The development of shale gas and coal bed methane in Australia: best practice for international jurisdictions?

• Author: Hunter, Tina

1. INTRODUCTION II. SCOPE AND METHODOLOGY III. UNCONVENTIONAL PETROLEUM RESOURCES IN AUSTRALIA A. Shale Gas Resources B. Development of coal seam gas resources in Queensland IV. REGULATION OF UNCONVENTIONAL GAS RESOURCES IN AUSTRALIA A. Overview of Regulation--Jurisdiction and Competence B. Regulation of East Coast Coal Seam Gas C. Central and Western Australia Shale Gas Development D. Harmonisation of Unconventional Petroleum Regulation in Australia V. CONCLUSION I. INTRODUCTION

   Australia contains vast amounts of both conventional and unconventional petroleum resources. (1) Like the United States and the united Kingdom, Australia primarily focused on the development of conventional petroleum resources, with onshore gas production for commercial purposes occurring from conventional reservoirs for over fifty years. (2) The production of gas commenced with the exploitation of the giant Moomba field in the cooper Basin, operated by Santos, which has been a constant and voluminous supplier of petroleum, especially gas, to the densely populated eastern states via a series of pipelines. (3) The Moomba field exists in central Australia, in an area that is sparsely populated, and which most Australians do not even know exists. (4) other conventional gas extraction has occurred in the cooper Basin in South Australia (SA), the Otway Basin in Victoria, and the Amadeus Basin in the Northern Territory (NT). (5) Conversely, the production of conventional petroleum from Western Australia (WA) has been small to date. (6) With the exception of the giant Moomba field in the Cooper Basin, onshore conventional petroleum resources have been relatively unspectacular, contributing little to Australia's energy supply. (7)

   Unlike the United States, Australia and Australians have had little exposure to the development of unconventional petroleum resources (UPR) to date. This is primarily a function of the location of the largest source of onshore production, the Moomba gas fields in the Central Australian desert. To most Australians, gas magically appears at the end of a tap at home, with little thought to how the gas arrives there. This is especially the case in New South Wales (NSW) and Victoria, which are heavily reliant on gas for industry and domestic use. (8) In the western areas of Australia there is a heavy reliance on gas for the generation of electricity, which is primarily attributable to the low coal resources that WA possesses. (9) This gas has, until now, been provided largely from offshore gas fields, making WA vulnerable to interruptions to gas supply, illustrated by a 30% reduction in gas supply in 2008 as a result of the Varanus Island Gas pipeline explosion. (10) In order to ensure the security of its supply, the western Australian government is committed to investigating and developing its unconventional gas resources as an additional source of gas for the WA domestic and industrial population. (11)

   At the beginning of the 2000s, there became an extraordinary interest in the small amounts of coal seam gas (CSG) (12) that had been produced from the coal reserves in the Surat Basin in Queensland (Qld), (13) on the back of increased interest in shale gas in the United States. (14) The development of CSG in Queensland has been undertaken by a large number of Australian and international petroleum companies, including British Gas, Arrow Energy, Shell, PetroChina, Santos, Queensland Gas Company, Conoco Phillips, Total, Petronas, Kogas, Origin and Sinopec. (15) Extraordinarily, the Queensland Government has not coordinated the development of field infrastructure, transport and processing facilities. Rather, these facilities have been developed by the consortia of companies that have been established to exploit Queensland's CSG resources. (16) This has resulted in the triplication of pipelines, storage, processing and shipping facilities, and facilitated the need to reclaim Curtis Island and undertake large scale dredging in an area within the Great Barrier Reef Marine Park off the coast of Gladstone. (17) The rapid development of CSG resources in Queensland over the last 10 years has led to the Queensland government scrambling to effectively legislate the development of CSG in a manner that addresses the social issues arising from CSG development in a predominantly agricultural area.

