Key Points:
If oil shale processing can be made energy-efficient and operate within appropriate environmental levels then it may well be another resource which Queensland can capitalise.
Recently, the Minister for Environment and Heritage Protection and the Minister for Natural Resources and Mines announced that the Queensland Government will allow the development of a commercial oil shale industry in Queensland under strict environmental conditions.
It was stated in the announcement that Queensland currently has around 90% of Australia's known oil shale resources, which is said to be equivalent to approximately 22 billion barrels of oil.
From an oil security perspective it is a resource that is difficult to ignore, but historically the proposals to develop oil shale deposits in Queensland have suffered from demonstrating the extraction technology is viable and environmental concerns.
This article examines the recent changes to the Queensland Oil Shale Policy and what these changes mean for possible project proponents.
What is oil shale?
Oil shale is a fine-grained sedimentary rock containing large amounts of organic matter called kerogen. It is classified as an "unconventional resource" which can be transformed into liquid hydrocarbons in two ways:
- by a process which involves mining the rock, crushing and heating it (retorting), to extract and then refine the petroleum; or
- by in situ heating (heating the rock while still in the earth), extracting the oil and then refining.
Under the Mineral Resources Act 1989 (MRA), oil shale is defined as "shale or other rock (other than coal) from which a gasification or retorting product, as defined in the Petroleum and Gas (Production and Safety) Act (PAG Act), may be extracted or produced".
Under the PAG Act, a gasification or retorting product is defined as "a fluid that:
- is extracted or produced from coal or oil shale by a chemical or thermal process or that is a by-product of that process; and
- consists of, or includes, hydrocarbons".
It has been estimated that one tonne of commercial grade oil shale may produce around 100 to 200 litres of oil, which equates to approximately half to one barrel of shale oil per tonne of oil shale.
The Oil Shale Policy
The Government's new oil shale policy comes after a report was submitted by Queensland Energy Resources Pty Ltd (QER) to the Government on its demonstration plant at the Stuart deposit near Gladstone.
The report concluded that the environmental performance of the plant is generally sound and went on to recommend that a staged approach should be adopted to scaling up the technology.
The Government has said the new Policy has been adopted to:
- recognise the strategic importance of oil shale to contribute to energy security, and encourage private sector investment in high quality oil shale extraction technologies;
- ensure project proponents must first demonstrate their oil shale technology will meet high environmental standards and community expectations; and
- allow, in general, the consideration and development of other oil shale deposits in Queensland, pending thorough environmental assessment on a project by project basis.
The Queensland Government will continue the existing 20-year moratorium suspending development of the McFarlane oil shale deposit near Proserpine until 2028, particularly based on general environmental concerns for that region, although it's stated that it is open to reviewing that moratorium at some future time.
The current policy favours a staged approach that essentially requires a proponent to submit proposals on their retorting or extraction technologies via a trial in order to demonstrate it meets environmental standards and community expectations prior to moving to full commercialisation.
Each stage of a proposed development will be assessed via an Environmental Impact Statement under either the Environmental Protection Act 1994 or the State Development and Public Works Organisation Act 1971 to ensure that all potential environmental, social and economic impacts of the proposed projects are identified and assessed so as to avoid, minimise or sufficiently mitigate possible adverse impacts or risks.
However, once the technology has been proven (for example, the QER demonstration plant's technology), it is generally expected that assessment of other projects using that technology may be able to proceed as a complete project (rather than a staged approach) under the existing legislation's usual approvals process.
Mining tenure requirements
The key mining tenements for exploration, bulk sampling and production are the exploration permit, the mineral development licence and the mining lease, each granted under the MRA. An environmental authority is required for each of these tenements. Under the recently released Policy, any granted mineral development licences and mining leases for oil shale, as along with the associated environmental authorities will be made publically available via the relevant Department's website.
Key environmental compliance
The Department of Environment and Heritage Protection undertook a review of QER's pilot oil shale processing facility on the Stuart oil shale deposit near Gladstone, to ensure the facility complied with an acceptable level of environmental performance.
Following that review, the Department released its report in January 2013, "Environmental Review of QER Pty Ltd's Oil Shale Technology Demonstration Plant, Gladstone Queensland". The methodology and key issues assessed by the Department are set out in that report.
As expected the key areas of focus were those that had caused previous community concern when Southern Pacific Petroleum operated an oil shale plant between 1999 and 2004 using significantly different plant technology, such as:
- dust;
- water content and release;
- air emissions quality;
- shale waste quality;
- noise;
- odour; and
- greenhouse gas.
Each of the above issues was addressed by QER in its new trial plant and also by the Department in its review.
Guidance for future projects can also be found in the criteria against which the assessment could be conducted to check and ensure that key environmental objectives are met. The following sources contain key criteria:
- the Environmental Protection Act 1994, in particular the general environmental duty and best practice environmental management;
- the Environmental Protection (Air) Policy 2008, which includes an environmental management hierarchy, environmental values and relevant air quality objectives;
- the Environmental Protection (Water) Policy 2009, which includes an environmental management hierarchy for avoiding water contamination, prescribes water quality guidelines and defines environmental values of waters;
- the Waste Reduction and Recycling Act 2011, which prescribes the principles of management of the waste such as the polluter pays principal, the user pays principal and the product stewardship principal; and
- conditions of the relevant Environmental Authority applying to the project.
Conclusion
While clearly in its infancy in Australia, the oil shale industry has the potential to play a role in the mix of fuel sources for future petroleum demands and has particular advantages when viewed on a security of supply basis. If oil shale processing can be made energy-efficient and operate within appropriate environmental levels then it may well be another resource which Queensland can capitalise.
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.
