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Regulation of the coal seam gas industry in Victoria

Currently in Victoria there are a series of measures around onshore gas including coal seam gas including: 

  • a hold on new coal seam gas exploration and mining licences
  • a hold on approvals for hydraulic fracturing
  • a ban on the use of BTEX (benzene, toluene, ethylbenzene, xylene) chemicals

The ban on new approvals and hydraulic fracturing will remain in place until July 2015.

The ban on BTEX chemicals is ongoing.

Who owns the resources?

All minerals in the State of Victoria, including coal seam gas, belong to the people of Victoria and are therefore the property of the Crown. These include mineral resources located beneath private land to which access may be required for the purpose of exploration and/or mining.

How is coal seam gas exploration and mining regulated?

The Department of Economic Development, Jobs, Transport and Resources (DEDJTR) regulates the minerals, extractive, petroleum, pipelines and geothermal industries in Victoria and off-shore waters. It provides a consistent and transparent exploration and mining management regime, together with environmental standards, monitoring and enforcement that ensure these industries comply with their obligations and meet community expectations.

In Victoria, coal seam gas exploration and mining is regulated under the Mineral Resources (Sustainable Development) Act 1990 (MRSD Act). The MRSD Act provides a legislative framework for the development and regulation of the mineral exploration and mining industry, including gold, coal, and mineral sands.

The MRSD Act addresses licensing and approval requirements, along with other issues such as compensation, rehabilitation and royalties for extractive industries, mineral exploration and development activities.

The MRSD Act seeks to encourage an economically viable mining industry which makes the best use of mineral resources in a way that is compatible with the economic, social and environmental objectives of the State. A series of regulations and guidelines also apply to mineral exploration and development activities.

What is a company required to do before it can explore for coal seam gas?

A number of companies have been granted licences to explore for coal seam gas. These exploration licences do not allow for commercial extraction or production of gas. The low impact activities permitted on an exploration licence are directed at searching for or evaluating a resource. However, even these activities are regulated by strict requirements for approval of work by the Department of Economic Development, Jobs, Transport and Resources (DEDJTR) and, where relevant, by the Environment Protection Authority (EPA).

The exploration licence applicant is required to advertise in the local paper(s) of the licence area and one state-wide paper. Objections may be lodged within 21 days of the advertisements.

DEDJTR, as the licensing authority, assesses any objections against the application lodged when determining whether to recommend granting a licence.

If the licence is granted, the licensee must have approval or make and register a compensation agreement with affected landholders before starting any exploration work.

Should exploration establish the existence of a resource, and if the licence holder then wishes to apply to extract the coal seam gas, then a separate application for a mining licence is required.

Before a licensee can commence significant work under an exploration licence or a mining licence, they must:

  • have their work plan approved by DEDJTR;
  • hold public liability insurance;
  • enter into a rehabilitation bond with DEDJTR;
  • obtain all necessary consents and other authorities;
  • settle compensation with the owners and occupiers of private land where access for work is required;
  • give seven days notice of intention to commence work to the owner and occupier of the land and to the Chief Inspector; and
  • gain consent from the Government for any work on Crown Land.

In addition, strict conditions are attached to the licence relating to environmental matters. Compliance with such conditions is monitored by DEDJTR inspectors throughout the period of the licence.

What is a company required to do before it can start extracting coal seam gas?

In the event that the production of coal seam gas is feasible and that a proposal to extract the gas meets all regulatory requirements, it is estimated that it would take around five or more years for such a project to commence commercial production.

Any proposal to produce coal seam gas would require a lengthy period of testing and evaluation of feasibility. It would then be subject to an Environment Effects Statement process under the Environment Effects Act 1978.

These processes would enable government agencies to make sound decisions about future development.

If mining is proposed, both the mining licence application process and the planning process, provide further opportunities for public input and comment.

Like any other mineral resource, exploration and mining for coal seam gas are regulated by the MRSD Act and are subject to the requirements outlined above.

What rights do exploration or mining licences confer on companies?

An exploration licence grants exclusive rights, subject to conditions, to explore for minerals in defined areas of up to 500 square kilometres (or larger with ministerial approval). Mining requires a mining licence and is not permitted on an exploration licence. In general, an exploration licence is valid for five years, with the option to apply for renewal, and gives the licensee the right to apply for a mining licence. During the term of an exploration licence, licensees are required to relinquish ground. There are two relinquishment requirements: after two years, 25 per cent of the ground must be relinquished; after four years an additional 35 per cent must be relinquished.

A mining licence does not imply permission for mining to take place, but is required to seek work approvals required to establish a mining operation. Exploration is also permitted under a mining licence, which may cover an area of up to 260 hectares (or larger with ministerial approval). A mining licence may be valid for up to 20 years or longer with ministerial approval, with the option to apply for renewal.

