New Petroleum (Environment) Regulations commence in the NT - Environmental Law

There are significant changes between the draft and final versions of the Regulations, including an expanded definition of a "regulated activity".

New environmental regulations have commenced in the Northern Territory to achieve a best-practice environmental regulatory regime for the NT oil and gas industry.

On 28 June 2016, an amended version of the draft Petroleum (Environment) Regulations was approved by the NT Executive Council and signed by the Administrator. The new Regulations came into force on 6 July 2016.

The draft Regulations

We previously examined the key features of the draft Petroleum (Environment) Regulations which were released in March this year for public consultation. In addition to releasing the draft Regulations for public consultation, the NT Government engaged international expert Dr Tina Hunter to provide an independent assessment of the draft Regulations.

After consideration of both Dr Hunter's independent assessment and feedback from stakeholders and the community, the Government provided the following responses:

Under the Petroleum Amendment Bill 2016, which was passed by the NT Legislative Assembly on 26 May 2016 and received assent on 8 June 2016, regulations can be made under the Act for the protection of the environment that prescribe:

the functions and powers of the Minister; and
the way in which the Minister may perform those functions and exercise those powers, including the exercise of his discretion.

With the commencing of the amendments to the Petroleum Act, the draft Regulations could be approved (with amendment) and came into force on 6 July 2016.

What's different?

The key differences between the draft and final versions of the Regulations at a glance are:

Regulated activity

The definition of a "regulated activity" now expressly includes hydraulic fracturing and transportation (not just storage) of petroleum and hazardous substances.

In the draft Regulations, Schedule 1 detailed the information that was to be included in the Environmental Management Plan (EMP) for a regulated activity and specified the details to be included if the activity was hydraulic fracturing. Therefore, hydraulic fracturing was always contemplated as a regulated activity and the amendment simply clarifies this position.

EMP content and form

The draft Regulations provided that an EMP could relate to more than one regulated activity, whether the activities are to be carried out under the same or different petroleum interests or by the same or different interest holders.

This is no longer the case in the new Regulations, which expressly provide that the EMP must relate to only one regulated activity, regardless of whether the activity is to be carried out in one or more locations.

Stakeholder engagement

In relation to stakeholder engagement, amendments were made to require the interest holder to do the following before an EMP is submitted for assessment:

the interest holder must undertake a preliminary assessment of the environmental risks;
the interest holder must give all stakeholders comprehensive information about the activity;
the interest holder must give stakeholders an opportunity to respond;
the interest holder must provide extensive information in the EMP about how the interest holder has amended the EMP to take on board the concerns of interest holders; and
the interest holder must account for future stakeholder engagement in the plan.
The definition of "stakeholder" was also amended to

include a person or body whose rights or activities may be directly affected by the environmental impacts or environmental risks ¹ of the regulated activity proposed to be carried out or an agent or representative of that person or body.

Approval criteria for EMPS

In the draft Regulations the EMP was to (amongst other things) contain information necessary to demonstrate that the regulated activity will be carried out in a manner consistent with the principles of ecologically sustainable development (ESD) and the Minister was to apply those principles when considering whether an EMP meets the approval criterion.

Amendment was made to instead require that the Minister to take into account the principles of ESD when making a decision about an EMP. In its response to Dr Hunter's independent assessment, the Government states that this amendment, along with the stakeholder engagement amendments outlined above, is to ensure a strong connection between the principles of ESD and the stakeholder engagement process. The example given in the response, is that if the Minister is of the view that the stakeholder engagement that has taken place does not reduce environmental impacts risks to a level that is acceptable, that is valid grounds for refusing to approve the plan.

Public feedback raised concern in relation to the term "good oilfield practice" as an approval criterion and how it was difficult to quantify. In her report, Dr Hunter stated that "good oilfield practice" was incompatible with the other standard of "as low as reasonably practicable" included in the draft Regulations as:

"good oilfield practice" means all those practices and procedures that are generally accepted as good and safe in the carrying on of that exploration or those operations, as the case be; whereas "as low as reasonably practicable" seeks to reduce risk.

The concept of "good oilfield practice" has been removed as an approval criterion as the Government deemed the other requirements (ie. the requirement that environmental impacts and environmental risks of the activities to be reduced to a level that is "as low as reasonably practicable" and "acceptable" and consideration of the principles of ESD) as superior for approval criterion.

Approval process

The "30 days" period for the Minister to make a decision on an EMP has been replaced with "90 days". However, "30 days" will remain for where the Minister is to consider an EMP that is modified in response to a resubmission notice.

