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PREFACE
The Standing Council on Energy and Resources (SCER) has endorsed a National Harmonised Regulatory Framework for Natural Gas from Coal Seams (the Framework). The Framework delivers on a commitment by Australian governments to put in place a suite of leading practice principles, providing guidance to regulators in the management of natural gas from coals seams and ensuring regulatory regimes are robust, consistent and transparent across all Australian jurisdictions.
The Framework focuses on four key areas of operations which cover the lifecycle of development: well integrity, water management and monitoring, hydraulic fracturing and chemical use. Through this focus, the Framework provides assurance for communities and farmers that concerns in relation to protecting and managing both underground and surface water resources in particular are taken seriously by government and are being effectively regulated.
The Framework does acknowledge that natural gas from coals seams is, and will continue to be into the future, an important component of eastern Australia's domestic gas supply. It also acknowledges that as the Queensland Liquefied Natural Gas (LNG) projects commence production from 2014-15; the industry will contribute substantial export income to Australia's economy and is already creating jobs and business opportunities in the rural and regional areas where development occurs. However, the Framework provides guidance in developing the regulatory tools required to ensure that this development is managed sustainably.
CONTENTS
PREFACE
CONTENTS
EXECUTIVE SUMMARY
Towards sustainability and co-existence
Applying leading practice regulation
CHAPTER 1: TOWARDS SUSTAINABILITY AND CO-EXISTENCE
The Australian Context
Environmental, social and economic aspects
The participants
Delivering beneficial outcomes for all participants
Adaptive management and risk
Governments’ role to ensure a balanced outcome
The Framework
CHAPTER 2: APPLYING LEADING PRACTICES
Application of leading practice
Overarching leading practices
Analysis
Environmental impact assessments
Environmental management plans and strategies
Risk control and verification
CHAPTER 3: WELL INTEGRITY
Well integrity in development
Leading practices
Analysis
CHAPTER 4: WATER MANAGEMENT AND MONITORING
Water
Leading practices
Analysis
Baseline and ongoing monitoring
Regional-scale water assessments
Accounting for and managing produced water
Maximising re-use of extracted water
CHAPTER 5: HYDRAULIC FRACTURING
Leading practices
Analysis
Geological and hydrogeological assessments
Monitoring and quality control during hydraulic fracturing
CHAPTER 6: CHEMICAL USE
Chemical use in operations to extract natural gas from coal seams
Leading practices
Analysis
Handling and management
Minimise chemical use and adopt benign alternatives
Minimise time and maximise rate of recovery in hydraulic fracturing
Transparency in chemical assessment processes and chemical disclosure
Risk assessment of combined chemical mixtures
APPENDIXES
APPENDIX 1: COAL SEAM GAS – AN OVERVIEW
Water
APPENDIX 2: AUSTRALIA’S REGULATORY REGIME FOR NATURAL GAS FROM COAL SEAMS
Good regulatory practice in Australia
Legislation for management of natural gas production
Regulatory approach is ‘layered’
Objective-based regulation
State and territory and Commonwealth responsibilities
GLOSSARY
REFERENCES AND FURTHER READING
EXECUTIVE SUMMARY
Towards sustainability and co-existence
Natural gas from coal seams is playing an increasingly important role in meeting Australia’s overall energy requirements, particularly in Queensland (QLD) and New South Wales (NSW). Over the past decade this energy source has grown from a low base to supplying 35 per cent of the eastern Australian domestic gas market. The next decade will see the industry expand further with the commencement of liquefied natural gas (LNG) exports out of Queensland from 2014-15.
However, Australia cannot reap the benefits from this development if the industry’s social licence and community confidence are not established and maintained.
Development has at times divided local communities and brought challenges and change to rural areas. The future pathway for development will be determined by the ability of communities, farmers, other land users and industry to not only co-exist and manage potential environmental impacts and water resources but also grasp opportunities in regional communities for jobs, businesses and local development.
The successful development of the industry depends on Australian governments, industry and communities working together to achieve balance in environmental, social and economic outcomes. In particular, governments must provide the policy and regulatory settings and enforceable conditions that will be effective in managing development and will be efficient in maximising the benefits to the community while protecting the environment and human health. Importantly, governments also have a role providing information to the general public, the industry and the media to inform debate and discussion on resource development.
These regulatory and legislative settings should be underpinned by the principle of
co-existence. This is where a shared commitment exists between the resources industry, other land users, local communities and governments to multiple, merit-based and sequential land use that provides certainty for industry and improved community confidence in land use decision-making.
The National Harmonised Regulatory Framework for Natural Gas from Coal Seams responds to these imperatives and provides guidance on what constitutes leading practice in the core areas of well integrity, water management and monitoring, hydraulic fracturing and chemical use. While its primary purpose is to be a guidance document for governments, the Framework will benefit the community and industry by providing increased levels of consistency, certainty and transparency in the management of natural gas from coal seams in Australia.
