Focus: Legislating the protection of Queensland's groundwater from the impact of the petroleum industry
21 December 2010
In brief: New Queensland legislation will trade off greater protection of groundwater resources against greater regulation and compliance costs for petroleum tenure holders. Partner Bill McCredie (view CV) and Lawyer Michael Zissis look at the legislation, which is partly aimed at resolving some of the issues associated with the increasingly rapid growth of the liquefied natural gas industry.
- 'Make good' impacts on underground water
- Underground Water Impact Reports
- Management of 'cumulative impacts' and the QWC
- Transitional arrangements for amendments to Water Act
- Further reform to the Water Act
- Framework for 'CSG Recycled Water'
How does it affect you?
- Recent amendments to petroleum and water legislation in Queensland will change how the industry and the Queensland Water Commission (QWC) will monitor and manage the actual and potential detrimental impact the industry's use of underground water has on water bores, natural springs and public health.
- Generally, from 1 December 2010, existing petroleum tenure holders will have:
- 30 business days to submit a 'baseline assessment plan'; and
- 14 months to submit an initial 'underground water impact report' (UWI report), which will involve at least two months of public consultation.
- The QWC, as opposed to individual tenure holders, will be responsible for preparing the UWI report for declared 'cumulative management areas' (CMAs) where a number of tenure holders have overlapping underground water rights. The UWI report will assign underground water obligations to each of the tenure holders in the CMA.
- Petroleum tenure holders will be charged an annual levy to pay for the QWC's new monitoring responsibilities.
- Further, where water used for coal seam gas activities subsequently 'augments' a supply of drinking water, a petroleum tenure holder may be required to prepare a recycled water management plan within 12 months from 1 December 2010.
The regulatory framework for Queensland's growing liquefied natural gas (LNG) industry continues to develop, with arguably the year's most significant changes occurring when the Queensland Parliament passed the Water and Other Legislation Amendment Bill 2010 (the Bill) in the evening of the last sitting day of 2010.
The Water and Other Legislation Amendment Act 2010 (the Act), which received assent on 1 December 2010, imposes new obligations on the industry about its use of underground water for its operations, including coal seam gas (CSG) activities, to manage any detrimental impacts that use may have on water bores, natural springs and public health.
The Act amends 15 pieces of Queensland legislation, including the Water Act 2000, Water Supply (Safety and Reliability) Act 2008 (the Water Supply Act), Petroleum Act 1923 and Petroleum and Gas (Production and Safety) Act 2004 (collectively, the Petroleum Acts).
This article provides a high-level overview of the Act's legislative changes that are relevant to the extraction and use of underground water by the LNG industry. However, it should also be noted that the Act retrospectively amends the valuation methodology for mining, geothermal, GHG and petroleum leases under the Land Valuation Act 2010 (Qld).
Under the Petroleum Acts, petroleum tenure holders have certain rights to extract underground water to conduct their activities. Those rights are coupled with obligations to make good any detrimental impact.
The Act relocates the existing make good regulatory framework in a new chapter in the Water Act titled 'Underground water management' and increases the obligations on petroleum tenure holders.
Under the new framework, a petroleum tenure holder is required to:
- undertake a baseline assessment of each water bore impacted by its activities and have an ongoing assessment plan approved by the chief executive before the tenure starts; and
- enter into make good agreements with bore owners who can no longer obtain a reasonable supply of water from the bore due to the decline or likely decline in the water level caused by the tenure holder's extraction.
Any disputes about these make good arrangements must now go to mandatory mediation for resolution before being referred to the Land Court.
Under the new framework, a petroleum tenure holder is required to prepare an underground water impact report (UWI report) for approval within 14 months of the tenure starting, and then every three years (or earlier if directed). The UWI report must include specific information, including a water monitoring strategy and a spring impact management strategy, which the tenure holder is then obliged to implement.
The water monitoring strategy will identify the parameters and timetable for measuring the quantity of water extracted, as well as changes to the water level and quality of the relevant aquifer. The strategy must also include a program for reporting the strategy's implementation to the Queensland Water Commission (QWC).
The spring management strategy must identify 'potentially affected springs' and predict the likely impact on associated ecosystems and cultural and spiritual values. The strategy will also outline the options available to prevent any potential impacts on the spring and propose an action plan.
Before seeking approval, petroleum holders must undertake public consultation on its proposed UWI report for at least two months and any submissions received must then be considered and addressed in the UWI report submitted for approval.
Moving forward, make good agreements will be initiated following the approval process of the UWI reports. However, as such reports are likely to be approved after the start day for a tenure, the Act also obliges tenure holders to use their best endeavours to enter into a 'general agreement' about make good measures and compensation with the bore owners before the approval of the relevant UWI report.