Under both licences, work (other than work using hand tools) cannot take place within 100 metres of a dwelling (house) unless the landholder consents.

Regulation of issues associated with coal seam gas

What are companies required to do regarding community engagement?

Both exploration and mining licensees have a duty to consult with the community during all stages of a project, from exploration through to the operational phase and rehabilitation. This means that the licensee must share information with the community about any activities authorised by the licence that may affect that community.

A community engagement (CE) plan needs to be prepared by the mining licensee which should clearly identify the community and describe how, when and what engagement will occur with that community during all stages of the mining project. Minimum requirements of the CE plan are stipulated in the Mineral Resources Development Regulations 2002 and depend on the geographical size of the licence and what activities the licensee is undertaking. Exploration licensees are not required to develop a CE plan.

The purpose of this requirement is to share information with the community about any activities authorised by the licensee and ensure that the community is provided with reasonable opportunities to express their views.

What are companies required to do regarding water management?

Ground water and surface water are used in a variety of ways in exploration and mining operations including:

  • for dust control
  • in drilling
  • to maintain vegetation areas
  • for ore processing
  • to reduce erosion
  • to make mining safe.

Mining operations may include the construction of facilities including water races, tailings dumps, tailings dams, drains, dams, reservoirs, pipelines and bores. These will be specified in the work plan.

Water is subject to well established regulations. To access water, mining operators must obtain a licence in accordance with the Water Act 1989. The discharge of water (i.e. water injected back into groundwater or discharged into streams) is subject to the Environment Protection Act 1970.

Issues regarding groundwater management are examined by DEDJTR in partnership with the Department of Environment, Land, Water and Planning (DELWP). Conditions for protection of groundwater may be imposed on an exploration or mining licence.

Victoria has regulations and policies that provide protection of groundwater from pollution, and particularly high risk activities such as mining. The State Environment Protection Policy does not allow discharges that will pollute groundwater. Further information on protection of water and groundwater under the EP Act is available on the EPA website.

Water quality and management is also regulated by local water corporations, under the Water Act.

What are companies required to do regarding environmental protection?

Before any minerals exploration or mining operation can commence, a work plan addressing environmental risks must be approved and a rehabilitation bond lodged. The rehabilitation bond represents security of payment for any rehabilitation work that may be necessary as a result of a minerals exploration or mining operation. Other approvals may also be required under the Environment Protection Act 1970 and the Water Act 1989.

In addition, exploration licence holders are bound by DEDJTR's Code of Practice for Mineral Exploration. The code provides practical guidance about how exploration work should be conducted in Victoria to meet regulatory requirements and environmental standards.

Mining licensees must also obtain a planning permit or prepare an Environment Effects Statement (EES), which includes public and stakeholder consultation. As part of this process, potential environmental impacts must be identified and assessed and mitigation measures proposed. Residual environmental impacts will be considered during the planning approval process or when a determination is made for the project to proceed.

Further, all mineral development projects in Victoria are subject to the government’s ‘Native Vegetation Management Framework’, which strives for net gain in native vegetation via protection, enhancement and revegetation of the state’s native flora.

What is a company required to do before it can start hydraulic fracturing?

Hydraulic fracturing is one of several activities that may be undertaken to facilitate extraction of gas from a CSG well.

Hydraulic fracturing is not a new technique, however there is a significant amount of inaccurate information about it in circulation, particularly regarding its use in Queensland and New South Wales.

Hydraulic fracturing is sometimes used to help the gas flow from the coal. This involves pumping a fluid consisting largely of water and sand under pressure into a coal seam. The sand holds the fracture open to provide a pathway for the gas and water to flow to the gas well for extraction.

Based on evidence to date, the nature of Victoria’s coal resource may not require hydraulic fracturing to get coal seam gas to flow. Even with black coal seams hydraulic fracturing is only used in a small number of cases (in Queensland hydraulic fracturing is only used in 8 per cent of cases).

Furthermore, chemicals used in the process of hydraulic fracturing in other states would be unlikely to meet the strict requirements in Victoria for the protection of groundwater under Victoria’s strong environmental legislation.

Hydraulic fracturing is not considered in isolation, it is considered as part of a broader work plan approval process and is subject to the same range of controls and regulations as any other activity.

A company proposing to undertake hydraulic fracturing must satisfy DEDJTR that it is able to meet the conditions established in the agreed work plan for that site.

Furthermore, Victoria’s environmental and resource legislation differs from that operating in other states. For example, chemicals used in the process of hydraulic fracturing in other jurisdictions would be unlikely to meet the strict requirements for the protection of groundwater under Victoria’s strong environmental legislation.