Environmentalists have defeated a Morrison government attempt to develop an onshore gas field in the Northern Territory, arguing the climate change risks had not been considered.

The Environment Centre NT argued in the Federal Court that a $21 million government grant for an exploration program in the Beetaloo Basin was legally unreasonable on multiple grounds.

It said federal Resources Minister Keith Pitt had relied on advice that Imperial’s three drilling projects were likely to generate over $70 million in investment, which was incorrect.

The ECNT’s lawyers also said Mr Pitt should have considered the potential climate change risks from developing the onshore shale gas field before handing over taxpayers’ money to Imperial Oil and Gas.

They failed on those grounds.

But Justice John Griffiths found it was legally unreasonable for Mr Pitt to enter into grants contracts, signed on September 9, just days after ECNT applied for an urgent court hearing over the matter.

He ordered on Thursday that the Commonwealth’s decision to enter into three contracts with the Empire Energy subsidiary was invalid and declared them void.

ECNT director Kirsty Howey said Australia was lagging behind the global transition to renewable energy because the Morrison government insisted on propping up the fossil fuel industry.

“Under Australia’s commitment to the global Glasgow Climate Pact we need to phase out funding of new oil, gas and coal projects,” she said.

“The public has an expectation that taxpayer money will not be used to accelerate climate catastrophe by funding projects that will release vast amounts of emissions.”

The Beetaloo sub-basin has been estimated to hold more than 200,000 petajoules of gas.

The extraction and consumption of gas from this precinct would equate to a 13 per cent increase on Australia’s 2020 greenhouse gas emissions, according to one expert report.

The $21 million contract between the government and the Empire Energy subsidiary is part of a $50 million Beetaloo Cooperative Drilling federal grants program.

Grants under this program are subject to the Commonwealth’s Public Governance, Performance and Accountability Act 2013.

It requires Ministers to be reasonably satisfied that public money will be used efficiently, effectively, economically and ethically before making funding decisions.

Environmental Defenders Office lawyer Elaine Johnson said Beetaloo Basin “fracking” would lead to a significant global emissions increase.

“So it is critically important that the government is held accountable for any decisions to use public funds for new gas in the Beetaloo,” she said.

“In this case, the court found those reasonable enquiries didn’t extend to climate risk given the (drilling) project does not involve extensive gas extraction and production,” she said.

Protect Country Alliance said the decision exposes” the appalling and reckless behaviour of Mr Pitt, who arrogantly approved the grants despite an active legal case”.

“This reveals yet again that the Morrison government’s rush to throw billions in public money at gas giants is blatant corporate welfare that undermines our democracy,” spokesperson Dan Robins said.

The legal decision could lead to climate change risks being considered in future decisions about the use of public funds for fossil fuel projects.

Mr Pitt’s office, the Department of Industry, Science, Energy and Resources and Empire Energy have been contacted for comment.

– AAP