27 April 2021

Green light for the onshore Victorian conventional gas industry

This article was written by Scott Langford, Dominic Townsend and Luci Kjar-Crutterden

After nearly 7 years in the wilderness, onshore petroleum permit holders in Victoria will get the chance to recommence conventional gas exploration activities from 1 July 2021, marking the end of the moratorium that was put in place by the Victorian Government in 2014[1].  The Government hopes this will unlock up to 830 petajoules of gas, particularly in the Otway and Gippsland basins.

Key points

The following are the key issues and developments that petroleum exploration permit holders and other stakeholders should be aware of in preparation for the end of the moratorium:

  • Public consultation for new regulations - The new draft Petroleum Regulations will be released shortly (expected early May 2021) for public consultation through the ‘Engage Victoria’ website;
  • 5 year term reset - The existing term of petroleum exploration permits will ‘reset’ for a term of 5 years from the date the ban is lifted, ending on 1 July 2026. The term of retention leases will also reset from that date;
  • Operational plans – Before recommencing activities, permit holders must either vary their existing operation plan or submit a new operation plan which must be approved by the Minister;
  • Well Management Code – A new well management code, based on the Queensland and Northern Territory codes will be included in the new Petroleum Regulations;
  • Fracking ban locked in – On 16 March 2021, the ban on hydraulic fracturing was enshrined in the Victorian Constitution; and
  • Applications for production licences and retention leases – The Petroleum Act amendments (passed in June 2020) require submissions from the Victorian community and prescribe the social, environmental and economic factors to be taken into account in relation to decisions to grant a production licence or retention lease.

In this Alert, we provide a brief update on the upcoming public consultation process for the proposed replacement of the Petroleum Regulations 2011 (Vic) (“Petroleum Regulations”), as well as a ‘refresher’ on the changes to the Petroleum Act, which were passed under the Petroleum Legislation Amendment Act 2020 (Vic) (“Petroleum Amendment Act”) in June 2020.

If you have any questions about how these latest developments might affect your business, or require any assistance with submissions for the public consultation process, please do not hesitate to get in touch.

The new Petroleum Regulations and public consultation process:

  • The Petroleum Regulations will be amended based on recommendations received from the independent stakeholder advisory panel for the ‘Victorian Gas Program’
  • The Department of Jobs, Precincts and Regions (“Department”) recently confirmed to us that the draft Petroleum Regulations and associated Regulatory Impact Statement (“RIS”) will be published on the Victorian Government’s online consultation platform, ‘Engage Victoria’, in the first week of May. Upon release of the draft Petroleum Regulations and RIS, the public consultation process will commence.
  • Details of the public consultation process are as follows:
    • the Public Consultation process will be conducted through the ‘Engage Victoria’ website;
    • the Victorian Government will accept public submissions in respect of the draft Petroleum Regulations and RIS and will also post a series of questions through ‘Engage Victoria’ that will be open for responses from the public;
    • the submissions must be focused on the specific draft Petroleum Regulations and the associated technical specifications under the regulations, and should not include broader political points or opinions; and
    • there will be no limit on the length of submissions.
  • We understand from the Department that there is currently no set due date for the submissions nor any set duration for the public consultation process. The existing Petroleum Regulations are scheduled to end on 24 May 2021. However, the Department has advised that interim Petroleum Regulations, which are largely similar to the existing Regulations, will apply between 25 May 2021 and 1 July 2021, at which point in time, the new Petroleum Regulations are due to be introduced. As such, we expect that the timeframe for providing submissions will be limited.
  • The Department advised that the Victorian Government is currently developing a ‘Code of Practice’ for ‘Well Management’ (“Code”), which seeks to implement technical specifications around well construction, design, safety and integrity. The Code will be based on the equivalent Queensland and Northern Territory ‘Well Management’ Codes, which are, in turn, based on the widely accepted Norwegian NORSOK standard D-010 for well integrity. We note that the Code is expected to be released with the draft Petroleum Regulations and RIS for public consultation.

