Jurisdiction - Australia
Reports and Analysis
Australia – WA Fraccing Regulations.

26 January, 2013

 

Legal News & Analysis – Asia Pacific – Australia – Environment

 

Background

 

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.

 

Environment Plan requirements

 

Overview of regime

 

The Environment Regulations are essentially a mirror of the Commonwealth regime under the Offshore Petroleum and Greenhouse Gas Storage (Environment) Regulations 2009. The Environment Regulations establish an objectives-based framework for Environment Plans, broadly consistent with the Australian Standard for environmental management systems (AS/NZS ISO 14001).

 

The operator of a petroleum or geothermal activity must have an approved Environment Plan in place before undertaking that activity. Failure to do so is an offence. It is also an offence for an operator to carry out an activity after a significant new environmental impact or risk, or increase in impact or risk, arises and is not provided for in the approved Environment Plan.

 

Regulated petroleum activities

 

All onshore petroleum activities in WA now require an Environment Plan, approved and in accordance with the Environment Regulations. The definition of ‘petroleum activity’ is very broad and contains two limbs:

 

  • First, any operations or works carried out under a petroleum instrument (for example, exploration permits, drilling reservations, production licences etc).
  • Second, any other operations or works relating to petroleum exploration or development which may have an impact on the environment.

 

Regulated petroleum activities include, but are not limited to, seismic (or other surveys), drilling, fraccing, facility construction, operation or modification, decommissioning activities and the storage of petroleum.

 

Meeting the Environment Plan criteria

 

The Minister for Mines and Petroleum approves Environment Plans and must do so if reasonably satisfied that the Environment Plan meets certain criteria. A key requirement is that the environmental impacts and risks of the activity will be continuously reduced to as low as reasonably practicable and will be of an acceptable level.

 

The particular content requirements for Environment Plans are set out in the Environment Regulations and further clarified in the Guidelines. As the Environment Regulations are not prescriptively drafted, operators have some flexibility in preparing an Environment Plan.

 

We see the Environment Plan regime as being analogous to environmental impact assessment under State or Federal environmental legislation. In our view, a similar approach should be adopted for the development of an Environment Plan as is taken for other environmental impact assessment documentation, to ensure the Environment Plan contains sufficient information to objectively demonstrate that the criteria are met.

 

Full disclosure of chemicals and other substances

 

Difference from the Commonwealth regime

 

The key difference in the Environment Regulations from the Commonwealth regime is the Regulation 15(9) requirement for disclosure of chemicals. This represents a significant increase in mandatory transparency requirements in WA.

 

Required chemical details

 

The Environment Plan must include ‘details’ of any chemicals or other substances in treatment fluids used for drilling or fraccing, or otherwise introduced into a well, reservoir or subsurface formation, in the course of the activity. This information must also be included in the summary of the Environment Plan, which will be made publicly available by the DMP.

 

Precisely what ‘details’ are required is not prescribed in the Environment Regulations. The DMP’s ‘requirements’ in this regard are contained in the Guidelines and with further particularity in the Information Sheet. In summary, the following details are required for each product, additive or other substance:

 

  • Product/additive trade name
  • Supplier name
  • Purpose of use
  • Ingredients
  • Chemical Abstract Service (CAS) registry number
  • Maximum ingredient concentration in product
  • Maximum ingredient concentration in total fluid used
  • Material Safety Data Sheets
  • Information on ecotoxicity

 

Proprietary information

 

There is some uncertainty regarding how the DMP will treat proprietary information. A strict disclosure regime may compromise the protection of intellectual property in products and additives, and become a disincentive for innovation, with the potential to result in less than optimal environmental and performance outcomes.

 

It will take some time for the practical implications and parameters of disclosure to be worked through with industry and the DMP. In our experience, the DMP, like other Government Departments, has always acknowledged the need to balance transparency against other factors, including commercial and confidentiality issues.

 

The DMP ‘Strategy Paper: Transparency in Environmental Regulatory Decision Making’ acknowledges that the DMP is often provided with commercially sensitive or confidential. This paper identifies that the DMP will not disclose any such information. It is our expectation that any unintended consequences of transparency requirements under Environment Regulations, Guidelines and Information Sheet will be considered and addressed by the DMP.

 

 

For further information, please contact:

 
Tony van Merwyk, Partner, Herbert Smith Freehills
tony.vanmerwyk@hsf.com
 
Matthew Farnsworth, Herbert Smith Freehills
matthew.farnsworth@hsf.com

 

 

 

 

 

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