WA politicians call for tighter rules on well abandonment

POLITICIANS in Western Australia are furious after small cap New Standard Energy has effectively ignored government directions to rehabilitate and properly abandon and plug several wells in the Canning Basin.
WA politicians call for tighter rules on well abandonment WA politicians call for tighter rules on well abandonment WA politicians call for tighter rules on well abandonment WA politicians call for tighter rules on well abandonment WA politicians call for tighter rules on well abandonment

Paul Hunt

Senior Journalist: Energy & Commodities

Paul Hunt

The Western Australian Greens have taken aim at state minister for resources and petroleum Bill Johnston, saying he needed to grow a "spine to enforce penalties" against companies that blatantly disregard their oil and gas rehabilitation obligations. 

Energy News revealed last week junior oil explorer New Standard Energy would leave five oil and gas permits and four oil wells completely un-rehabilitated after ignoring five directions from the WA Department of Mines, Industry Regulation and Safety. 

The operator of the oil exploration project has deserted its obligations to properly plug and abandon and rehabilitate the wells, at least for the near future, due to its finances. 

The company, led by Beijing-based CEO Xiaofeng Liu, told the market last month it "acknowledged the delay" in rehabilitating its shale wells which have been sitting idle for nearly a decade. 

New Standard Energy's inaction has caught the attention of the WA Greens, who hold four seats in the Upper House and look to gain a balance of power if they regain a winnable seat lost in the last state election. 

Greens MP and party spokesperson for mining Robin Chapple said New Standard's failure to "take into account" its failed operations and cleanup costs was "totally unacceptable in WA." 

"This ecological risk that unplugged wells represent is huge - they represent a breach of agreement far beyond any slap on the wrist currently being offered by DMIRS," Chapple said. 

Chapple, a life-long anti-fraccing campaigner, cited the fact the wells had remained not been properly plugged and abandoned, for nearly a decade as a failure on both the Liberal Colin Barnett government and successive Labor McGowan government.

"Blatantly abandoning operational responsibility flies in the face of respectable trade practice in WA - and having two governments fail to act on this has only spread the failure of accountability" Chapple said. 

"If we don't have a government with the spine to enforce those penalties then they undermine the industry on the whole."

The Greens are calling for an orphan wells fund and said the mines, petroleum and energy minister needed to take a bond from companies operating onshore in the event they fail. 

Currently DMIRS are considering penalising New Standard Energy by charging the company under the Petroleum and Geothermal Energy Resources Act. 

Penalties would amount to just $10,000 per offence, and could be laid against the company on a day-by-day basis. This is considerably small considering the cost of abandoning and rehabilitating the well sites, and associated infrastructure including an airstrip, could reach the tens of millions of dollars. 

New Standard was suspended from the ASX in October last year after it failed to tell shareholders and the market the cost of properly rehabilitating and abandoning its well sites.

The company remains suspended to this day.

According to its quarterly cash flow report, New Standard Energy had just $394,000 in the bank.