CSG extraction potentially faces tougher regulation, increased penalties, further investigations ... and a long wait

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On 30 July 2013, NSW Chief Scientist and Engineer, Professor Mary O’Kane, released a 174 page report following a review of coal seam gas (CSG) related activities in the State which focused on the impacts of such activities on human health and the environment. The report highlights the need for a world class practice, high performance standards and training, and recommends the implementation of a State-wide repository for environmental data, a strong regulatory and monitoring regime and further research into environmental impacts.

BACKGROUND

On 21 February 2013, Premier Barry O’Farrell commissioned the NSW Chief Scientist and Engineer to conduct a comprehensive and independent review of CSG activities in the State (Review). Under the terms of reference, Professor O’Kane was requested to:

  • undertake a comprehensive review of industry compliance involving site and well inspections, and review of audits carried out by Government agencies;
  • identify and assess any gaps in the identification and management of risk arising from CSG exploration, assessment and production, particularly as they relate to human health, the environment and water catchments;
  • identify best practice in relation to the management of CSG or similar unconventional gas projects in close proximity to residential properties and urban areas, and consider appropriate ways to address such interfaces;
  • explain how the characteristics of the CSG industry in NSW compare to the industry nationally and internationally;
  • inspect and monitor current drilling activities including water extraction, hydraulic fracturing and aquifer protection techniques; and
  • produce a series of information papers on specific elements of CSG operation and impact to inform policy development including geology, water management, fraccing, fugitive emissions and subsidence.

The purpose of the Review was to address the community’s concerns about the operation of CSG activities in NSW.

As part of the Review, technical information papers on specific issues have been commissioned including:

  • Data management prepared by Intersect Australia Ltd;
  • Subsidence prepared by Jubert Pineda and Daichao Sheng of the University of Newcastle; and
  • Technologies and potential impacts prepared by Professor Peter Cook.

The Review process was carried out over 5 months, during which time over 200 public submissions were received.

RECOMMENDATIONS

In releasing the initial report (Report), Professor O’Kane described CSG extraction as “a complex and multi-layered issue” that has created divisions in NSW because of “the emotive nature of community concerns, the competing interests of its players, and a lack of publicly-available factual information.” Ultimately, the Report found that CSG clearly poses environmental and health challenges like all other forms of energy production. Although some of these challenges may effectively be managed through best practices and rigorous monitoring, the Report calls for a commitment to significant ongoing research into the long-term and cumulative environmental impacts.

Based on consultations and submissions to date, the Review made the following 5 key recommendations aimed at improving the information available to the community and assisting Government to build confidence that it has the intention and capacity to oversee a safe CSG industry:

  1. the establishment of a regime for the extraction of CSG that is world class, for example, by:
    (a) insisting on world best practice in all aspects and at all stages (exploration, production and abandonment) of CSG extraction;
    (b) implementing mandatory high performance standards; and
    (c) rigorous enforcement of non-compliances and imposition of high fines or revocation of licences (if appropriate);
  2. the development of the whole-of-environment data repository for all State environment data associated with water management, gas extraction, mining, manufacture and chemical processing activities;
  3. the establishment of a pre-major-CSG subsidence baseline across the State using appropriate data over the past 15 years to trace and address any significant cumulative subsidence;
  4. changes to CSG codes of practice to require personnel working in operational roles to be subject to mandatory training and certification requirements; and
  5. the expansion of the Government’s research into the CSG industry particularly in relation to sophisticated predictive underground models and cumulative impact assessment.

NEXT STEPS

Although the NSW Government’s response to her initial recommendations is yet to be seen, O’Kane anticipates delivering her next report in 2014.

In the next stages of the Review, Professor O’Kane intends to further explore and address:

  • the principles that can underpin setbacks and exclusion zones;
  • international best practice in unconventional gas extraction technologies and regulation;
  • risk characterisation and mitigation; and
  • the comprehensive study of industry compliance.

The next phase will involve commissioning studies on risk and exposure pathways for chemicals and contaminants, as well as commissioning further legal work to strengthen land owner compensation, company insurance and operator penalties.

IMPLICATIONS

Although the Report does not make any sweeping conclusions about the impacts of CSG extraction on the environment and human health, the next stages of the Review are inevitably going to take time and, potentially, cause delays to the delivery of vital gas supplies to the State. The NSW Government’s response to the initial recommendations along with the next stages of the Review will provide a firmer indication of the likely length of such delays.

At this stage, it is over to the Government to implement a repository for all State environment data to monitor the cumulative impacts of CSG over the long-term. A prompt response by the Government to implement the extensive monitoring system recommended by the Report could be established in time to allow the CSG industry to develop before the State suffers gas shortages and price rises as contracts begin to expire late next year.


The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.


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Louise Camenzuli

Partner. Sydney
+61 2 9210 6621

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