The draft Regulations contained a concept of "partial approvals" whereby the Minister could approve part of an EMP where that part met the approval criterion. This concept has been removed in the final Regulations and the Minister can only make the following decisions in relation to the submitted EMP:

if reasonably satisfied that the plan meets the approval criteria:
approve the plan, with or without conditions; and
give the interest holder an approval notice and statement of reasons for the approval; or
if not reasonably satisfied that the plan meets the approval criteria – give the interest holder a notice (a resubmission notice) specifying:
the Minister is not reasonably satisfied that the plan meets the approval criteria; and
the reasons why the Minister is not reasonably satisfied; and
a reasonable period within which the interest holder may modify the plan and submit it for approval; or
if satisfied that more than 90 days will be required to make a decision as per the above – give the interest holder a notice setting out a proposed timetable for consideration of the plan.

The Minister is now also required to provide a Statement of Reasons which will published along with an approval or refusal notice, as the case may be.

Revision of EMPS

A revision of an EMP is now only triggered by the following:

when there is a new or increased environmental risk or impact;
at least 90 days (was previously 30 days) before the end of each period of five years, starting on the latest of the day the original EMP or revision approval was given or a day specified in a notice by the Minister; and
where the Minister is reasonably satisfied that a current EMP requires revision.

Where a modification to a regulated activity is proposed or there is a change in the existing environment and a revision is not required (ie. it does not fall within the scope of the above triggers) an interest holder will only be required to give notice to the Minister of the modification or change in the existing environment.

Records to be kept

The prescribed records for the activity² must be kept for the longer of the following periods:

five years following the period during which the petroleum interest for the activity is in force (in the draft Regulations this was the period during which the petroleum interest for the activity was in force); or
15 years after the record comes into existence.

Offences

Liability for contravention of the regulations now applies to any "person" (which includes a person or body corporate) when previously it only applied to the "interest holder". This means that liability will now apply to an interest holder and to a subcontractor engaged by the interest holder to perform an obligation.

New infringement notice offence provisions have been inserted into the final Regulations in relation to the provisions or revision of an EMP as outlined above.

Recordable incident

Failure to give a written report to the Minister about recordable incidents remains as an offence, but the definition of "recordable incident" has been amended to clarify that it is an incident which still caused an environmental risk or impact that was not provided for in the EMP but is less severe than material or serious environmental harm.

Therefore, the definition of "recordable incident" is now an incident arising from a regulated activity that:

has resulted in an environmental impact or environmental risk not specified in the current plan for the activity; or
has resulted in a contravention of an environmental performance standard specified in the current plan for the activity; or
is inconsistent with an environmental outcome specified in the current plan for the activity; and
is not a reportable incident³.

Transitional provisions

The transitional provisions have been removed and it is understood that a transitional plan for existing EMP approvals is currently being finalised and will be included in future amendments to the Petroleum Act.

What next?

The Government has already released a guide to the new Regulations and it is understood that it will also prepare a series of guidelines to address⁴:

Overall requirements for an EMP;
Risk management;
Well construction and integrity;
Well decommissioning;
Baseline and ongoing water monitoring requirements;
Water and wastewater management;
Chemicals including risk assessment and public disclosure;
Air emissions including flaring and venting;
Flora, fauna and weed management;
Soil management and erosion control;
Rehabilitation and environmental security; and
Incident management, investigation and notification.

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Footnotes

¹ A separate definition for "environmental risk" was inserted and means the chance of something happening that will have an environmental impact, measured in terms of the environmental consequences and the likelihood of those consequences occurring.

² prescribed records for the activity are the following documents:

the original environment management plan, as approved by the Minister;
each revision of the plan, as approved by the Minister;
reports, including monitoring, audit and review reports, about environmental performance or the implementation strategy under the plan;
records of emissions and discharges into the environment made in accordance with the plan;
records of calibration and maintenance of monitoring devices used in accordance with the plan;
records of, and copies of reports about, reportable incidents and recordable incidents;
certificates associated with the disposal of waste;
information or records relating to stakeholder engagement;
all documents developed or received by the interest holder in relation to matters to which these Regulations apply;
records of any other documents the interest holder is required by these Regulations to keep.

³ reportable incident means an incident, arising from a regulated activity, that has caused or has the potential to cause material environmental harm or serious environmental harm.

⁴ We understand that this is not an exhaustive list of the topics that will be covered in the Government's proposed guidelines.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

Australia: New Petroleum (Environment) Regulations commence in the NT