2014 was a year of significant activity in Australian unconventional gas regulation. Coal seam gas (CSG), shale gas and hydraulic fracturing were the subject of reviews or inquiries in Queensland, New South Wales, Western Australia, Tasmania, South Australia and the Northern Territory. Moratoriums on unconventional gas exploration and hydraulic fracturing were introduced or extended in New South Wales, Victoria and Tasmania, and significant reforms were introduced elsewhere.

This article summarises the key developments in unconventional gas regulation across Australia in 2014.

New South Wales

The most significant developments in 2014 occurred in NSW, where a busy 12 months of reform culminated in the release of the comprehensive ‘NSW Gas Plan’ (Gas Plan).

In February 2013, New South Wales Chief Scientist, Professor Mary O’Kane, began a review of CSG activities in NSW, and the final report was released in October 2014. The report reached generally positive conclusions regarding the CSG industry, finding that the technical challenges and risks posed by CSG operations can be managed through:

  • careful designation of areas appropriate for CSG extraction,
  • high standards of engineering and professionalism within CSG companies,
  • the creation of a NSW whole-of-environment data repository so that data from CSG industry operations is accessible, and
  • comprehensive monitoring of CSG operations.

In March, a 6-month moratorium on the processing of all new petroleum exploration licence (PEL) applications in NSW was announced. In September, the moratorium was extended for another 12 months (to 26 September 2015). During the moratorium, no PELs (which are required for CSG exploration) will be issued, and the NSW Government was to undertake an audit of all existing PELs.

In November, the Gas Plan was announced. It ‘resets’ coal seam gas activity in NSW and will, by mid-2015, result in the lifting of the moratorium on CSG development in the State. Key changes include:

  • all existing PEL applications will be cancelled,
  • there will be a one-off ‘buy-back’ of existing ‘unused’ PELs,
  • a new ‘Strategic Release Framework’ will be established to control the release of new areas of land for gas exploration,
  • no new PELs will be issued until the proposed new framework is in place (expected to be mid-2015);
  • a ‘use it or lose it’ policy will be established, requiring titleholders to commit to developing the State’s resources or risk losing their title,
  • new conditions for gas licences will be introduced in 2015, and the existing Codes of Practice will be revised, and
  • the Environment Protection Authority will be appointed as the lead regulator for compliance and enforcement of conditions of approval for gas activities. The Minister for Resources and Energy will assess all exploration licences, and the Minister for Planning will assess production licences.

Victoria

A moratorium on CSG exploration and hydraulic fracturing has been in place in Victoria since August 2012. In May 2014, the moratorium was extended to all onshore gas projects, with the Victorian Government putting on hold any decisions regarding the approval of onshore gas exploration work plans until additional information is available regarding community views and impacts on water resources.

In September, the Resources Legislation Amendment (BTEX Prohibition and Other Matters) Act 2014 (Vic) (BTEX Act) was passed by the Victorian Parliament. The BTEX Act provides a legislative basis for the existing administrative ban on the use of BTEX chemicals in hydraulic fracturing which has been in place in Victoria since 24 August 2012. Queensland has had a similar legislative ban on BTEX chemicals since March 2013.

The Victorian State election took place in November 2014, and the Victorian Labor Party (which has now formed government) is expected to maintain the current moratorium, and establish a Parliamentary inquiry into CSG extraction and hydraulic fracturing.

Queensland

Reforms to Queensland CSG regulation in 2014 were, given the long history of CSG production and hydraulic fracturing in the State, largely evolutionary. In January, the Queensland Competition Authority (QCA) completed a review of CSG regulation in Queensland. While the focus of the review was the identification of reform options to reduce government expenditure, it proposed a number of relevant regulatory reforms:

  • the introduction of standard conditions for CSG production activities,
  • the reduction of reporting and notification obligations for minor incidents of environmental harm, and
  • the adoption of outcome-based regulations.

In accordance with the QCA’s recommendations, in April the Department of Environment and Heritage Protection (DEHP),  released significantly streamlined model environmental authority (EA) conditions for petroleum activities. An EA is required before a petroleum lease can be granted in Queensland, and accordingly all new CSG projects are likely to be subject to the refined model conditions. The new conditions are ‘outcome-focused’, provide for ‘transparency and consistency’ across the petroleum industry, and have been reduced in length by 50%. The reformed petroleum conditions are consistent with the broader shift in approach of the DEHP in 2014, from a focus on prescribing detailed standards for licence holders to compliance and enforcement.

Western Australia

In July 2013, the Western Australian Parliament commissioned an inquiry into the implications of hydraulic fracturing for unconventional gas in the State. The inquiry continued throughout 2014, and has not yet concluded. As a result, no significant reform took place in Western Australia in 2014.

Northern Territory

In February 2014, the Northern Territory government announced an inquiry into hydraulic fracturing and its potential effects on the environment. Despite the inquiry, a moratorium was not imposed, and hydraulic fracturing continued throughout 2014. In April, the terms of reference for the inquiry were released, and the report was finalised and submitted to the Northern Territory government in December 2014.

South Australia

In December 2014, a Parliamentary inquiry into unconventional gas and hydraulic fracturing in south-east South Australia commenced. The inquiry is investigating the potential risks and impacts of hydraulic fracturing, including in particular:

  • the risks of groundwater contamination,
  • the impacts upon landscape,
  • the effectiveness of existing legislation and regulation, and
  • the potential net economic outcomes to the region and the rest of the State.

Tasmania

In March 2014, a 12-month moratorium on, and a review into hydraulic fracturing commenced in Tasmania. In October, an issues paper was released, and a final report is expected by March 2015. No hydraulic fracturing has yet been undertaken in the State.

Commonwealth

In June 2013, the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) was amended to include a new matter of national environmental significance: a water resource in relation to coal seam gas development and large coal mining development. However, the ‘water trigger’ was excluded from assessment by states under the existing bilateral assessment agreements.

In May 2014, the Environment Protection and Biodiversity Conservation Amendment (Bilateral Agreement Implementation) Bill 2014 (Cth) (EPBCA Bill) was introduced into Parliament. The EPBCA Bill proposed to amend the EPBC Act to extend the bilateral assessment framework to include the water trigger, which would streamline the assessment process for CSG projects requiring EPBC Act assessment. The EPBCA Bill was passed by the House of Representatives in June 2014, however was blocked by the Senate in October.

What’s next?

With 2014 having been a year of investigation and inquiry, 2015 should see the development of more substantive unconventional regulation across Australia. Detail regarding the legislative and policy reform emerging from the NSW Gas Plan is expected to be released in early 2015, and the result of inquiries in Western Australia, South Australia and the Northern Territory should become available. Ultimately, 2015 should see a clearer picture emerge regarding the future direction of unconventional gas in Australia.