The Regulation Of Unconventional Petroleum Exploration And Production In Western Australia - Oil, Gas & Electricity

With Western Australia having one of the largest technically recoverable shale gas reserves in the world in its Canning and Perth basins, ¹ it is no wonder that unconventional petroleum ² exploration in WA is gathering pace and attracting investment from international oil companies.

But the logistical hurdles of bringing the petroleum to market, and the relatively high cost of labour and the extraction of the resources, mean that it may be a while yet before we catch up with our South Australian neighbours and see first production. Nevertheless, regulators in WA are cognisant that they must strike a balance between fostering the burgeoning unconventional petroleum industry and addressing concerns that exist in relation to the environmental impacts of unconventional petroleum exploration and production, in particular the effects of hydraulic fracturing (or 'fracking') ³. Against this background, this bulletin seeks to outline the current regulatory framework for unconventional petroleum exploration and production in WA and some of the recent developments in this space.

For an interesting insight into the shale gas revolution in Australia and the financing of this revolution, please refer to our recent Thinking piece, available via this link.

CURRENT REGULATORY REGIME IN WESTERN AUSTRALIA

The Department of Mines and Petroleum (DMP) administers onshore petroleum and geothermal activities in WA. Onshore petroleum activities are regulated under various sources of legislation, such as the Petroleum and Geothermal Energy Resources Act 1967 (WA), which regulates the entire petroleum spectrum from exploration to abandonment, and the associated Schedule of Onshore Exploration and Production Requirements 1991(Schedule), which contains many provisions that are generally found in regulations, such as, drilling, regulation of production and reporting requirements. Onshore petroleum activities must also comply with legislation relating to public health, the environment and water resources, such as the Environmental Protection Act 1986 (Cth), which is administered by the Environmental Protection Authority (EPA) and the Department of Environment and Conservation.

The DMP is responsible for assessing and approving all drilling and fracking operations. Parties intending to carry out such activities need to submit a number of applications to the DMP, including:

a drilling application;
an environmental management plan (EMP); and
a safety management plan. ⁴

In order to approve a fracking operation, the DMP requires detailed information to be submitted, including, the scale of the program; distances from nearest aquifer(s); all chemical additives used; volumes, management and disposal of water; integrity of well casings; fracture modelling and monitoring of fracking; and long term monitoring to determine whether chemical contamination is an issue.

Potential environmental impacts identified for fracking projects are assessed within the DMP's regulatory framework in the first instance. The DMP will refer a proposal to the EPA in certain circumstances, such as if the proposal is likely to impact a water resource area.

The EPA will determine whether to assess fracking related projects on a case-by-case basis by deciding whether the project will have a significant effect on the environment. ⁵

REGULATORY DEVELOPMENTS IN WESTERN AUSTRALIA

The WA Government has stated its commitment to a regulatory regime that ensures responsible development of the unconventional petroleum industry, while protecting the environment, groundwater resources and public health. ⁶ Recognising that the current regulatory framework in WA needs to be amended and augmented to accommodate the up-tick in unconventional petroleum exploration in WA, the Government has instigated three main initiatives that aim to ensure that WA's regulatory framework meets global best practice.

Independent Review Board

The Government's first initiative was to commission Dr Tina Hunter to conduct an independent review of the regulatory framework for unconventional petroleum activities in WA in 2011 (available via this link (Report)). The Report made 15 recommendations for changes to the current regulatory framework, the most important of which arguably being that the regulatory processes should be strengthened and that legal enforceability needed to be improved through developing new environmental and resource management regulations. In response to the Report, the DMP has begun the implementation of a reform package, the key legislative amendments of which will serve to:

strengthen enforcement provisions for regulators;
mandate full disclosure of chemicals; and
mandate public release of approved Environment Management Plans. ⁷

The DMP will also be reviewing its policies, procedures, guidelines and activities to improve community consultation by industry participants, target compliance with auditing plans and improve consultation agreements with other government agencies.

The DMP begun the first part of this reform process in January 2012, when it released draft environmental regulations ⁸ under which all environment management plans submitted to the DMP must be publicly disclosed. ⁹ In addition, the DMP amended its guidelines for The Preparation and Submission of an Environment Plan (Guidelines). ¹⁰ Following a period of stakeholder consultation, the draft environmental regulations were finalised and the new Petroleum and Geothermal Energy Resources (Environment) Regulations 2012 (WA) (Environmental Regulations) took effect from 29 August 2012.

