Increasing media attention around fraccing has in part elevated stakeholder concerns

On 29 August 2012, the Petroleum and Geothermal Energy Resources (Environment) Regulations 2012 (WA) (Environment Regulations) commenced operation, codifying the existing requirement for all onshore petroleum activities to have an approved Environment Plan. To support the Environment Regulations, the Department of Mines and Petroleum (DMP) has also published Guidelines for the preparation of an Environment Plan (Guidelines) and an Information Sheet on chemical disclosure (Information Sheet).
The Environment Regulations were developed following Dr Tina Hunter’s report ‘Regulation of Shale, Coal Seam and Tight Gas Activities in Western Australia’ (Hunter Report). The Hunter Report found that while the DMP’s processes to protect the environment from onshore petroleum activities were adequate, the regime lacked legal enforceability. Dr Hunter recommended that the Environment Regulations be written to provide legal certainty and ensure enforceability.
Increasing media attention around onshore unconventional gas activities in WA, in particular fraccing, has in part elevated stakeholder concerns. This is recognised in the Hunter Report, with the use of chemicals in the fraccing process identified by Dr Hunter as a cause of ‘community distress’. Dr Hunter recommended that the DMP provide full, transparent disclosure of all chemicals used in WA fraccing operations and this requirement has been built into the Environment Regulations.
Complying with the new chemical disclosure requirements, particularly in respect to the protection of proprietary information, is a key concern arising from these reforms.

Read our WA Fraccing regulations article here.

Mining blog recap for 2012

2012 saw the merger between Herbert Smith and Freehills, creating one of the world’s most experienced energy and resources firms. As it draws to a close, we pause to reflect on some of the key developments in the mining industry.

This year we saw several regulatory and legislative changes take place in the mining sector:

• New South Wales, Queensland, Northern Territory, Australian Capital Territory, South Australia, Tasmania and the Commonwealth all took steps to ensure the harmonisation of safety laws via the Model Work Health and Safety Act was introduced by January 1.
• In August, Victoria declared a ban on approvals to undertake hydraulic fracturing (fraccing) as part of onshore gas exploration, and the issue of new exploration licences for coal seam gas (CSG). While Queensland took a significant step in reducing red tape by passing the Mines Legislation (Streamlining) Amendment Act 2012.
• The new Indonesian Mining Law enabled foreign investors to hold business permits for the first time, although foreign investors are now required to divest ownership in companies on an incremental scale after 5 years of production (up to 51%).
• The Commonwealth Government released, for comment, the exposure draft of the Native Title Amendment Bill 2012, which proposes substantive amendments to the Native Title Act 1993 (Cth).

In March, we reported that M&A transactions in the mining and energy sectors were buoyant, accounting for almost half of all deals in the preceding 6 months. Despite significant nervousness and negative opinions surrounding the market in recent months, Chris Richardson of Deloitte Access Economics suggested that the glass is still ‘half full’ for the resources sector at the Annual National AMPLA Conference.
In September, Queensland called for EOI in its lucrative bauxite leases, while also announcing an increase in coal royalties of up to 50 per cent per tonne. In October, Western Australia granted approval for Toro Energy to proceed with the State’s first uranium mine to be developed.
The year also saw a raft of inquiries and debates:

• Coal seam gas (CSG) was on the agenda on the east coast. Victoria released a report entitled ‘Inquiry into Greenfields mineral exploration and project development in Victoria’, in a move to understand how better to develop and regulate Victoria’s CSG potential, while New South Wales tabled an inquiry into the environmental, economic and social impacts of mining CSG.
• In October, the Productivity Commission announced a 12 month inquiry into the non-financial barriers to mineral and energy resource exploration to determine if there is unnecessary regulatory burden.

With still a month or two to go in 2012, be sure to keep an eye on our blog for further updates.

Victoria declares ban on fraccing

The Victorian Government has declared bans on:

• approvals to undertake hydraulic fracturing or “fraccing” as part of onshore gas exploration; and
• the issue of new exploration licences for coal seam gas (CSG).

This move follows the ban on fraccing by the New South Wales Government, which has been in place since July 2011.

The measures taken by the Victorian Government do not affect exploration activity approved under current CSG exploration licences that do not involve fraccing, such as surveying and drilling for core samples.

It appears that the bans are a response by the Victorian Government to the pressure exerted by regional community groups, as described in our blog entry of 13 June 2012.

According to the Victorian Government, the bans will remain in place until a national harmonised framework for CSG has been developed. The work program to deliver this framework was announced in December 2011 by Energy and Resources Ministers from across Australia, and results of that work are expected in December this year.

The Minerals Council of Australia has said the Victorian Government’s measures in relation to CSG are ‘profoundly disappointing’. In particular, it states that the decision to rely on the development of a national framework for CSG is ‘concerning’ as the framework may be delayed for years, meaning that Victoria would miss the opportunity to develop an industry that could generate jobs and significant revenue for the state.

Similarly, the Australian Petroleum Production & Exploration Association (APPEA) has said that the Victorian Government’s decision to put the bans in place ‘sends the wrong message to investors and will see the state fall further behind Australia’s rapidly growing resource-rich states’.

There is currently no CSG production in Victoria, and exploration for CSG is in an embryonic stage. Fraccing does not currently occur in Victoria.