooses to locate and pursue a project is a matter for them, not for the government. But, where the state government has come out and made, or is intending to coordinate, the location of development, like the renewable energy zones, we reflect that in our tender guidelines, where we say that we have a preference for projects in New South Wales located in renewable energy zones, for example. Other projects can still apply, but we do try and coordinate with the work that state governments are doing about how they plan for the location of these projects in their own states. Ms PENFOLD: There is an on-cost to the Commonwealth because, where there's a gap, where there's an impact in a community, those councils are seeking, partly through this inquiry—the impact on them has come up pretty much with every council we've spoken to. Either they can't rate the renewable infrastructure or there's an impact on roads. So they're seeking Commonwealth coverage to fix the consequences of something that we've already invested in. So it's a bit of a whack-a-mole. I think the answer is it's not directly considered. Mr Hladenki : Those considerations are beyond the specific intent of the support the system provides. Ms PENFOLD: Thank you. CHAIR: We might end there. I'd really like to thank you all for your attendance here today. If you have been asked to provide any additional information, would you please forward that to the secretariat by 2 October 2026..