‘Refresh’ on the Petroleum Amendment Act changes and what they mean for you:

  • The Petroleum Amendment Act – which was passed by the Victorian Parliament in June 2020 - amended the Petroleum Act to require submissions from the Victorian community and prescribed social, environmental and economic factors to be taken into account in the making of certain decisions under the Petroleum Act. For example, under the Petroleum Amendment Act:
    • the Minister must conduct a public consultation process before inviting tender applications for an exploration permit or production licence, and must take into account any written submissions received during the public consultation process in deciding whether to invite such tender applications;[2]
    • applicants for retention leases and production licences must publish a notice of their application to the broader Victorian public, which must state, among other things, that any person is entitled to make a written submission to the Minister in respect of the application;[3]
    • the Minister must take into account any submission(s) received in deciding whether to grant (or refuse to grant) a retention lease or production licence (as applicable);[4] and
    • the Minister must, in granting a retention lease or production licence, be satisfied that the applicant has addressed the matters raised in any submission received (or taken reasonable steps to do so) and has addressed any ‘prescribed factor’ (or taken reasonable steps to do so).[5]
  • Further, for holders of an exploration permit or retention lease in force immediately before the moratorium commenced, the Petroleum Amendment Act ‘resets’ the term of the permit or lease (as applicable) on 1 July 2021. Therefore, the term of exploration permits will be taken to expire 5 years from the day after the day on which the moratorium period ends (i.e. 1 July 2026).[6]  Similarly, the term of existing retention leases will reset from that date. Holders of an exploration permit or retention licence were required to submit a new ‘work program’ by 1 January 2021.[7]
    • Notably, the Petroleum Amendment Act also requires that, before carrying out a petroleum operation under a relevant authority (i.e. an exploration permit, retention lease or production licence) on or after 1 July 2021, the holder of the relevant authority must first submit an ‘operation plan’ that replaces the previously accepted operation plan in relation to the petroleum operation or, alternatively, must apply to vary the previously accepted operation plan. The holder of the relevant authority must not carry out petroleum operations until the Minister accepts the new or varied operation plan (as applicable).[8]
    • As an aside, for off-shore permits, the Petroleum Amendment Act also amends the Offshore Petroleum and Greenhouse Gas Storage Act 2010 (Vic) to require holders of an offshore production licence to provide domestic consumers with the first opportunity to purchase its petroleum.[9]

    Enshrined ban on fracking

    • The Constitution Amendment Act, which was passed by Parliament in March 2021, makes it more difficult for the Victorian legislature to reverse the bans (present in various pieces of Victorian legislation) against fracking and coal seam gas exploration and extraction in Victoria. The Constitution Amendment Act amends the Victorian Constitution to ‘constrain the power of the Parliament to make laws repealing, altering or varying certain provisions that prohibit hydraulic fracturing and coal seam gas exploration and mining’.[10]
    • The effect of enshrining the ban on fracking in the Constitution is that it is more difficult to repeal in future, because such amendments would require the approval of a three-fifths majority of each House of Parliament, rather than a simple act of Parliament.
    • With this strengthened prohibition against fracking and coal seam gas exploration in Victoria, we do not expect that permit holders will be able to use these petroleum exploration and extraction methods in Victoria for the foreseeable future.

[1] The Hon Russell Northe MP, Minister for Energy & Resources and Minister for Small Business, Onshore gas exploration on hold as consultation continues (Press Release, Victorian Government, 28 May 2014).

[2] Petroleum Legislation Amendment Act 2020 (Vic) ss 7, 15.

[3] Ibid, ss 10, 12.

[4] Ibid.

[5] Ibid, ss 11, 13.

[6] Ibid, s 29. 

[7] Ibid, s 28. 

[8] Ibid, s 29.

[9] Ibid, s 31.

[10] Constitution Amendment (Fracking Ban) Act 2021 (Vic) s 4.

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