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Australia – Proposed Changes To The Authorisation Of Coal Seam Gas Water Management Activities.

31 August, 2012

 

Legal News & Analysis – Asia Pacific – Australia – Environment 

 

Under the Mines Legislation (Streamlining) Amendment Bill 2012

 

In brief

 

  • The MLSA Bill seeks to clarify, and in some areas extend, the authorisation of CSG water management activities under petroleum tenements in Queensland.
  • Under the proposal, a pipeline licence could be granted under the P & G Act for a stand-alone CSG water pipeline, which is likely to benefit both the CSG industry and any industry seeking to re-use CSG water for its operations (eg power stations, town-water supply entities, agricultural businesses and coal mines).
  • The MLSA Bill both confirms and expands the rights to carry out the transport by pipeline, storage, processing and treatment of CSG water on petroleum leases, including by expressly authorising the treatment and storage of CSG water produced outside the area of a petroleum lease by another entity.
  • Some ambiguity still remains with respect to the authorisation of CSG water management activities on ATPs, and with respect to CSG water management activities "downstream" of treatment and pipeline activities (ie beneficial re-use).

 

Introduction

 

To date, the extent to which activities associated with coal seam gas water ("CSG water") management under the Petroleum & Gas (Production and Safety) Act 2004 ("P & G Act") are authorised under a petroleum tenement has been unclear, cumbersome or restricted with respect to some types of activities.

 

The Queensland Government recently introduced, on 2 August 2012, the Mines Legislation (Streamlining) Amendment Bill 2012 ("MLSA Bill"). Among other proposals to streamline resource legislation in Queensland the MLSA Bill seeks to clarify, and in some respects extend, the authorisation of CSG water management activities under petroleum tenements, particularly with respect to petroleum leases and pipeline licences.

 

Proposed changes under the MLSA Bill

 

The MLSA Bill proposes to make the following changes to the P & G Act:

 

  • to include "produced water" as a substance that can be transported in a pipeline, meaning that a pipeline licence under the P & G Act could be granted for a "stand-alone" CSG water pipeline, subject to the requirement to obtain an environmental authority under the Environmental Protection Act 1994 (Qld) and any appropriate water licences under the Water Act 2000 (Qld) (see amendments to section 16);
  • to define the term "produced water" to include both the immediate form of CSG water produced from CSG operations, and the downstream forms of CSG water and associated waste streams, including treated CSG water and concentrated saline water or brine (see proposed new section 15A);
  • to extend the "incidental activity" rights for a petroleum lease holder under section 112 to include an activity reasonably necessary for or incidental to either another authorised activity for the same petroleum lease or an authorised activity for another petroleum lease or authority to prospect;
  • to extend the "incidental activity" rights for an authority to prospect ("ATP") holder under section 33, to include an activity reasonably necessary for or incidental to either another authorised activity for the same ATP or another ATP;
  • to confirm the rights under section 110 of the P & G Act to construct pipelines transporting CSG water within a lease area from which it has been produced, and across contiguous lease areas; and
  • to expressly authorise the processing of CSG water on a petroleum lease, including with respect to CSG water produced outside of the area of the petroleum lease and not produced by the lease holder (see proposed new section 111A).

 

When read together, these proposed changes significantly clarify and expand the scope of CSG water management activities which may be authorised on petroleum tenements in Queensland.

 

Pipeline Licences for CSG Water

 

The proposed power under the MLSA Bill to grant a pipeline licence for a stand-alone CSG water pipeline is possibly the most significant change proposed by the Bill with respect to CSG water. The change addresses the current difficulties with undertaking projects requiring the construction of CSG water pipelines to centralised treatment facilities or to facilities which will re-use or dispose of the water, which are not conveniently located within contiguous petroleum leases so as to take advantage of section 110 of the P & G Act.

 

In addition to CSG operators, the proposed changes are likely to benefit any industry involved in the treatment or re-use of CSG water. This includes operators of power stations, town-water supply entities, agricultural businesses and coal mines, which previously would have had to negotiate agreements with each landholder along a water pipeline route. The proposed changes will decrease the risks and uncertainties that exist under the current system in relation to tenure security, route options and complex planning approval requirements.

