Source: Allens Insights (legal sector)
Establishing a suitable legislative framework 9 min read
With the country’s coal-fired power fleet rapidly ageing, nuclear power has been suggested as a possible provider of low-emissions, reliable power to support the energy transition. This raises the question: what changes are required to Australia’s legal and regulatory framework to support the introduction of a nuclear industry?
Developing any new industry takes time and involves significant, often complex, changes. The development of Australia’s offshore wind sector, for example, has encountered these kinds of challenges, along with its own unique hurdles. In the same way, lifting the federal and state/territory bans on nuclear power is essential to opening the door for nuclear energy projects in Australia.
In this Insight, we explore the legal and regulatory reforms necessary for nuclear power projects to become a viable option in Australia.
Key takeaways
- Establishing a nuclear industry in Australia requires significant legal and regulatory changes.
- Lifting the federal and state/territory bans on nuclear power is essential to opening the door for nuclear energy projects in Australia.
- A dedicated regulatory body would need to be established to oversee the nuclear industry, ensuring safety and compliance.
- A comprehensive third-party liability regime would need to be implemented to manage risks and provide clarity around accountability.
- Australian government financial support will be necessary, either via a government-owned nuclear power developer or combining government funding with private sector involvement to support nuclear power projects.
- Coordination with states and territories would be crucial to align legislative frameworks and enable the successful development of nuclear power infrastructure.
Key steps to establish a nuclear energy industry in Australia
Establishing a nuclear industry in Australia would require significant changes, including lifting existing bans, aligning federal and state legislation, creating a dedicated regulatory body, developing a third-party liability regime and implementing a financing structure capable of attracting long-term investment.
The initial steps would require the Government to:
- lift legislative bans;
- coordinate with states and territories to ensure consistent frameworks that support the nuclear sector;
- establish a dedicated regulatory body to oversee the industry’s standards and operations;
- implement a comprehensive third-party liability regime to address safety and accountability; and
- develop financing structures that attract investors and international developers.
1. Lift the federal ban on nuclear power plants
The development and operation of nuclear power plants in Australia is currently banned under federal legislation, specifically the Australian Radiation Protection and Nuclear Safety Act 1998 (Cth) (ARPANS Act) and the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act), and various state legislation.
The federal ban may be lifted by:
- amending the EPBC Act to provide a pathway for federal environmental approval of nuclear installations—this would include amendments to the following sections of the EPBC Act: 37J (No declarations relating to nuclear action), 140A (No approval for certain nuclear installations), 146M (No approvals relating to nuclear actions) and 305(2)(d) (Minster may enter into conservation agreements); and
- amending the ARPANS Act, which regulates the construction, operation, and licencing of small-scale nuclear and radioactive facilities primarily used for medical and medical research purposes (like the Lucas Heights Facility) to provide for the licencing and regulation of civil nuclear power stations. This would also involve expanding the existing scope and application of the licencing regime under that Act to address specific nuclear power plants development and operation issues.
As an alternative to amending the ARPANS Act, adopting a similar approach to the one taken for the AUKUS nuclear-powered submarines, which involved the enactment of the Australian Naval Nuclear Power Safety Act 2024 (Cth) (ANNPS Act). Broadly, the ANNPS Act:
- provided a licencing and safety regime for regulated activities (such as constructing and operating an AUKUS submarine) within designated zones in Western Australia and South Australia; and
- excluded the operation of state and territory laws that would otherwise apply to such activities.
Other federal legislation that may need to be amended to support nuclear power plants include: the National Radioactive Waste Management Act 2012 (Cth), the Australian Nuclear Science and Technology Organisation Act 1987 (Cth), and the Nuclear Non-Proliferation (Safeguards) Act 1987 (Cth).
2. Establish a nuclear energy regulator
At the same time, Australia would require a new legal authority to regulate industry operations in areas such as nuclear safety, site licencing, construction, operation, decommissioning, fuel and waste.
Such an authority would be similar to, for example, the UK’s Office for Nuclear Regulation, which oversees the 36 licensed nuclear sites in Great Britain (including the recently licensed Hinkley Point C and Sizewell C).
The regulatory body could be established by:
- expanding the mandate of the regulatory body established under the ARPANS Act (being the Australian Protection and Nuclear Safety Authority) to include licencing and regulation of nuclear power facilities (noting the Coalition’s Nuclear Energy Plan highlights the possibility of also consolidating the functions of this regulatory body with the Australian Safeguards and Non-Proliferation Office—being the regulatory body responsible for nuclear and chemical weapons treaties); or
- expanding the functions of the Australian Naval Nuclear Power Safety Regulator, which is responsible for the regulation of the AUKUS nuclear-powered submarines.
3. Coordinate state and territory legislation
The Government would also need to work with the states and territories to coordinate new federal, state and territory legislation to support the delivery of nuclear power projects.
This would require NSW, Queensland, South Australia, Victoria, Western Australia and the Northern Territory to lift their respective bans on nuclear activities.
4. Implement a third-party liability regime
Domestic liability regime
Given community and participant concerns about potential nuclear incidents, most nuclear energy jurisdictions have implemented a comprehensive domestic legal regime governing liability for nuclear events. We expect Australia would need to adopt a similar regime.