   Conversely, industry has been slow to develop shale gas in the region, where Australia is predicted to have huge reserves. 18. This is largely attributable to two realities. The first is the vast distribution of shale gas reserves in an area of Australia that is sparsely populated with little existing infrastructure. (19) The other is community reservations and concerns regarding shale gas development, largely as a result of the movie Gasland in 2010. (20) Gasland, alongside community concerns relating to the development of CSG in Queensland, prompted community groups in WA to engage in community protest and question the government regarding the regulation of shale gas development. (21) As a consequence, the WA government undertook a review of its shale gas regulatory framework to ensure it is fit for purpose. (22) Similarly, there have been concerns regarding the development of shale gas resources in the Northern Territory, particularly from cattle farmers and indigenous groups. (23) As a result of these concerns, the NT government also undertook a study of its regulatory framework for unconventional gas resources, and, as a result, is reforming the onshore petroleum regulatory framework. (24)

   The concerns that have been raised by communities and farmers regarding the development of UPR generally fall into three categories. Firstly, and perhaps the greatest concern expressed by the community, is the effects of hydraulic fracturing on the ground water and communities. An examination of social activism and protest relating to UPR development in Australia places this issue at the forefront ahead of other concerns. (25) The main concern with hydraulic fracturing that is voiced by such community groups is that it poses a risk to human health and the environment, largely due to the chemicals utilized down-hole. (26) As such, chemical use and disclosure is associated with these concerns. The second community concern related to the development of UPR is the use of valuable water resources, and the disposal of produced water after hydraulic fracturing. (27) This concern is largely attributable to the scarcity of water in Australia, (28) particularly in areas where shale gas development is likely to take place, and the importance of water resources on the east coast, where CSG development is occurring, for agricultural production and sustenance of life. (29) Thirdly, concerns about the development of UPR in Australia broadly relate to land and incorporate damage to productive farming land, land access and compensation, and long-term indigenous land protection. (30) These concerns are not unique to Australia, and have been raised in other, emerging jurisdictions. (31)

   Given the level of activity in Queensland, the community concerns that have been voiced over the last 5 years relating to UPR development and future development of UPR in central and western Australia, there has been a plethora of legal reform associated with UPR development. This article examines the legal reforms concerning UPR that have occurred in Australia in response to such community concern. In particular, this article will examine the legal framework relating to UPR in Australia, incorporating (but not confined to) an examination of legal reform associated with the areas of concern, namely hydraulic fracturing and chemical disclosure, water use and treatment, and land access and compensation.

2. SCOPE AND METHODOLOGY

   This paper examines the legal systems that exist to regulate the development of unconventional gas resources (UGR) in Australia, and how the regulatory framework addresses community concerns in the development of unconventional gas. The contribution of this paper to the wider study of UPR regulation is that it considers how the law has developed and exists in Australian jurisdictions in response to socio-legal issues related to UPR development, namely the impact of hydraulic fracturing on communities, community concerns related to water use and treatment associated with UPR development, and land access and compensation arising from UPR development. The findings of this paper are applicable to other jurisdictions outside of the United States that are undertaking the development of UPR, as it provides a study of varying styles of regulation for these activities.

   Given the socio-legal issues, this study utilises a socio-legal research methodology, analysing the law and its relationship with the wider society. As part of the socio-legal research methodology, it embraces doctrinal research as a tool to examine the legal doctrine within the broader society, and its implication and effect. Doctrine can be defined as 'a synthesis of rules, principles, norms, interpretive guidelines and values. It explains, makes coherent or justifies a segment of the law as part of a larger system of law. Doctrines can be abstract, binding or non-binding'. (32) In the instance of this study, doctrine is limited to the rules, principles, and norms related to UPR development in Australia. Utilising the doctrinal research approach, this paper provides a systematic exposition of the rules governing UPR development. It then places these laws within the social context within which the laws have developed.

3. UNCONVENTIONAL PETROLEUM RESOURCES IN AUSTRALIA

   Australia is a geologically old and complex continent, spanning over 3.8 billion years of the earth's geological history and containing almost all known rock types. (33) UPR in Australia are geographically separated, with CSG reserves dominating the east coast of Australia, and shale gas reserves dominating the central and western...