Fracking in the Northern Territory gets a green light but there is work to be done

Following on from the release of the Final Report of the independent Scientific Inquiry into Hydraulic Fracturing of onshore unconventional reservoirs in the Northern Territory, the NT Government decided on 17 April 2018 to lift the fracking moratorium and implement the 135 recommendations contained in the Final Report.

The Inquiry's Final Report concluded that if its recommendations were adopted and implemented in full, the risks associated with hydraulic fracturing in the Territory will be mitigated or reduced to acceptable levels and in some instances avoided altogether.

Implementation of recommendations

The NT Government has now accepted all of the recommendations to allow fracking to occur within 51% of the Territory with the balance to be frack free with the implementation of no-go zones, including in National Parks, Conservation Areas, Indigenous Protected Areas, towns, residential and strategic assets, and areas of high cultural, environmental or tourism value and no fracking in areas where there is no petroleum potential.

The NT Government has prepared a Government Responses to Recommendations from the Final Report to identify the recommendations that are supported and those which are supported in-principle with further analysis and/or consultation being required to determine their implementation.

The recommendations supported in principle and the justification are:

• Recommendation 7.2 That the Government introduces a charge on water for all onshore shale gas activities: this recommendation requires further analysis and/or consultation to determine implementation, including evaluating options, and fully understanding how water allocations, licencing, consumption and use may be affected by introducing a charge for water as currently no industry is charged for water in the Territory.
• Recommendation 12.9 That gas companies provide the necessary funds to ensure the ongoing maintenance requirements for road infrastructure are met for the life of any onshore shale gas project. These should be based on the individual gas company’s percentage of tonnage hauled along the roads: There are a range of ways to ensure gas companies contribute to the cost of shared infrastructure that they use and each require further investigation during the implementation planning to determine the approach best suited to Territory circumstances.
• Recommendation 14.8 That prior to the grant of any further exploration permits or production approvals, the Government enacts a minimum mandatory compensation scheme payable to Pastoral Lessees for all onshore shale gas production on their Pastoral Lease. Compensation should be calculated by reference to the impact that the development will have on the Pastoral Lease and the Pastoral Lessee, for example, the number of wells drilled, the value of the land (both before and after), and the area of land cleared and rendered unavailable for pastoral activities: There are a variety of ways to ensure pastoralists have access to appropriate compensation for all onshore shale gas activities on their landholding and they require further investigation and consultation with both industry sectors to determine the approach best suited to Territory circumstances.
• Recommendation 14.19 That prior to granting any further exploration approvals, cl 3(2)(b) of Sch 1 of the Petroleum (Environment) Regulations be amended: This recommendation provided specific wording for the amendment so as to require an approval authority to evaluate the potential cumulative impact of petroleum and other activities and the NT Government wants to undertake further investigation to test any unintended consequences of the specific wording.
• Recommendation 14.25 That prior to any further production approvals being granted, where litigation is brought genuinely in the public interest, costs rules be amended to allow NT courts to not make an order for the payment of costs against an unsuccessful public interest litigant: The intent of this recommendation is to ensure the potential cost of litigation is not a barrier to parties who genuinely believe they are acting in the public interest when seeking to appeal a decision. The NT Government believes that this requires further analysis and/or consultation to determine how this is to be implemented.

In addition, the NT Government has released a series of factsheets that summarise key components of its response to the recommendations.

Reforms on the horizon

While the NT Government's decision has given a green light to hydraulic fracturing in the Territory, environmental assessments and changes to the regulatory framework for the oil and gas industry will need to occur. Some of the key changes to the regulatory framework will include:

Prior to the grant of future exploration approvals

• development of enforceable codes of practice for well integrity and well decommissioning;
• development of wastewater management frameworks;
• amendment to the Water Act to require gas companies to obtain water extraction licences under that Act;
• legislative amendments to allow open standing to challenge administrative decisions made under the Petroleum Act and Petroleum Environment Regulations;
• legislative amendment to require that all draft Environmental Management Plans (EMPs) for hydraulic fracturing be published in print and online and available for public comment prior to Ministerial approval; and
• prohibitions with respect to the use of all surface water resources and the discharge of any onshore shale gas hydraulic fracturing wastewater (treated or untreated).

Prior to the grant of future production approvals

• development of robust and transparent monitoring strategies;
• discussions with industry and pastoralists regarding land access requirements and compensation;
• legislative amendments to require the release of all EMPs for public comment;
• legislative amendments so that merits review is available in relation to decisions under the Petroleum Act and Petroleum Environment Regulations including, but not limited to, decisions made in relation to the granting of all EMPs;
• development and implementation of a financial assurance framework for the onshore shale gas industry;
• enactment of a broader range of powers to sanction, including but not limited to remediation and rehabilitation orders; revocation, suspension or variation orders; enforceable undertakings; injunctions (mandatory and prohibitory); and civil penalties;
• review of, and increases to, criminal penalties for environmental harm under the Petroleum Act and Petroleum Environment Regulations in line with world-leading practice; and
• enactment of provisions which establish a chain of responsibility for gas companies and related parties to ensure compliance with environmental obligations;

Other changes

• legislative amendment requiring that all EMPs for hydraulic fracturing be assessed by the EPA and approved by the Minister for the Environment;
• legislative amendment to require a statutory land access agreement be negotiated and signed by the Pastoral Lessee and the gas company prior to undertaking any onshore shale gas activity on a Pastoral Lease (including but not limited to any exploration or production activity);
• legislative amendment to the environmental assessment and approval process for all exploration and production approvals, to require that the Minister consider the cumulative impacts of any proposed onshore shale gas activity; and
• immediate consideration and implementation of mechanisms to retrospectively apply Recommendation 14.4 to granted exploration permits. This recommendation requires the following areas to be declared reserved blocks under section 9 of the Petroleum Act, each with an appropriate buffer zone:
• areas of high tourism value;
• towns and residential areas (including areas that have assets of strategic importance to • nearby residential areas);
• national parks;
• conservation reserves;
• areas of high ecological value;
• areas of cultural significance; and
• Indigenous Protected Areas.

The NT Government has now appointed Dr David Ritchie as the independent officer to oversee the implementation of the Inquiry's recommendations and will need to establish a Community and Onshore Shale Gas Industry and Business Reference Group to provide feedback on the development of an implementation framework, and its subsequent execution.

It is understood that Chief Minister Michael Gunner has already written to the Prime Minister and the Federal Leader of the Opposition seeking their agreement to partner with the NT Government in offsetting all additional emissions and that comment will soon be sought with respect to on draft Climate Change and Environmental Offset policies which the NT Government aims to finalise before the end of 2018.

Chief Minister Gunner will also need to request that the Australian Government amend the EPBC Act to apply the water trigger to onshore shale gas development.

Next steps for the implementation of the recommendations

The NT Government has prepared a timeline for the design and implementation of the recommendations including the following stages:

• STAGE 1 – Design and STAGE 1a: Implementation begins, to be completed by July 2018;
• STAGE 2 – Implementation of 30 Priority Recommendations (to allow exploration to commence including hydraulic fracturing): to be undertaken between July 2018 and the end of 2018; and
• STAGE 3 – Implementation of remaining recommendations required before a production licence can be approved: to be undertaken between the end of 2018 and 2021.

The NT Government has stated that the implementation plan is to be released in July 2018 and will clearly show how the recommendations will be implemented.

If you would like any further information regarding the Inquiry's Final Report recommendations which the NT Government will now be implementing please contact us.

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