Applying leading practice regulation
The application of the leading practices identified in this Framework demonstrates a shared commitment among governments to apply a consistent and leading practice approach to the management of natural gas from coal seams in each jurisdiction.
In applying leading practices, governments should implement streamlined, transparent and consistent processes to ensure that industry activities are managed in accordance with the level of risk associated with those activities. Leading practices include effective planning mechanisms where governments with industry, recognise community expectations and undertake proactive engagement, informed by facts and conducted in good faith.
The Framework itself is not in itself a risk assessment of the industry but has developed a set of leading practices which are framed in a way that is compatible with a risk-based approach to regulation. Some leading practices are overarching and are aimed at improving the frameworks and structures that apply to assessing impacts from development, for example, ensuring that a comprehensive environmental impact assessment is a part of the approvals process. Other leading practices prescribe more specific measures that are considered appropriate to be applied to development associated with the production of natural gas from coal seams, for example, the requirement for independent supervision of well construction.
In general terms, the development of natural gas from coals seamsmay present a similar spectrum of risks across numerous locations; however some risks will also be specific in relation to the works proposed or the geology, hydrogeology and environmental values peculiar to a site. It is necessary to maintain leading practice approaches that are risk-based and capable of adaption to address these site-specific risks.
Successful implementation of the Framework will also depend on the community’s readiness and openness to engage with governments and industry. The application of the leading practices identified in this Framework builds community confidence in the operation of the industry. It also delivers a balanced message about the challenges associated with development and how these are being addressed to deliver the greatest net benefit to Australia.
A total of 18 leading practices have been identified to mitigate the potential impacts associated with the development of natural gas from coals seamsand build a robust national regulatory regime for the industry (Table ES 1). Many of these practices are capable of addressing multiple impacts. Four of the leading practices are overarching strategies that are equally relevant to all four core areas of development addressed under the Framework. The remainder apply more specifically to each of the core areas of well integrity, water management and monitoring, hydraulic fracturing and chemical use.
Table ES.1: Summary of leading practices
Leading practice / Wellintegrity / Water
management / Hydraulic
fracturing / Chemical
use
1 / Undertake a comprehensive environmental impact assessment, including rigorous chemical, health and safety and water risk assessments / / / /
2 / Develop and implement comprehensive environmental management plans or strategies which demonstrate that environmental impacts and risks will be as low as reasonably practicable / / / /
3 / Apply a hierarchy of risk control measures to all aspects of the project / / / /
4 / Verify key system elements, including well design, water management and hydraulic fracturing processes, by a suitably qualified person / / / /
5 / Apply strong governance, robust safety practices and high design, construction, operation, maintenance and decommissioning standards for well development / / / /
6 / Require independent supervision of well construction /
7 / Ensure the provision and installation of blowout preventers informed by a risk assessment /
8 / Use baseline and on-going monitoring for all vulnerable water resources /
9 / Manage cumulative impacts on water through regional-scale assessments /
10 / Ensure co-produced water volumes are accounted for and managed /
11 / Maximise the recycling of produced water for beneficial use, including managed aquifer recharge and virtual reinjection /
12 / Require a geological assessment as part of well development and hydraulic fracturing planning processes / / /
13 / Require process monitoring and quality control during hydraulic fracturing activity / /
14 / Handle, manage, store and transport chemicals in accordance with Australian legislation, codes and standards / /
15 / Minimise chemical use and use environmentally benign alternatives / /
16 / Minimise the time between cessation of hydraulic fracturing and flow back, and maximise the rate of recovery of fracturing fluids / /
17 / Increase transparency in chemical assessment processes and require full disclosure of chemicals by the operator in the production of natural gas from coals seams / /
18 / Undertake assessments of the combined effects of chemical mixtures, in line with Australian legislation and internationally accepted testing methodologies / /
Key: Leading practice primarily applies to this core area and is discussed within its respective chapter
Leadingpractice is also relevant to this core area
The Framework identifies leading practices that can be adopted by regulators to provide a harmonised approach to managing activities associated with the development of natural gas from coals seamsand give effect to a nationally consistent regulatory regime appropriate to the industry.
The Framework does not require developing new, specific legislation in all jurisdictions, as many jurisdictions already have in place legislation and regulation. Common elements for these regulatory systems include legislation for the protection of human health, conservation of the environment and water resources, protection of property rights and multiple land use. However, there may be areas where existing legislation or regulation does require change or adaption to be consistent with the leading practices identified in the Framework.
While the focus of the Framework is on a harmonised regulatory approach for the industry and a response to specific community concerns; some of the approaches to leading practice advocated in the Framework may have applicability to other oil and gas activities like shale and tight gas.
