Conventional gas exploration and production will resume in Victoria after years of being banned, because a three-year investigation found it can be done safely.
But fracking will become unconstitutional in the state.
Victoria has had a moratorium on onshore gas exploration for years and it had become a point of political contention, particularly over energy prices and supply.
The decision to scrap the ban from July 2021 comes after a three-year investigation into the issue by the Victorian Gas Program, a group overseen by the state’s Lead Scientist Dr Amanda Caples.
The probe found an onshore conventional gas industry won’t compromise the state’s environmental or agricultural credentials.
“There are things that need to be improved, there are some further steps we need to take. But we can safely, explore and extract natural gas against those highest of standards,” Premier Daniel Andrews told reporters on Tuesday.
There are potential onshore gas resources in the Otway Basin and parts of Gippsland.
More than 80 per cent of residents in Victoria’s southwest and Gippsland are supportive of seeing them used, the investigation found.
The industry could generate $310 million annually for regional economics and create 6400 jobs over the lifespan of its projects.
The probe held more than 800 events and gatherings to gauge community views and those of environmental and business groups.
The state opposition and Victorian Chamber of Commerce and Industry have welcomed the lift on the moratorium, calling it long overdue.
Environment Victoria doesn’t share their enthusiasm, saying the move to lock in the burning of more fossil fuels is a “backwards step” in addressing the risks posed by climate change.
“It’s incredible that after our horror bushfire season any government would now encourage new fossil fuel projects,” the group’s chief executive Jono La Nauze said.
Mr Andrews said Victorians ultimately want record investment in renewable energy and strong targets for emissions reduction, which the government is providing.
But gas is a “significant transitional fuel” and the government needs to take a “balanced approach”, he stressed.
“You can’t just turn off fossil fuels tonight, and then hope to be turning on the light tomorrow. It doesn’t work that way,” he said.
New licences for gas supply will be reserved first for Victorian businesses and households, the premier added, in the absence of a national gas reserve.
“Our gas is for our businesses and our households first,” he said.
Business lobby the Ai Group said the benefits of the decision won’t be felt any time soon, with further exploration to establish probably reserves to take years in the best case.
Other laws have also been introduced to permanently ban fracking and coal seam gas exploration under the Victorian constitution.
That was an Andrews Labor government election promise ahead of the 2018 vote.