 

While consultation and agreement with landholders will be required to the same extent as existing petroleum pipelines, the ability to obtain a pipeline licence under the P & G Act for CSG water is likely to provide a welcome option to the industry. The MLSA Bill also proposes a new section 437A, which will allow for the registration of easements for a pipeline licence under the P & G Act "in gross", to be treated as public utility easements, thereby overcoming the requirement at common law to demonstrate a particular benefited parcel of land in order to create an easement.

 

CSG water management activities

 

The express authorisation of CSG water management activities and the expansion of incidental rights for petroleum leases is also likely to be of particular benefit to CSG operators by:

 

  • confirming that the pipeline transport, storage, processing and treatment of CSG water is an authorised activity for a petroleum lease; and
  • expanding this authorisation to allow pipeline transport, storage, processing and treatment activities to be aggregated across a number of leases, and therefore undertaken by the most efficient and effective means.

 

It is unclear on the current drafting of the MLSA Bill as to whether the proposed extension of incidental rights will extend to any other petroleum lease, irrespective of its location or holder. Despite the current unrestricted wording of the MLSA Bill, the explanatory memorandum states that the intention is to authorise activities ancillary to adjoining petroleum tenements. The amended section 110 will aso continue to restrict CSG water pipelines (which are not otherwise authorised by the extended power to grant a pipeline licence for CSG water) to being located completely within an area of one or more leases, either held by the same holder or the subject of a coordination arrangement with another holder.

 

It also remains unclear whether the intention of the new section 111A is to allow a petroleum lease to be granted only for the purpose of CSG water management activities (ie without any production or testing activities). While the new section means that such activities would no longer need to be defined as incidental to other authorised activities on the lease, other general provisions relating to petroleum lease applications have not been updated by the MLSA Bill to reflect the possibility of a lease for stand-alone CSG water management activities. It is important to note that the proposed amendments do not alter the scope of underground water rights under Chapter 2, Part 4 of the P & G Act, for which approval under the Water Act 2000 (Qld) is not required.

 

Remaining Issues

 

The MLSA Bill largely clarifies the extent to which CSG water management activities are authorised for petroleum leases, but does not do the same for ATPs.

 

While the extended ancillary rights power in section 33 of the P & G Act could be relied on for some CSG water management activities on an ATP, there seems no reason why clarifications (similar to those provided for petroleum leases) have not been provided in the Bill for CSG water management activities (relating to evaluation and testing) on ATPs.

 

Some ambiguity also remains as to the extent to which CSG water management activities downstream of treatment and processing facilities and authorised pipelines will be authorised activities for a petroleum tenement, such as the on-tenure beneficial re-use of CSG water and its associated waste streams.

 

It will therefore remain important for CSG operators to review their CSG water management activities as a whole in order to identify whether all relevant activities are authorised under a petroleum tenement, or may require separate authorisation under the Sustainable Planning Act 2009 (Qld) and associated legislation.

 

Lessons

 

  • The MLSA Bill proposes significant changes to the authorisation of CSG water management activities on petroleum tenements in Queensland, and should be considered by any entity with interests in CSG water management and re-use.
  • All proponents of projects which may seek to treat or re-use CSG water should be aware of the proposed options under this MLSA Bill that will facilitate aggregated storage and treatment facilities, and that will allow a pipeline licences to be granted for the transport of CSG water.
  • Even if the MLSA Bill is passed in its current form, CSG operators will still need to ascertain whether all of their CSG water management activities will be authorised activities for a petroleum tenement, as some ambiguities will still remain in the P & G Act, particularly with respect to ATPs and beneficial re-use activities.

 

 

 

For further information, please contact:

 

Caroline Ammundsen, Partner, Ashurst

caroline.ammundsen@ashurst.com

 

Mark Cowan, Ashurst

mark.cowan@ashurst.com

 

 

 

 

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