Santos recently announced success in the South Australian Cooper Basin shale gas joint venture it holds with Beach Energy. The Moomba-191 well, located within 350 metres of existing gas gathering infrastructure, has flowed dry gas at a stabilised rate of 2.6 mmscf/d and connection activities are reported to have commenced to provide Australia’s first commercial production of gas from a shale well.1

In Western Australia, AWE Ltd has continued with a hydraulic stimulation program of 3 wells located in the onshore Perth Basin, announcing that a stabilised flow rate of 1.35 MMscf/d was recorded over a 40 hour flow period in respect of the Seneco Well No 2.2

In October 2012, Central Petroleum announced its joint venture with Santos to spend up to $150 million for the further exploration and potential development of up to 13 permit/application areas in the Amadeus and Pedirka Basins in central Australia.3 More recently, Central Petroleum signed a second Farm-out agreement with French energy giant Total, for the exploration of approximately 6 million acres in the Southern Georgina basin in northern Australia. The exploration will start with an investment by the joint venture of $60 million for stage 1 and, at Total’s election, $130 million for stages 2 and 3.4

The fraccing process used to extract unconventional gas resources continues to be the subject of environmental concerns and various state regulatory measures. It has been widely criticised, particularly when used in coal seam gas (CSG) formations in the eastern states of Australia, with respect to the risks of depletion of aquifers in agricultural regions, and contamination of water resources by water produced through fraccing and fracturing / penetration of surrounding aquifers.

Recent regulatory developments

New South Wales

In the eastern states of Australia, the focus has been on fraccing for CSG extraction, which occurs at shallower depths than shale gas extraction.

The New South Wales government has recently lifted a moratorium on fraccing5 and released its Strategic Land Use Policy, which sets out a range of initiatives designed to balance growth in the CSG industry with protection of agricultural land and water resources.6

Two Codes of Practice have been introduced to regulate CSG fracture stimulation in the state:

  • Code of Practice for Coal Seam Gas – Fracture stimulation activities (Fracture Stimulation Code)7; and
  • Code of Practice – Well integrity.8

CSG titleholders are required to comply with the Codes to ensure that any CSG fracture stimulation activities and activities relation to CSG well integrity are compliant with the conditions of title issued pursuant to the Petroleum (Onshore) Act 1991 (NSW).

In order to conduct any fraccing activities, a titleholder must, amongst other things, have in place an approved Fracture Stimulation Management Plan (FSMP), which must identify:

  • all chemicals used in fraccing activities in the FSMP;
  • the location, extent, pre-existing water quality and use of water sources which have the potential to be impacted by the fracture stimulation activity; and
  • how flowback water is to be managed.

In addition the titleholder must consult with affected stakeholders prior to undertaking fraccing activities. The Fracture Stimulation Code specifies that the FSMP is a public document and may be published on the department’s website.

It is important to note that the Fracture Stimulation Code does not apply to fracture stimulation activities conducted for other purposes (such as conventional petroleum, shale gas, geothermal or geosequestration), except at the discretion of the department.9

Victoria

The Victorian government has banned the use of BTEX chemicals (benzene, toluene, ethylbenzene and xylene), and put a hold on any approvals for fraccing activities as part of onshore gas exploration in Victoria until the Commonwealth and the States further consider a consistent approach under the proposed National Harmonised Framework for CSG in December 2012.10

Western Australia

In Western Australia, there are currently no known potentially commercial CSG resources. However, potential environmental risks exist with extraction of shale gas resources located in the Perth and Canning Basins.

The Petroleum and Geothermal Energy Resources Act 1967 (WA) (WA Act) sets out requirements for the drilling of unconventional gas wells, the granting of production licences and the registration of titles.

In Dr Tina Hunter’s report dated July 2011, analysing the capacity of the WA Act to regulate onshore shale gas activities, a number of recommendations were made, including that the WA Department of Mines and Petroleum (DMP):

  • provide full and transparent disclosure of any chemicals used during fraccing; and
  • write environmental regulations to regulate onshore petroleum activities, to ensure enforceability of Environmental Management Plans.11

Under the WA Act, the Minister is authorised to give direction to the holder of a petroleum title in relation to environmental protection by virtue of the Schedule of Onshore Exploration and Production Requirements – 1991, such as requiring the submission of an environmental plan, however there is no legislative provision to enforce compliance with the plan.

The DMP has responded by agreeing with a majority of Dr Hunter’s recommendations. 12 On 28 August 2012, the new Petroleum and Geothermal Energy Resources (Environment) Regulations 2012 (WA) were gazetted. Under these regulations, the operator of a petroleum activity must:

  • submit an environmental plan for the Minister’s approval, inclusive of an implementation strategy containing details of any chemicals that may be used during fraccing activities;
  • after notification of the Minister’s approval, submit a summary of the environmental plan for public disclosure, which must also contain details of chemicals that may be used during any fraccing activities; and
  • report to the Minister, at least on an annual basis, on the extent to which there has been compliance with am implementation strategy and performance objectives have been met and provide monthly reports, detailing any recordable incidents.13

An operator is subject to a $10,000 fine if the activity is carried out without, or contrary to, an approved environment plan.14

South Australia

In South Australia, shale gas activities cannot be carried out without an approved Statement of Environmental Objectives (SEO), based on an Environmental Impact Report (EIR).

In April 2012, the Energy Resources Division of the Department for Manufacturing, Innovation, Trade, Resources and Energy released and sought public comment on a draft roadmap for unconventional gas projects in South Australia.15 Areas of focus include ensuring that regulators have relevant and up-to-date capabilities, and that an effective management system exists for risks associated with regulatory capture and environmental harm.

The roadmap is due to be released with recommendations in November/December 2012 as a strategy to inform government policies to facilitate efficient deployment of capital, technologies and infrastructure for the export of unconventional petroleum gas and liquids in South Australia.16 

The key legislative requirements in each Australian jurisdiction where fraccing activities have been undertaken can be summarised as follows:

Click here to view table.

Conclusion

Regulation of fraccing activities is varied amongst the different state jurisdictions and has been developed around the predominant unconventional gas resource found in each jurisdiction.

With respect to shale gas more specifically, more onerous legislative requirements, coupled with the potentially greater costs associated with extracting the resource from deeper depths than those for CSG, may impact on the development of the shale gas industry. In response to the WA regime in particular, there has already been some comment regarding the need for regulatory changes to be science-based and proportionate to risk, and not create barriers to new market entrants to an emerging sector.23