For more information on the Environmental Regulations, please refer to our Corrs in Brief which summarises the key facets of the new regulations (available via this link).

The second part of the reform process will see the introduction of new Resource Management Regulations (Resource Management Regulations), which we understand are currently in the final stages of drafting and will be released by the DMP in June of this year for stakeholder comment. The Resource Management Regulations ¹¹ are expected to be highly technical. The regulations will replace the dated Schedule of Onshore Exploration and Production Requirements 1991 and we understand that these regulations will give the DMP greater enforcement powers and will update the scope of its powers to provide for the growing unconventional petroleum industry in WA.

Some of the additional powers granted may include making drilling programs and fracked water management plans enforceable. There have been concerns regarding the enforceability of management plans relating to water produced from abandoned shale gas wells, which the Resource Management Regulations are expected to address. We will provide a further update once the Resource Management Regulations have been finalised.

EPA Advice

Under the second initiative, the EPA has provided guidance to the WA Government and the industry on the regulation of onshore gas activities through Environmental Protection Bulletin No. 15. ¹² The EPA notes that it will maintain a watching brief on the development of DMP regulatory arrangements, including working with the DMP to ensure the community and industry has appropriate information and guidance.

Interagency Working Group

The third initiative of the DMP was to establish an interagency working group to ensure a coordinated and comprehensive approach to the regulation of onshore petroleum activity. Various state government departments are represented on the working group.

INDUSTRY RESPONSE

It is not only the WA Government that has been quick to respond to the burgeoning unconventional petroleum industry, The Australian Petroleum Production and Exploration Association has been proactive in developing a code of practice for fracking which provides various guidelines which industry operators have committed to. ¹³

GOING FORWARD

Unconventional petroleum exploration in WA is still in its infancy, but given the prospect of a significant up-tick in exploration in the coming years, we expect there will be considerable public interest in (and scrutiny of) the industry. As such, stakeholders should familiarise themselves with the regulatory framework and develop procedures for compliance.

The author would like to acknowledge the contributions of Chris Pass to this article.

Footnotes

¹The Energy Information Administration has estimated that onshore WA has 288 tcf of technically recoverable reserves of shale gas: "World Shale Gas Resources – An initial estimate of 14 regions outside the United States" (April 2011) available here..

²The term unconventional petroleum refers to hydrocarbons that are more difficult and less economical to extract than their conventional cousin, mainly because these hydrocarbons occur in rock formations with low porosity and permeability, which means that specialised technology, such as horizontal drilling and fracking, is required to reach and extract these hydrocarbons. Examples include, shale gas, coal seam (or coal bed methane) gas and tight oils and gasses.

³Fracking is a process that uses fluids and other materials that are pumped under high pressure into wells to open channels in the rock formations, increasing the flow of and allowing extraction of hydrocarbons.

⁴See the DMP's FAQ on Unconventional Gas in Western Australia.

⁵Environmental Impact Assessment Administrative Procedures 2010 (WA)

⁶DMP "Department of Mines and Petroleum Response to Report: Regulation of Shale, Coal Seam, and Tight Gas Activities in Western Australia" (31 October 2011) at page 2, available here.

⁷For further information on the DMP's regulatory responses to the Report, please follow this link.

⁸Petroleum and Geothermal Energy Resources (Environment) Regulations 2011 (WA); Petroleum (Submerged Lands) (Environment) Regulations 2011 and the Petroleum Pipelines (Environment) Regulations 2012

⁹The object of the draft regulations is to ensure that any petroleum activity or geothermal activity is consistent with the principles of ecologically sustainable development, and carried out under an appropriate environmental plan. Relevantly, hydraulic fracturing is included in the definition of petroleum activity and geothermal activity.

¹⁰Draft Guideline for The Preparation and Submission of an Environment Plan (2011), available here.

¹¹Not to be confused with the Petroleum and Geothermal Energy Resources (Environment) Regulations 2012 (WA) which the Resources Management Regulations will complement.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.


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