Australia: A CSG water treatment plant can be prospecting and does not need development consent in NSW

Last Updated: 22 August 2016
Article by Nick Thomas and Rebecca Davie

Most Read Contributor in Australia, August 2016

The decision in People for the Plains confirms that petroleum title holders have broad latitude to undertake development without consent in some situations.

The decision in People for the Plains confirms that petroleum title holders have broad latitude to undertake development without consent in some situations.A recent decision by Justice Moore in the NSW Land and Environment Court held that a proposed water treatment facility for water extracted during coal seam gas (CSG) exploration is part of a "prospecting" activity and therefore does not require a separate development consent or environmental impact statement.

This decision confirms that onshore petroleum title holders have some latitude to undertake development that "serves the purpose of prospecting" within the scope of the prospecting assessment regime, even if that development could also be used for production activities which typically need separate development consent and an EIS.

The People for the Plains case

In the case of People for the Plains Incorporated v Santos NSW (Eastern) Pty Limited [2016] NSWLEC 93, a community group - People for the Plains - challenged the lawfulness of Santos's proposed development of a water treatment facility at Leewood, outside the Pilliga State Forest in the Narrabri local government area.

The facility formed part of the Leewood Produced Water Treatment and Beneficial Reuse Project which proposed to treat "produced water" from CSG exploration activities, separate it into brine and "near-drinking quality" water, and use that near-drinking quality water to irrigate Lucerne crops which would be sold commercially.

People for the Plains argued that:

  • development consent was required for the project, and so the project was being carried out unlawfully without that consent, in breach of the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act); and
  • approvals given for the project by the NSW Division of Resources and Energy under the conditions of Santos' exploration licence, which had been issued under the Petroleum (Onshore) Act 1991 (NSW) (PO Act), were void and of no effect, because to the extent that the water treatment activities involved "prospecting", those activities must take place within the same petroleum title as the produced water is generated; the water cannot be transferred for treatment within another petroleum title.

Santos's position was that the project does not need planning approvals beyond those that it already held for the CSG exploration activities which the project would service, and that the approvals given for the project under the terms of Santos' existing exploration licence were appropriate because the project was part of its exploration activities.

In relation to the location of the facility under the PO Act, Santos submitted that a purposive approach to statutory construction is appropriate and the location of the water treatment activities should not be so limited.

The argument about development consent

Most development in NSW needs development consent from a consent authority (usually the relevant local council or the Minister for Planning) under the EP&A Act. Obtaining development consent can be a costly and lengthy process. So the EP&A Act provides that some activities may be carried out without development consent in specified situations, such as where an environmental assessment is carried out under the EP&A Act as part of another statutory approval process, or the proponent is a public authority.

Under State Environmental Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (Mining SEPP) cl 6(c), development for the purposes of petroleum exploration, which includes "prospecting", is permitted without consent. Thus, if activities are characterised as "serving the purpose" of prospecting then they will be permitted without the need for development consent under the EP&A Act. Conversely, mining and petroleum production projects usually do need development consent, and are subject to rigorous environmental assessment and approval processes. This is consistent with the aims of the Mining SEPP, which broadly include promoting the development of significant mineral resources while encouraging ecologically sustainable development through the environmental assessment and sustainable management of development of mineral, petroleum and extractive material resources.

The question for the Court in this case was the extent to which any of the activities associated with the project can be characterised as being "prospecting" within the meaning of that term in the PO Act and for the purposes of the exemption from the requirement for development consent in the Mining SEPP.

Justice Moore took a broad approach to the interpretation of the provisions and, having regard to the approach set out by Preston CJ in Chamwell Pty Ltd v Strathfield Council [2007] NSWLEC 114, held that the appropriate way to characterise a component of development is to consider the overall purpose of the various components of that development, an inquiry which is different from determining the character of each individual component.

It was factually important that the generation of "produced water" is a necessary part of the exploration and appraisal of CSG. Any CSG operation will need infrastructure to store, treat and dispose of produced water from the coal seams. Justice Moore held that the water physically results from the prospecting process and, as such, it serves the purpose of prospecting. Accordingly, the construction and operation of the water treatment plant and associated infrastructure does not require separate approval under the EP&A Act as it is permitted without consent.

However, this does not extend to the irrigation of treated water or the amelioration of soils within the irrigation area, which were two of the nine identified elements of the Leewood facility project. Justice Moore held that, as a result of the scale and intensity of the cropping activities, the irrigation and cropping activities were not ancillary to the CSG prospecting activities. However, under the Narrabri LEP, the area was in a primary production zone where extensive agriculture is permitted without consent. Accordingly, the cropping activities also did not require separate development consent under the EP&A Act (albeit for different reasons).

Does the proposed activity have to be on the land in the exploration licence or assessment lease?

Under section 29 of the PO Act, holders of exploration licences have exclusive rights over "petroleum on the land comprised in the licence". Under section 33 of the PO Act, holders of assessment leases have exclusive rights over "any petroleum deposit on the land comprised in the lease".

In this case, People for the Plains alleged that the activities at the Leewood facility were not undertaken on the same land as the land the subject of the petroleum title where the produced water was generated. Justice Moore adopted the "limited but expansive" purposive approach to statutory interpretation advanced by the Secretary for the NSW Department of Industry, the Third Respondent. He considered that a purposive approach to statutory interpretation may require the incorporation of additional words into the provisions to give effect to the intention of the legislature. Justice Moore rejected the contention that the provisions should apply to any other land which had a petroleum title held by the same holder noting that this would be too wide. However, he decided that section 33 should be read to say "on the land comprised in the lease and on the land of any exploration licence from which the lease has been excised".

As the land on which the Leewood facility was being built was previously covered by the assessment lease, Justice Moore held that it fell under section 33. Consequently, it could be considered (and approved) under the terms of Santos' existing exploration licence.

What does this case mean for petroleum title holders?

The decision in People for the Plains confirms that petroleum title holders have broad latitude to undertake development without consent where that development:

  • falls within the broad characterisation of "prospecting", which only requires that it "serves the purpose of prospecting"; and
  • is on the same land that is covered by the petroleum exploration licence or assessment lease.

Petroleum title holders who are proposing a similar project may wish to consider:

  • whether the project or aspects of it could be characterised as "prospecting" under the definition in section 3 of the PO Act or "petroleum exploration" under the definition in cl 3(2) of the Mining SEPP;
  • whether there are any elements of the project which may not be considered ancillary to prospecting (such as the cropping in this case), and, if so, whether these activities are permitted without consent under other applicable environmental planning instruments such as the relevant LEP; and
  • whether the development relates to land under the same petroleum title and, if not, whether that petroleum title previously covered the same land.

RELATED KNOWLEDGE

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.

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