Environmental groups criticised the decision on Tuesday. The Greens said an onshore gas industry could imperil waterways and farmland. "It is truly appalling that the Victorian Labor Government is trying to pull the wool over our eyes by making this disastrous announcement in the middle of a pandemic," Victorian Greens environment spokeswoman Ellen Sandell said. "Opening up more drilling for gas is terrible for our farmers, environment and climate." Premier Daniel Andrews said extensive consultation had been held with communities and farmers across the state. He said natural gas would be explored and extracted under the "highest standards" to protect the environment and communities.

Mr Andrews told reporters new gas supplies would be reserved for Victorian households and businesses first. New licenses for extraction will be conditional on a first offer being made to the Victorian market. "Reserving Victorian gas for Victorian businesses and Victorian households makes sense and that’s what these arrangements will also deliver," he said. Exploration and extraction will begin from the middle of 2021. "There’s no prospect of any project getting away before then." Resources Minister Jaclyn Symes said a royalty system already applied to gas and modelling indicated it could generate $43 million a year once the industry got started.

The announcement - made months before the moratorium expires on June 30 - comes at a critical time as the push to lift the supply of gas into both Victoria and New South Wales takes on greater urgency. Manufacturers have begun openly blaming a three-fold increase in the gas price as they close their doors while the national consumer watchdog has warned of a looming supply shortfall unless more local supply is brought into market. The Morrison government, meanwhile, has made increasing gas production a condition for states to receive multibillion-dollar energy funding deals. Ben Davis, state secretary of the Australian Workers Union, on Tuesday said the state's conventional gas drilling moratorium should never have been imposed in the first place, and its removal was "well overdue". "It's a known technology and a safe technology, so I'm really heartened by the government's announcement today," he said. The decision would bring desperately needed new gas into the southern states of Victoria and NSW, Mr Davis said, and help offset the looming supply shortfall feared in the coming years as gas output from ExxonMobil and BHP's Bass Strait gas fields rapidly declines.

He said the revival of conventional gas drilling would lead to the expansion of new jobs in the gas industry and would offer reprieve for manufacturers who were struggling to stay afloat due to gas prices of up to $10-$12 a gigajoule, three times above historic levels. Loading "It offers light at the end of the tunnel for manufacturers who have been considering their options now for a year or two, to get more supply into the market so manufacturers can pay less for gas than the current unsustainably high prices," Mr Davis said. It comes after government geological surveys have identified "potentially significant" onshore conventional gas resources particularly in the Otway Basin, which stretches across the border to South Australia. Production of Victoria's estimated resources could generate more than $310 million annually for regional economies and create 6400 jobs, according to the state government. Environment Victoria chief executive Jono La Nauze warned that lifting the gas ban would make climate change worse and expose Victorians to greater risks of fires, heatwaves and drought.

"It is critical the Premier come clean with Victorians on how he plans to reduce Victoria's greenhouse emissions in line with limiting global warming to 1.5 degrees," Mr La Nauze said. Scientific studies into the presence of onshore gas reserves have focused on the west of the Otway Ranges and also onshore in Gippsland. South Gippsland farmer Fergus O'Conner, a beef cattle producer and member of Farmers for Climate Action, said it was essential to look after agricultural land and not put it at risk with gas extraction. “You wonder why the government has a community consultation period, when they do what they want anyway," Mr O'Conner said. "They ought to be held accountable." Lead Scientist Amanda Caples said research had shown there could be up to 830 petajoules in both the west Otways and Gippsland. Companies that wanted to drill for gas on private land would have to strike agreements with landholders, she said.