A court in Australia’s Northern Territory (NT) has overruled federal government drilling grants in the Beetaloo shale basin. The $15m (A$21m) grants – issued to a subsidiary of Empire Energy Group – were dubbed “legally unreasonable” by the court, though the government can still renegotiate the deal.

The overruling was conducted on the grounds that the project was approved while it was still subject to court proceedings. The grants were issued after a claim had been made by the Environment Centre NT (ECNT) that the Morrison government did not adequately consider the project’s environmental impact.

While the court ruled against the grants it did not rule against the project entirely, rejecting the ECNT’s claim. Justice John Griffiths said the issue of Australia’s carbon emissions targets was not relevant to the programme as the grants concern exploration rather than production.

Resources minister Keith Pitt welcomed the decision, in a statement saying it was “common sense” in its allowing the project to proceed, adding that it will bring thousands of jobs and billions of dollars to the state.

Pitt will be able to reissue the grants following a negotiation of their terms.

Environmentalists have voiced concern over the project since its inception, with a group of scientists in September writing an open letter, saying the project must be stopped if the state was to offset emissions.

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By GlobalData

“The rapid escalation of climate change and its impacts … leaves no room for major new fossil fuel developments like fracking across the NT” the letter reads.

The ECNT took to the courts over the project’s environmental impact, as well as its encroachment on Indigenous lands, saying that these consequences were not considered in the government’s assessment of the programme. At the hearing in November, Perry Herzfeld SC – representing the ECNT – told the court that extracting and using gas from the region would use up the rest of Australia’s carbon budget under the Paris Agreement.

The NT is getting increased attention for its shale potential, holding an estimated 200 trillion cubic feet of shale gas, though concerns remain that any future projects will tip the nation over its carbon allowance.