These regimes typically cover topics such as:
- Liability channelling: to reduce the number of defendants in any claim (and simplify the associated proceedings), jurisdictions adopt one or more mechanisms to ensure that nuclear liability is channelled to the nuclear installation operator only. For example, in the UK, the Nuclear Installations Act 1965 (NIA) allocates liability for a nuclear incident to the operator and provides a full defence in the UK courts to others for the types of liability covered by the NIA. In the Australian context, this would require navigating Australia’s federal system, involving overlapping state and federal laws.
- Strict liability: to simplify arguments around negligence and causation, many jurisdictions adopt a strict liability regime. That is, the nuclear operator is deemed to be liable for loss flowing from an incident at its installation, regardless of who is actually at fault.
- Liability caps: while the regimes seek to make it easier to bring a nuclear claim, they typically provide a statutory liability cap in favour of the operator, often with the government operating as an insurer of last resort for claims above the statutory cap. For example, in the UK, the NIA sets annual financial caps on operator liability, after which the UK Government covers claims up to the required minimum thresholds.
International liability regime
In addition to implementing a comprehensive domestic liability regime, it is likely Australia would seek to sign and ratify one or more international nuclear liability treaties.
There are three different (and somewhat competing) international regimes. While Australia might seek to participate in multiple treaties, in practice most jurisdictions choose to participate in one only.
- The most recent treaty is the Convention on Supplementary Compensation for Nuclear Damage (CSC), which was established under the auspices of the United Nations’ International Atomic Energy Agency (IAEA) in 1997 and covers the greatest number of nuclear power reactors globally. Importantly, the United States, Japan, India and Canada have signed and ratified the CSC only. Australia is a signatory to the CSC, but has not ratified the CSC.
- The 1960 Paris Convention on Third Party Liability in the Field of Nuclear Energy (Paris Convention), supplemented by the Brussels Convention Supplementary to the Paris Convention and most recently updated in 2004, was developed under the auspices of the Organisation for Economic Co-operation and Development (OECD) Nuclear Energy Agency (NEA). It mainly covers Western European states, including the United Kingdom and France.
- The 1963 Vienna Convention on Civil Liability for Nuclear Damage, most recently updated in 2004, was also developed under the auspices of the IAEA, but mainly covers states in Eastern Europe and Latin America.
While it would be possible for Australia to proceed without ratifying one of these conventions (as the PRC and South Korea have chosen to do), Australia’s dependence on a global nuclear supply chain means it is likely to ratify at least one.
Ratifying a nuclear treaty would bolster Australia’s domestic nuclear liability regime, eg by precluding claims being brought in other signatory jurisdictions for incidents occurring in Australia. The choice of treaty would also shape Australia’s nuclear liability policy, eg because they mandate different levels of state indemnity for nuclear incidents.
5. Adopt a financing structure
Funding model
It is unlikely that a foreign investor funding model, used in the UK and other nuclear energy jurisdictions, would be available for Australian projects. Instead, Australian nuclear power projects would likely be developed by:
- a new government-owned nuclear power developer— perhaps similar to NBN Co, Australia’s national wholesale open-access data network; or
- a private developer, partly financed by the Government through a combination of debt and equity—perhaps similar to funding models adopted for Badgerys Creek Airport and the WestConnex road project—both of which involved a mixture of federal grant funding and concessional loans.
In either case, Australia would need to rely heavily on a ‘national champion’ to drive the development of these projects, in partnership with experienced private sector nuclear companies.
Expansion of ARENA and CEFC
Australia may also consider expanding the mandate of existing agencies such as the Australian Renewable Energy Agency and Clean Energy Finance Corporation to extend to nuclear energy projects, to provide such grant funding and concessional loans (respectively).
Government support
In addition, we expect that federal support would be required for the construction phase of each project, as well as a government offtake contract or revenue underwrite for these projects, in order to secure debt financing.
To the extent that bank debt is proposed to be included in the financing mix, it is likely that financiers would require extensive due diligence to fully understand the proposed technology, due to the novelty of such technology in the Australian market, and proposed risk mitigants for delay and cost overruns given the challenges experienced for similar projects overseas.
In determining an appropriate structure, Australia may look to existing nuclear energy jurisdictions for examples and lessons that can be learned.
For example, in the UK, there has been a shift in the approach to government support contracts—from the ‘contract for difference’ model to a utility model involving a regulated asset base.
- Contract for difference (Hinkley Point C): investors agree to pay the entire cost of constructing the nuclear plant, in return for an agreed fixed price for electricity output following completion—this is funded by consumers, who will pay the difference between the wholesale electricity price and the final fixed price once the plant is operational.
- Regulated asset base model (Sizewell C): investors are able to share some of the project’s construction and operating risks with consumers from the start, lowering the cost of capital.
The complex regulatory road ahead
While the potential for nuclear energy to contribute to Australia’s low-emissions future is clear, the path to achieving this vision will involve overcoming significant challenges.
Despite the hurdles, a carefully structured and long-term approach could pave the way for nuclear power to play a role in diversifying Australia’s energy mix and supporting its transition to a sustainable and low-emissions future.