17 April 2018

Northern Territory paves the way for onshore gas

This article was written by Lachlan Fahey.

Unconventional gas exploration could resume in the NT by the middle of next year, following today's announcement by the Northern Territory Government that it has accepted all 135 recommendations of the NT independent hydraulic fracturing inquiry.

The Inquiry found that while there are significant risks associated with hydraulic fracturing, the risks can be managed through implementing appropriate regulation and standards. For more details on the Inquiry’s Final Report – please see our previous article NT Scientific Inquiry into onshore shale gas extraction releases final report.

What does this mean for you?

  • The Chief Minister has stated that hydraulic fracturing exploration for onshore gas could begin in the NT by the middle of next year. New production resulting from this initiative, could ultimately lead to the easing of gas supply issues on the east coast, as the first pipeline connection between the NT and the east coast (the $800m Northern Gas Pipeline) is due to come online later this year. Prior to the NT moratorium, companies such as Origin Energy, Santos and Falcon Oil & Gas had plans to explore and drill tracts of land in the NT. According to some sources, the NT is estimated to have approximately 257,000 petajoules of onshore gas – with almost 70% coming from the Beetaloo Basin, located about 500kms south-east of Darwin.
  • We expect that stakeholders, including onshore gas players, will continue to play a role in consulting with the NT government as it embarks on implementing the Inquiry’s recommendations. A detailed plan for implementing all 135 recommendations will be completed and released to the public in July. We expect that the NT will be looking to other jurisdictions, such as Queensland, as a model for an unconventional gas regulatory and legislative framework.

Key details of the announcement

  • The Northern Territory Government has accepted all 135 recommendations of the NT independent hydraulic fracturing (which includes ensuring that there is no net increase in the life cycle greenhouse gas emissions in Australia from any onshore gas produced in the NT).
  • 49% of the Territory will be a drilling ‘no-go’ zone (these areas will include National Parks, conservation areas, indigenous protected areas, residential areas, strategic assets and areas of high cultural, environmental or tourism value).
  • NT Chief Minister, Michael Gunner, has acknowledged that any resulting increase in greenhouse gas emissions is a key community concern, and he has announced that he has written to the Prime Minister and the Federal Opposition Leader seeking their agreement to partner with the NT in offsetting additional emissions from any onshore gas produced. The Inquiry did not indicate what type of emissions offset strategy should be introduced – it merely recommended that the Federal and NT governments work together to either strengthen existing policies and/or introduce new policies. The NT government will also be seeking comments on a draft Climate Change and Environmental Offset policy which it is seeking to finalise prior to the end of 2018.
  • The announcement noted that industry will be paying its “fair share” of the regulatory cost through an “appropriate cost recovery model”. The need for such a cost recovery model was included as a recommendation in the Inquiry’s final report. Although no further detail has been provided as to what this model will look like, the Inquiry’s Final Report:
    • pointed to examples of other regulators that operate on a cost-recovery funding model, such as the offshore petroleum industry regulator (NOPSEMA) and ASIC; and
    • noted that there is scope in the NT to increase regulatory fees for a number of approvals to properly fund the regulation of any onshore gas industry.
  • Strict new laws and regulations will be put in place in order to implement the Inquiry’s recommendations. The NT government has specifically announced that key elements of these new laws and regulations will include:
    • Ensuring all Environmental Management Plans for fracking must be assessed by the EPA and signed off by the Minister for the Environment.
    • New requirements that must be met before exploration approval is granted, including codes of practice for well integrity and well decommissioning, development of wastewater management frameworks, and the requirement for gas companies to obtain a water license.
    • New requirements that must be met before production can take place, including the development of robust and transparent monitoring strategies, discussions with industry and pastoralists regarding land access requirements and compensation, and release of all environmental management plans for public comment.
    • Broad standing to seek both judicial and merits reviews of statutory decisions.
    • Broad new powers to sanction non-compliance, civil enforcement proceedings and increased criminal penalties for environmental harm.
    No additional detail has yet been released – however, we expect that the NT will look closely to equivalent regulations and legislations in other jurisdictions, such as Queensland, when implementing the Inquiry's recommendations.
  • An independent officer will be appointed to oversee the implementation of all 135 recommendations, and the NT government has approved expenditure of $5.53m over three years to implement these recommendations.

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