On 31 May 2013, the Standing Council on Energy and Resources (SCER) endorsed the National Harmonised Regulatory Framework for Natural Gas from Coal Seams (the Framework).
SCER is a body established by the Council of Australian Governments (COAG), and its members are the relevant Ministers for energy and resources from the Commonwealth, States, Territories and New Zealand. SCER has particular policy responsibility, on behalf of COAG, regarding regulation and oversight of the energy and resources market in Australia.
The Framework is not a legislative document. First and foremost, its purpose is to provide guidance to State and Territory governments, who each have primary responsibility for regulating the energy and resources markets within their respective jurisdictions. Therefore, the key relevance of the Framework is how it will affect future regulation at a State and Territory level. Indeed, in Victoria, the State Government announced a moratorium on hydraulic fracturing (fracking) and on issuing new exploration licences for coal seam gas until the Framework had been finalised and released.
The application of the Framework is broader than its full title suggests – the Framework applies to fracking activities in general, not just fracking related to coal seam gas. The Framework will therefore be of interest to participants in the broader shale and tight gas industries, as well as coal seam gas.
Fracking is given a chapter of its own in the Framework, which has three other key topics also covered in individual chapters, each relating to specific concerns with the fracking process – well integrity, water management and chemical use.
Fracking broadly refers to a mechanical process which produces fractures in geological formations. A fluid composed of water, sand and chemicals is injected underground at high pressure though a perforated well. The high pressure fluid injection creates underground fractures, releasing hydrocarbons. The fractures are kept open by a 'proppant', usually composed of sand and chemical additives, which allows the hydrocarbons and fluid mixture to travel back to the well, and then to the surface.
The Framework needs to be implemented and reflected in regulation at a State and Territory level. No time limit for implementation is specified, but it is worth noting that the Framework was developed and approved by an organisation whose membership comprises the relevant ministers of each of the States and Territories.
Participants in the sector should expect that any future fracking activities, nation-wide, will only be approved if they accord with the Framework. For Queensland and New South Wales, where the market and regulatory landscape are more developed, detailed legislative and policy implementation may not be required to implement the Framework. For other States and Territories, where the market is still relatively immature, as in Victoria, we would expect a more detailed legislative response to the Framework, and for that to occur quite quickly.
Leading practices for fracking
The Framework identifies 18 'leading practices' to be followed across all Australian jurisdictions to 'build a robust national regulatory regime'. Five of the leading practices are general and apply equally to each of the key areas of concern identified in the Framework, calling for the development of an environmental impact assessment and management plan for each fracking project. Of the remaining leading practices, key points to note include:
- Well construction should be independently supervised, with a well construction report required to be given to the regulator after completion of construction of each well.
- 'Water accounting' methods should be applied to allow all water used and produced in the fracking process to be monitored, located, accounted for and, if need be, treated. Significantly, compensation arrangements should extend to water users, not just land owners and occupiers.
- Fracking fluids should be recovered as soon as possible after fracking has been completed, and recovery rates of fracking fluids should be maximised (ie the volume of fracking fluids left underground should be minimised). Both of these measures are intended to reduce the likelihood of any chemicals contained in the fracking fluids from migrating into the surrounding geological formation around the well and the fractures.
- Of the recovered fracking fluids, maximising water recycling should be operator's first priority, through cleaning and provision to water users or re-insertion into surface waters or aquifers. If recycling is not feasible, water should be disposed of in accordance with regulator-approved conditions, for example at a regulated waste disposal facility. This tiered priority approach for dealing with produced water is the practice currently adopted in Queensland under the Coal Seam Gas Water Management Policy 2014.
- Full public disclosure of chemicals used in the fracking process should be required, subject to a legitimate need to protect intellectual property rights. It is hoped this measure will 'increase public confidence in the industry'. Where full public disclosure is not possible, operators should at least ensure they are able to give full disclosure of all chemicals used to the relevant regulator on a confidential basis. This will impact on operators' confidentiality and disclosure arrangements with chemical suppliers, among others.
- A baseline water assessment should be conducted, prior to commencing any fracking activities. This water assessment will give a reference point for future water quality monitoring, which should also required. The presence of any contaminants in the water should be reported to regulators immediately who, if required, will be able to shut down the fracking operations and re-design the process to ensure protection of the environment.
- An initial geological assessment should also be required, ideally prior to the operator beginning any activities (ie commencing to dig any wells), but at least prior to any fracking taking place. This geological assessment will help inform the operator's planning process, yielding valuable information regarding the locations of underground aquifers and faults. When combined with fracture monitoring techniques this will help operators and regulators to determine maximum pressures that can be used safely in different geological formations, in particular ensuring fractures do not extend too far, causing inter-connectivity between previously separate aquifers. A fracturing completion report should be prepared and submitted to the regulator after completion of particular fracking operations.
Regional scale assessments of the cumulative impacts of fracking on the water system should be conducted, as well as assessments of the combined effects of chemicals used in the fracking process. Whilst these assessments may be conducted by a governmental agency, rather than the operators themselves, the Framework does not make it clear that this will necessarily be the case. Operators should therefore be aware that these requirements, at least in part, may be imposed on them.
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.