As such, the Framework identifies that leading practice regulation is not a static concept. Effective inter-governmental cooperation and proactive international partnerships will continue its development. Jurisdictions will report back to the Standing Council on Energy and Resources (SCER) on progress in implementing the Framework and on areas where state or territory legislation remains inconsistent with it. SCER also provides a forum for discussion and information exchange between governments on developing leading practice regulation for the industry and other sectors.
The Framework forms the foundation for continued improvement in leading practice built on improved science and data. It also increases public understanding of issues relevant to the industry, the role of governments, industry and communities, and the science and economics which underpin the development of the sector.
CHAPTER 1: TOWARDS SUSTAINABILITY AND CO-EXISTENCE
KEY POINTS
Natural gas from coals seams is making a significant contribution to eastern Australia’s domestic gas supply security.
Sustainable development in the context of these projects means that they should be environmentally sound, socially responsible, technically appropriate and financially profitable.
More generally, sustainable development in the resources sector is underpinned by the guiding principles of the Multiple Land Use Framework (MLUF). The adoption of these principles demonstrates a commitment to maximising the environmental, social and economic value of land and water resources.
The development of the industry requires a shared commitment between all land users including farmers, local communities, industry and governments to multiple and sequential land use.
Governments at all levels have a key role in providing scientifically-robust information to better inform public discussion on resource development more generally and the natural gas from coals seams sector in particular.
KEY FINDINGS
1.1In their role as regulators of industry activities, Australian governments should further improve their individual and combined efforts in communicating effectively with key stakeholders, ensuring access to factual and timely information and assisting communities to participate in decision-making.
1.2The sustainable development of Australia’s the industry relies on governments, industry and communities working together to deliver the best possible balance of social, environmental and economic outcomes for Australia.
The Australian Context
Australia has significant exploitable reserves of natural gas from coals seams, primarily located in the coal basins in QLDand NSW but with production potential in most states and territories. Commercial production commenced in Australia in 1996 with slow production growth for its first decade.
From 2005, production in QLDcommenced a stage of rapid growth, encouraged by the QLDGovernment’s policy of mandating the use of natural gas in 13 per cent of Queensland electrical generation capacity. In 2005, production in Queensland was around 40 petajoules (PJ) per annum with just under 10 PJ produced in NSW.
Today, production remains centred in QLDwith 252 PJ produced during 2012 with NSW production falling to just over 6 PJ. The production of natural gas from coals seamsnow contributes more than 35 per cent of eastern Australian domestic gas supplies (EnergyQuest 2013) and is an important component of an affordable and secure energy supply.
This step change in production is demonstrated by other measures of industry activity. By the end of 2012, 1,439 exploration and appraisal wells and 2,789 production wells had been drilled. Companies have signed 3,780 access agreements to allow the drilling of wells and the construction of supporting infrastructure such as pipelines on private land. Over 27,500 workers and contractors were employed by the industry, nearly all of them in QLD(APPEA 2013). There are three liquefied natural gas (LNG) processing facilities under construction in QLDwhich will commence supplying international gas market from 2014-15 and increase demand for natural gas from coals seamsfurther.
Environmental, social and economic aspects
The growth in the industry over the past decade and likely future growth poses significant challenges for governments, communities and the industry. As with the development of other extractive resource industries, the sustainable development of the sector requires balanced consideration of its environmental, social and economic impacts, benefits and costs.
Activities associated with the development of natural gas from coals seamswill affect the environments in which it occurs. Potential environmental issues such as groundwater depletion, produced water management, surface disruption from activities associated with the drilling of wells and the construction of pipelines, and chemical use associated with well drilling and hydraulic fracturing must be managed to minimise environmentalimpacts. Industry should ensure that the planning and operational stages of exploration and production are consistent with leading practices and regulatory requirements. Government should ensure that industry regulation also reflects environmental leading practice and is monitored and enforced.
A key social challenge in development is ensuring that future generations have the same or greater access to social and environmental resources as the current generation. The industry is contributing to sustainability through the development of jobs in local communities and improved social infrastructure and facilities such as affordable housing in communities, improved health service, assistance to social and sporting clubs etc. - ensuring that it leaves a positive legacy for future generations. However, unless a community is engaged with and supportive of operations, the industry will not be able to claim or maintain its social licence and continued operations will be unsustainable.
From an economic perspective, a project needs to operate profitably in the longer-term in order to be sustainable. Companies supplying natural gas to the Australian domestic market and in the future to international customers, have numerous contractual and financial obligations which require certainty of future operations. However, the balance sheet for the industry needs to ensure equitable benefits for all stakeholders including local communities, local businesses, shareholders and government through its contribution to job creation, improved social infrastructureand taxation and royalties.
The participants
The community, industry and governments are the key participants in the development of the industry. Open and honest dialogue and constructive negotiation are critical to developing productive relationships between participants.