The draft Final Report of the independent Scientific Inquiry into Hydraulic Fracturing of onshore unconventional reservoirs in the Northern Territory, released yesterday, has found that any risks associated with onshore gas development and hydraulic fracturing can be mitigated or reduced to an acceptable level, or completely avoided, if the NT Government decides to lift the current moratorium.
Notwithstanding the expansive list of recommendations, the draft Final Report does not recommend whether or not the NT Government should lift the moratorium as this was outside the scope of the Inquiry.
There will now be further public consultation via written submissions and public hearings in February 2018 before the final report is issued in March 2018.
The moratorium and inquiry
The NT Government announced on 14 September 2016 that a moratorium on hydraulic fracturing would be imposed in the Territory with an independent scientific inquiry to follow. That Inquiry was tasked with assessing the scientific evidence to determine the nature and extent of the environmental impacts and risks associated with hydraulic fracturing of unconventional reservoirs and associated activities in the Northern Territory and for each of those impacts and risks:
- describing the methods, standards or strategies that can be used to reduce the impact or risk to acceptable levels; and
- identifying any necessary scientific, technical, policy or regulatory requirements or resources that are in addition to the reforms being implemented through the existing environmental reform process to achieve the acceptable levels.
There have been four key stages of the Inquiry:
- the Background and Issues Paper released in February 2016;
- the final Terms of Reference released in December 2016;
- the Inquiry's Interim Report released in July 2017; and
- ACIL Allen Consulting's independent economic impact assessment released in October 2017.
Draft Final Report findings and recommendations
The Inquiry has now effectively echoed the findings of numerous scientific inquiries and reviews in other Australian jurisdictions that any risks associated with hydraulic fracturing can be minimised or eliminated with robust regulation.
The draft Final Report includes 120 recommendations and it was concluded that, if these recommendations are adopted and implemented in full, the risks associated with hydraulic fracturing in the Territory will be mitigated or reduced to acceptable levels and in some instances avoided altogether.
Land suitability
The Government should consider mechanisms to ensure that applications that are currently extant are not granted in relation to areas that are not prospective for onshore shale gas or where coexistence is not possible. The land to be released for shale gas development should be environmentally, socially and culturally appropriate for that use.
Baseline assessment
A strategic regional environmental and baseline assessment, including a regional groundwater model and regional terrestrial biodiversity assessments, should be undertaken for any prospective shale gas basin before any production licences are granted for shale gas activities in that basin.
Codes of practice
Enforceable codes of practice should be developed and implemented, with minimum, prescriptive, standards and requirements to reflect industry world leading practices and to give clarity to the regulatory framework.
An independent regulator
The regulator should be independent insofar as the agency that is responsible for promoting any onshore shale gas resource is not the same agency responsible for its regulation.
Water extraction
Water extraction licences under the Water Act (NT) should be mandatory before any production licence is granted, and the Australian Government should be asked to amend the Environment Protection and Biodiversity Conservation Act 1999 (Cth) to apply the "water trigger" to all onshore shale gas development.
Prohibitions
The use of all surface water resources for all onshore unconventional shale gas hydraulic fracturing in the Territory, and the discharge of shale gas hydraulic fracturing wastewater (treated or untreated) to either drainage lines, waterways, temporary stream systems or waterholes, should be prohibited. The reinjection of treated or untreated wastewaters (including brines) into aquifers should not be permitted until detailed investigations are undertaken to determine whether or not the risks associated with this practice can be managed to acceptable levels.
Assessment and approval process
There should be legislative amendments to increase the transparency of the decision-making process, the accountability of the decision-maker, and the quality of the decision-making. Examples would include who can make objections to the proposed grant of an exploration permit, a "fit and proper person" consideration to be applied to the gas company applicant, taking into account and applying the principles of ecologically sustainable development, merits review of decisions and standing to challenge administrative decisions.
Rehabilitation and offsets
There should be progressive rehabilitation of well pads and pipeline corridors and development, and implementation of an environmental offset policy to allow for the offset of any environmental impacts and risks which are unable to be avoided or adequately mitigated.
Financial assurance
A leading practice financial assurance regime should be developed. This would comprise transparent environmental rehabilitation bonds as well as a non-refundable levy to ensure that funds are available for the long term monitoring of wells and, if required, the management and rehabilitation of abandoned wells.
Existing and future uses
There should be regulation to ensure that existing and future users of land can continue to enjoy their rights and interests in the land, including a mechanism for compensation.
Pastoral leases (access)
A land access agreement should be required by legislation, which must be signed by the pastoral lessee and the gas company before any onshore shale gas activity on pastoral land (including exploration). Any breach of this agreement would be a breach of the relevant approval giving rise to the petroleum activity being carried out on the land.
Pastoral leases (compensation)
The Government should consider implementing a mandatory minimum compensation scheme payable to pastoral lessees by reference to the number of wells drilled on the pastoral lease and the area of land cleared and rendered unavailable to the pastoral lessee.
Sacred land and cultural impacts
Proposed reforms would include requiring an Authority Certificate (where necessary) from the Aboriginal Areas Protection Authority under the Northern Territory Sacred Sites Act (NT) before undertaking any onshore shale gas activity, amending legislation so that sub-surface formations can be included as a sacred site or a feature of a sacred site, and completion of a comprehensive assessment of the cultural impacts of any onshore shale gas development prior to the grant of any production licence.
Public transparency
A range of matters, information and results should be made publicly available, and public consultation required at various stages.
Cost of regulation
A full cost recovery system for the regulation of any onshore shale gas industry should be designed and implemented.
Next steps
The Final Report is expected in March 2018. The NT Government has said that it would either ban fracking in the Northern Territory or allow it in highly regulated circumstances in tightly prescribed areas.
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.
