But the industry argues that stricter state limitations on carbon than apply in the rest of Australia make no sense given the need to meet national emissions reductions targets. Woodside chief operating officer Meg O’Neill has pointed out that the EPA’s proposed guideline imposed a “wildly disproportionate” share of the national emissions task on WA projects under both the federal government’s emissions reduction target of 26-28 per cent by 2030 and the opposition’s targets of a 45 per cent cut by 2030 and net zero emissions by 2050.

They also point to the role that gas plays in reducing emissions internationally by replacing coal as a source of energy in key markets such as China, although that argument has failed to get traction with environmental groups.

Australian Petroleum Production & Exploration Association head Malcolm Roberts said the industry is committed to operating in accordance with emissions policy set by government, while acknowledging the LNG sector has no clear pathway to reach net-zero carbon by 2050.

“Each of the projects have to take into account their carbon risks over time,” Dr Roberts said, pointing to offsets, international credits and technological improvements as potential avenues. They are “certainly aware” of the challenge of the zero-carbon goal, he added.

Dr Hatton invited critics of the now-shelved EPA guideline to come forward and consult on ways the watchdog could make its approvals “robust not just in terms of environmental protection and implementable and feasible, but also less subject to judicial review”.

“Something we were very mindful of [in the guidelines] was showing due regard to indemnify, in a sense, or make more legally robust, our determinations,” he said.

Dr Hatton pointed to emissions being a factor in the Supreme Court in WA ruling EPA approval of the controversial Roe 8 highway invalid in 2015.

In the Northern Territory, government approval for the clearing of 20,000 hectares of land is subject to a Supreme Court appeal on the grounds it will increase greenhouse gases.

And in NSW, a landmark court ruling last month blocked the proposed Rocky Hill coal mine on the grounds it would hasten climate change.

Dr Hatton said he regretted not consulting big LNG companies directly on the new guideline, a situation leading to industry claims it was “ambushed” by the new ruling. A document the EPA circulated in January to APPEA and a limited number of other organisations under strict confidentiality restrictions made no mention of a carbon-neutral requirement, nor of the possibility of including “Scope 3” emissions — those released by customers, for example — in an assessment, sources said.

The EPA withdrew the guidelines on Thursday after WA premier Mark McGowan called Dr Hatton to raise concerns spelled out by top Woodside, Chevron, Shell and Santos executives at a parliament house crisis meeting earlier in the day.

The EPA now expects to spend at least the next 12 weeks consulting on a revised version of guidelines that left LNG companies dumbfounded on how they would offset millions of tonnes of carbon emissions and opened the door for emissions from Chinese steel mills to be taken into account when assessing iron ore projects.

Dr Hatton said he accepted criticism of the previous consultation process and admitted the industry group had not been shown a final version of the beefed-up emissions guidelines before they were announced.

“I regret that I didn’t go out directly to companies that I might have anticipated would be most immediately challenged or confused,” he said. “I’m correcting that.”

The details of the public consultation process have yet to be finalised, but a Shell spokeswoman said the oil giant “welcomes the opportunity to be involved in the consultation process to find a way forward on this complex issue.”

Business Council of Australia chief executive Jennifer Westacott said industry needs to help design guidelines that don’t stall much-needed investment and also urged a national approach.

“More ad-hoc regulation would have undermined the competitiveness of Australian businesses, forcing them to compete with one hand tied behind their backs,” she said.

The EPA maintains it did due diligence on the potential to offset carbon emissions at the levels required under its policy and found it was possible despite claims to the contrary from the LNG players.

Dr Hatton said the EPA needed to make sure its advice had a “measure of practicality” and that it might not be practical for companies to go out into the international market and buy million tonnes of CO2 equivalent a year.

Dr Hatton said the EPA “would vacate the space” if at a national level some mechanism that put a price on carbon was introduced and in its opinion put Australian on track to meet Paris targets.

Both Shell Australia chairman Zoe Yujnovich and Woodside boss Peter Coleman have called for Australia to adopt a carbon price.

Firebrand union leader Christy Cain attacked Mr McGowan’s intervention with the EPA after meeting the LNG giants.

Mr Cain, the WA branch secretary of the Maritime Union of Australia, said Mr McGowan was too willing to do the bidding of the big end of town.

“The likes of Woodside and Chevron are just worried it will have a detrimental effect on their profit. It is an absolute disgrace.”

There is no love lost between the MUA and Mr McGowan after his government defied Labor policy to open up parts of the state to fracking.

Mr Cain said that if the McGowan government was worried about jobs in the offshore oil and gas industry where there remained huge reserves it wouldn’t have give a green light to fracking.

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