Australia: Victorian Gas Market Taskforce: Final report and recommendations

Last Updated: 15 March 2014
Article by Jeremy Loeliger and Stephen Thompson

The Gas Market Taskforce was established by the Victorian Government in January 2013 to examine gas supply issues in the State. The Taskforce delivered the final report to the State Government on 1 November 2013, which was made available to the public several weeks later alongside an invitation for submissions on the report which the Government will receive until the end of this month (March 2014).

The Taskforce was not created to exclusively review and report on coal seam gas (CSG) in Victoria, yet the emphasis of attention surrounding the report has been its implications for CSG in the State. With a fracking moratorium in place since April 2012, CSG remains an un-tapped source of gas in Victoria. The State Government has expressed an intention to keep the moratorium in place until at least July 2015, by which time it will also have had the time to complete and consider a community consultation process and independent water study across potentially affected areas of the State.

The report makes 19 recommendations, the first 9 of which are directly related to CSG. The report is broadly supportive of CSG, though only in a regulatory environment where the reforms it has proposed are also put in place. The key reforms within the report that affect CSG are summarised below.

  • Legislative and regulatory reforms to implement the 18 leading practises set out in the "National Harmonised Regulatory Framework for Coal Seam Gas" (Framework), endorsed in May 2013 by the Standing Council on Energy and Resources, a body established by the Council of Australian Governments (COAG).
  • Until these leading practices are implemented, participants seeking to obtain an exploration, retention or mining licence, or seeking approval of a work plan under an existing licence, should have conditions imposed on the licence or work plan to comply with the leading practises until these have been fully implemented as part of the legislative and regulatory framework.

    Included among the 18 leading practices are measures such as:

    1. independent supervision and sign-off on well construction, aimed at ensuring well integrity;
    2. adopting advanced water accounting methods to be able to monitoring and, to the extent possible, recover all fluids used in the hydraulic fracturing (fraccing) process;
    3. requiring a baseline water assessment prior to undertaking any fraccing activities; and
    4. full disclosure of all chemicals used in fraccing operations on a publicly accessible online register.
  • Creating a new position of "Gas Commissioner" within the Victorian administration, to be charged with facilitating and overseeing community consultation in relation to onshore gas exploration and extraction
  • Creating an independent "Water Science Commission" to be chaired by an eminent scientist and sitting under the supervision and administration of the Gas Commissioner. The Water Science Commission would be charged with:
    1. Making the lead in all water science and monitoring programmes in Victoria; and
    2. providing independent advice to industry participants on, in particular, water quality, and also other environmental issues relevant to onshore gas exploration and/or extraction activities.
  • Undertaking a comprehensive baseline assessment and on-going monitoring of water resources in areas that may be prospective for onshore gas and, in particular, requesting the Commonwealth to commence the Gippsland bioregional assessment as soon as possible.
  • Independently reviewing and, where appropriate, utilising data from industry participants to inform the State's water science and licensing programmes.
  • Encouraging alignment and coordination between applicable legislation and agencies responsible for water management and gas industry regulation by, in particular:
    1. ensuring all industry participants undertaking fraccing activities are issued with a water licence under the Water Act 1989 (Vic), and are therefore subject to the same requirements and oversight as all other water resource users; and
    2. ensuring all industry participants are required to hold a water licence where aquifers are known to be connected by their particular extraction or exploration activities, including where this applies to conventional, off-shore gas activities.
  • Encouraging the use of benign chemicals in fraccing activities by, in particular, imposing a permanent ban on BTEX chemicals in hydraulic fracturing activities in Victoria and requiring a demonstration of the effects of proposed chemical mixes proposed to be used in such activities prior to their use.
  • Adopting a competitive royalty rate (in comparison to rates existing in other jurisdictions and, in particular, other States in Australia) to appropriately incentivise industry to explore and develop onshore, unconventional gas. This should include a "royalty holiday" at the outset of production to reduce project set-up costs and, importantly, encourage projects to proceed to production.
  • Encouraging a fair share of the benefits from onshore gas production that goes directly to the regions affected, to build community support for the activities, by:
    1. adopting a mechanism for a share of the royalties from gas extraction activities to go directly to local communities ("Royalties for the Regions");
    2. establishing a process to allow local communities to advise on funding priorities for the royalties received through the "Royalties for the Regions" programme; and
    3. raising the upper limit for compensation for loss of amenity ("solatium payments") from $10,000 to $20,000, and indexing this new upper limit to CPI.
  • Streamlining regulatory arrangements and reducing duplication of regulatory oversight, in particular by:
    1. requesting the Commonwealth Government to work with Victoria to accredit its environmental assessments and approval processes; and
    2. appointing a senior official and within the Victorian administration, in addition to the Gas Commissioner and chair of the Water Science Commission (see second and third dot point above), as the 'go to' person for coordinating all applicable regulatory approvals and other industry requirements.



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Jeremy Loeliger
Stephen Thompson
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