Where there are a number of petroleum tenure holders with overlapping underground water rights in the one area, the area may be declared a 'cumulative management area' (CMA) and the QWC, as opposed to the relevant tenure holders, will be responsible for preparing the UWI report for the CMA within 14 months of the declaration. A CMA UWI report will assign underground water obligations to each of the tenure holders in the CMA.
The QWC will also be responsible for the necessary consultation for the UWI report and the oversight of compliance with the obligations established by the UWI report.
The expansion of the QWC's responsibilities under the new framework will come at a cost to the industry. Petroleum tenure holders will be charged an annual levy, which will be worked out in a way prescribed by regulation. The Explanatory Notes for the Bill suggest the levy will be apportioned, where practical, between tenure holders or classes of holders according to the cost to the QWC of carrying out functions specific to them. If unpaid, the State may recover the levy amount from the tenure holder as a debt with interest.
Make good agreements entered into between petroleum tenure holders and bore owners before the commencement of the Act will remain valid.
However, from 1 December 2010, existing petroleum tenure holders will have:
- 30 business days (unless otherwise approved) to submit a baseline assessment plan for approval; and
- 14 months to prepare its initial UWI report.
In light of the fact the QWC is responsible for preparing UWI reports in CMAs, existing holders ought to seek immediate advice from the Queensland Government as to whether their tenure is likely to fall within a CMA (to be declared in the coming year).
The Queensland Government has established a project team to monitor the success of the interrelationship between the new framework under the Water Act and the Environmental Protection Act 1994 (Qld). The project will specifically examine whether:
- an aquifer impact management strategy ought to be included as part of the UWI report; and
- the financial assurance required under the Environmental Protection Act sufficiently protects landholders against tenure holders that go insolvent and cannot fulfil make good arrangements.
The Act also amends the Water Supply Act to provide 'purpose-built rigorous requirements for the supply of CSG water if it has a material impact on town drinking water supply sources'.
The definition of 'recycled water' has been amended to include CSG water that augments a supply of drinking water. Augmentation may be:
- indirect – whereby the CSG water is released into a water source and may mix with other water, such as into a watercourse, lake, dam or weir, an aquifer or off-stream storage; or
- direct – where the CSG water is delivered to a drinking water service provider, for use in a drinking water service.
The Act requires the approval of an associated recycled water management plan (RWM plan) which must include additional information specific to CSG water suppliers. There are further additional requirements for suppliers into aquifers. Approved RWM plans are likely to be conditioned and include 'post-supply obligations' that will continue to apply even after the supply of CSG water has stopped, including if a plan is suspended or cancelled. Furthermore, an approved drinking water quality management plan must be approved before supply where there is direct augmentation of the water supplies of a drinking water service provider.
A regulation (not yet released) will provide an exclusion to the need for a RWM plan where the disposal of CSG water will have no material impact on town drinking water sources (in some circumstances, it is likely the exclusion will relate to the disposal of CSG water into an aquifer). The Act also introduces a framework to allow a petroleum tenure holder involved in indirect augmentation to apply for an exclusion from the requirement to prepare a RWM Plan.
Existing RWM plans for the supply of CSG water will be taken to be 'interim recycled management plans' until 1 December 2011, meaning plans compliant with the new provisions will need to be made within 12 months.
The Act, and its relatively quick passage through the Queensland Parliament, illustrates a determination by the Queensland Government to develop a management framework for the emerging LNG industry as rapidly as the industry is developing itself.
The changes are predominantly aimed at ensuring a petroleum holder's rights under the Petroleum Acts to extract underground water, including from aquifers shared by other water users or interconnected with those aquifers, are monitored to ensure bore owners are not disadvantaged and natural spring ecosystems are not put at risk.
The Act joins a growing body of policy documents related to the management of underground water and CSG water (including Queensland's Department of Environment and Resource Management's Coal Seam Gas Water Management Policy 2010) and will act as the catalyst for further change in 2011, particularly with the release of regulations associated with the new provisions.
The transitional arrangements for the Act mean that existing petroleum holders are not exempt from the new obligations, so all holders ought to take steps to ensure compliance under the new regulatory regime and seek preliminary advice from the Queensland Government as to whether their tenures will form part of a CMA.
Failure to comply with the new obligations could trigger penalties for a range of new offences under the Water Act and Water Supply Act introduced by the Act.
As more information about the impacts of the industry's activities on water bores and springs becomes available (including from the data collected by petroleum holders in accordance with new underground water obligations), the framework is likely to be refined further and petroleum tenure holders ought to initiate administrative arrangements now to ensure compliance in a rapidly evolving regulatory environment.
- Bill McCrediePartner,
Ph: +61 7 3334 3049
- Chris SchulzConsultant,
Ph: +61 3 9613 8772
- Andrew MansourPartner, Sector Leader, Power & Utilities,
Ph: +61 2 9230 4552
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