Key Points:

The Northern Territory Government has announced measures which now form its revised method for how land for oil and gas is released for the oil and gas industry.

On 18 November 2015, the NT Government announced the criteria to be applied to determine whether oil and gas activities can occur in the Territory. This follows the earlier release of the Onshore Oil and Gas Guiding Principles which will be utilised by the NT Department of Mines and Energy for the assessment of future petroleum exploration and production licences. The Guiding Principles and measures will act as an interim measure while the NT Government continues with its review of the existing regulatory framework for this industry.

Trigger for interim measures

Following on from the release of the Report of Inquiry into Hydraulic Fracturing in the Northern Territory in February 2015 which was prepared by Dr Allan Hawke AC, the NT Government commenced both its consultation with the oil and gas industry and community on the draft version of the Guiding Principles and its review of the relevant NT legislation.

The NT Government finalised and released the Guiding Principles as an interim measure for the regulation of oil and gas development in the Territory while it continues with the review of the existing regulatory regime. In conjunction with the Guiding Principles, the recently announced measures are aimed at ensuring onshore oil and gas activities can occur safety and responsibly in the Territory.

The NT Government is also in the process of considering the options to establish a best-practice regulatory framework for the exploration, production and rehabilitation activities of the onshore oil and gas industry in the Territory.

Below we have considered key items in both the Guiding Principles and those measures which have recently been announced.

Overarching guiding principles

Five overarching guiding principles are set out in the Guiding Principles which the oil and gas exploration, production and rehabilitation lifecycle is to be consistent with so as to ensure safety for the public and the preservation of the Territory's environment:

  • Continue to development and implement best practices to ensure the safety of employees and the community.
  • Continue to minimise the effect of the industry on the environment and focus on continuous improvement in environmental risk management.
  • Establish and maintain good relationships with land holders and the broader community; working and negotiating in good faith.
  • Continue to provide transparency in negotiations and operations including water use, chemical use and fugitive emissions.
  • Work to support and realise benefits for the local community including through engaging local suppliers and expertise.

Operational guidelines and additional measures

The Guiding Principles also contain a range of operational guidelines which apply to the following key risks and areas of impact and will need to be considered by any future permit applications:

  • Well design, construction and operation
  • Water management
  • Land access
  • Air and noise emissions
  • Community and social impacts
  • General operations
  • Hydraulic fracturing
  • Chemical and waste handling and management
  • Rehabilitation and decommissioning
  • Local context.

Many of the operational principles contained in the Guiding Principles simply reflect the legislative and regulatory provisions currently in force. However, some of the key items which form those principles and the further measures announced by the NT Government can be summarised as follows:

Key Issue

Guiding Principles

Further measures

Water management

The background summary provides that water management strategies must be developed early and in consultation with local communities and regulators and be consistent with requirements under the Water Act. In particular, the operating principle provides that the construction and works on water investigation, production and monitoring bores will be consistent with the requirements of the Water Act, including the use of licenced drillers and the compliance with the minimum construction standards for water bores in Australia.

The impacts of mining and petroleum are currently regulated by the Department of Mines and Energy and the Water Act does not apply to oil and gas activities. The NT Government has now announced its intention to remove the exemption in the Water Act relating to oil and gas activities.

 

Land access

The background summary provides that the NT Government does not support drilling in towns, and has a number of safeguards in place to ensure oil and as activities can co-exist with other land uses.

The NT Government has announced the following measures:

  • it will not grant titles in residential areas as they are not considered as being compatible with oil and gas exploration or development;
  • it will not grant acreage release and exploration permits where there is a land use conflict, based on the following criteria:
  • Urban living areas including rural residential areas ? where land is not zoned, but the land use is consistent with these purposes, oil and gas activities will not be permitted. If a rural landowner seeks co-existence, they will have the ability to negotiate on a case by case basis through land access agreements.
  • Areas of intensive agriculture ? Department of Mines and Energy will assess the compatibility of land use, however oil and gas activities will not take place on areas such as melon farms, mango orchards and aquaculture operations. If a landholder agrees to exploration on their land, they will be able to negotiate on a case-by-case basis through land access agreements.
  • Areas of high ecological value - as determined through the NT's environmental assessment process following implementation of the Hawke review into the NT's environmental assessment and approvals processes.
  • Areas of cultural significance as advised by the Aboriginal Areas Protection Authority ? there is no change for Aboriginal land under the Aboriginal Land Rights or Native Title Acts.
  • Areas that include assets of strategic importance to nearby residential areas ? including areas with high potential for other uses such as tourism related development around Bitter Springs at Mataranka.

Hydraulic fracturing

The background summary provides that results of government and scientific inquiries released to date (including the recently concluded public Inquiry into Hydraulic Fracturing in the Northern Territory) have overwhelmingly found that when risks are identified and appropriate control measures are put in place, hydraulic fracturing is considered safe.

 

Recent permit applications refused

There have already been two oil and gas exploration permit applications which have been assessed using the Guiding Principles and the additional criteria announced by the NT Government. Those applications were for Palatine Energy 's proposal for Watarrka National Park and NT Gas' proposal for the Coomalie Council Region.

It was announced on 24 November 2015 that both applications were refused as they were assessed as not satisfying all of the recently announced criteria.

Proposed timeline

The Guiding Principles sets out the proposed timeline of the review and reforms to the regulatory framework for oil and gas activities. The next steps proposed following on from the release of the Guiding Principles and additional measures announced are:

Timing

Next steps

2nd-3rd Quarter 2015
  • Finalisation and implementation of draft Petroleum (Environment) Regulations
  • Commence review of approvals, compliance and monitoring processes.
  • Commence legislative and regulatory amendments - consult with industry and community.

4th Quarter 2015
  • Introduction of new or amendment legislation.
  • Finalise and agree to approvals, compliance and monitoring processes across agencies.

1st Quarter 2016
  • Passage of amendment legislation.
  • Amendments to Northern Territory legislative and regulatory framework.

2nd Quarter 2016
  • Commencement of enhanced Northern Territory legislative and regulatory framework.

What you should do

Operators and investors in the oil and gas industry should consider whether their current and future operations are consistent with the Guiding Principles and consider what implications the recently announced measures will have for future proposals.

If you would like to understand the full impact of the principles and measures on your organisation please contact us.

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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.