WA is set to introduce a revised resource management regime for the exploration and production of petroleum resources located within State titles, but is seeking your views first.
Last month, the Western Australian Department of Mines and Petroleum (DMP) released its draft Petroleum and Geothermal Energy Resources (Resource Management and Administration) Regulations 2014 (RMA Regulations) for public comment. Submissions are open until 30 May 2014.
Significantly, the RMA Regulations seek to introduce a revised comprehensive resource management regime for the exploration and production of petroleum and geothermal resources located in certain "lands of the State"1 from title areas within the jurisdiction of in Western Australia. The stated aim of the RMA Regulations is to ensure that operations are conducted in a proper manner, in accordance with good oil-field practice, and in such a way that is compatible with the optimum long-term recovery of petroleum and geothermal energy resources.
If enacted, the regulations would follow similar legislation made under the Offshore Petroleum and Greenhouse Gas Storage Act in 2011 with respect to offshore Commonwealth titles.
The RMA Regulations cover a range of resource management and administration matters, including survey activities, well design, field development and data administration.
The RMA Regulations form the third part of a suite of regulations that commenced in 2010 with the introduction of the Petroleum and Geothermal Energy Resources (Occupational Safety and Health) Regulations 2010, the Petroleum and Geothermal Energy Resources (Management of Safety) Regulations 2010 and the Petroleum and Geothermal Energy Resources (Environment) Regulations 2012.
The second part of this third and final set of changes, the Petroleum (Submerged Lands) Resource Management and Administration Regulations 2014, will cover submerged lands adjacent to the coast of Western Australia, and will be drafted after the RMA Regulations are finalised.
The RMA Regulations will require title holders to obtain Ministerial approval at least 30 days (in some instances 90 days) prior to commencing any geochemical, geological or geophysical surveys. The Minister may accept or reject an application outright, or issue his approval subject to conditions.
Title holders will be required to implement an approved well management plan (WMP) for all petroleum well-related activities, prior to their commencement. A well activity is broadly defined, covering any activity relating to a well that is carried out during the life of the well, and includes drilling, hydraulic fracturing, testing, production, recovery and abandonment.
The draft RMA Regulations mandate that a WMP should, at a minimum:
- identify and assess all risks associated with the well activity and their resultant impacts;
- establish specific performance objectives and standards against identified risks (including measurement criteria to assess performance of those standards); and
- detail mitigation procedures for identified risks, including those where the likelihood of occurrence is low.
The regime aims to reduce the risks and impacts to a level that is "as low as reasonably practicable" (ALARP).
It should be noted that the WMP regime does not replace or remove any separate approvals or requirements under applicable safety and environmental legislation.
Under the draft RMA Regulations, a titleholder must provide the Minister with a discovery assessment report within 90 days after the date of the discovery (or such other period authorised by the Minister).
There will also be obligations to provide an annual assessment report in respect of a title. This single report will replace disparate existing annual reporting requirements, including those under the Schedule of Onshore Petroleum Exploration and Production Requirements. With Ministerial consent, an entity with multiple titles may consolidate its reports into one document.
Field development plan
The RMA Regulations adopt an objective-based regime in respect of petroleum field developments. Specifically, the granting of a production licence does not of itself entitle the licensee to recover petroleum from a relevant block.
Under the RMA Regulations, recovery is conditional on the licensee having obtained Ministerial approval of a final field development plan (FDP) covering the licence area. This is significant from a timing perspective since it implies such approval is sought and obtained after the production licence has been granted and therefore subject to the five-year time period in which the licensee must commence operations or otherwise relinquish the licence.
In this context, the RMA Regulations provide a mechanism under which State exerts greater influence over the recovery process. Such influence is further enhanced by the criteria on which the Minister is required to base any decision to approve or refuse an FDP, specifically, whether the proposed recovery process complies with "good oil field practice" and the "optimal long-term recovery of petroleum".
With greater influence for the State, the RMA Regulations potentially also impact proposals to develop offshore petroleum resources that straddle State and Commonwealth titles without an approved FDP. The extent to which they potentially impact developments after approval has been granted remains unclear.
With respect to onshore "unconventional" resource developments, an applicable FDP must also include an applicant's proposed arrangements for baseline water monitoring in respect of groundwater management strategies. The aim of this requirement is to increase transparency and accountability to the protection of groundwater resources (which has been a well-publicised concern).
In limited circumstances, the Minister may approve operations for the recovery of natural gas without an approved FDP for no more than a three-month period. This exception is intended to facilitate certain small-scale operations (such as extended production tests) without incurring the not insignificant expenditure of a FDP. One question worth considering is whether the three-month period is sufficient for a licensee to gain an accurate indication of the likely production performance for its operations. The practical reality however is that, without appropriate gas infrastructure, licensees will have little option other than to vent or flare natural gas produced during this period. In this context, legislators may have sought to strike a balance between the need for a licensee to understand the technical viability of the resource and the environmental implications of venting or flaring produced gas.
Opportunity to have your say...
Public comment on the draft RMA Regulations is open until 30 May 2014, and may be provided to the DMP via the "Submission Template" located on their website.
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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.