NSW proposes CSG overhaul

THE New South Wales government aims to overhaul royalties and community benefits as part of planned CSG reforms to "develop a competitive gas industry" that meets the state's supply needs.
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The various reforms are being marketed as the "NSW Gas Plan", and notably the state government has promised to implement all the recommendations made by NSW chief scientist Mary O'Kane - who recently found that the risks associated with CSG exploration and development could be managed in a landmark report that took 19 months to complete.

The plan called one of the five key priority areas "Pause, reset and recommence - gas regulation on our terms"; while also promising better science and information to deliver world's best practice and regulation, strong and certain regulation, "sharing the benefits", and securing NSW gas supply needs.

Given the growth of CSG opposition groups, with their members ranging from wealthy farmers to seasoned environmental activists, the new reforms aim to make the economic benefits of CSG activity more apparent.

"Landholders and communities will share in the financial benefits during exploration and production and a Community Benefits Fund will deliver infrastructure for communities upfront," NSW Resources and Energy Minister Anthony Roberts said.

"We will commission an independent review of royalties to ensure we have the right settings to develop a competitive gas industry in the State to meet our supply needs."

However, the freeze on awarding new CSG permits will still remain for some time yet.

"The entire system for Petroleum Exploration Licences (PELs) will be reset, with the NSW Government deciding which areas will be released for exploration and to whom," Roberts said.

"A freeze on assessing new PEL applications will remain in place until the new system is set, and legislation will extinguish 16 previous applications."

Under the changes the Environmental Protection Agency will take over all environmental compliance and enforcement for CSG matters - indicating that the Office of CSG could be scrapped.

The state government is also keen to make reforms relating to big domestic gas users.

"The NSW Government will continue to push for greater transparency of the East Coast Gas Market," Roberts said.

"We will ask gas companies to disclose their gas supply arrangements to demonstrate the development of NSW gas reserves will benefit the State's gas consumers.

"The NSW Government is committed to growing our local gas supply in a safe and environmentally sustainable way, protecting our water, land and other industries."

NSW Deputy Premier Troy Grant blamed the previous government for community mistrust in the CSG scene.

"Under the former Labor Government the industry was managed through a flawed and out-dated regime, with many Petroleum Exploration Licenses approved carelessly across the state," he said.

"As a result, communities were left with an industry that developed without proper oversight."

While more news could emerge on the state's CSG front, the announcement of its new gas plan was reportedly scheduled for yesterday until a media leak occurred to a newspaper - causing it to be delayed to today.

"It is understood there were concerns among Nationals MPs, with backbenchers asking for personal briefings on the plan," the ABC reported.

"This week Nationals MP and former local government minister Don Page used his valedictory speech to Parliament to demand the Government quarantine his seat of Ballina from CSG activity."

The Australian Petroleum Production and Exploration Association has cautiously welcomed the gas plan, but sees a few gaping holes it wants addressed.

"The current situation - which sees NSW import 95% of its gas, even though it possesses 500 years' worth of supply - should be viewed as unacceptable by the state's 1.3 million gas consumers," APPEA said.

It noted that just 10 exploration wells drilled in NSW in the 2013-14 financial year, yet not one production well was drilled in the state; compared to over 1600 wells drilled in Queensland in the same year.

APPEA said agriculture and gas production were working side-by-side in Queensland through more than 4700 land access agreements that allow for the production of gas and the provision of income to farmers that is not dependent on the weather.

APPEA called on further clarification on the following details before the policy principles can be translated into positive action:

  • The government's plan appears to shut down opportunities for new investment in the state and does not allow for new exploration;

  • The suggestion that gas production be reserved for use in NSW is clearly at odds with the fact that NSW has relied on the willingness of other states to supply gas into NSW for many decades. The type of ‘reservation' policy outlined has been widely condemned by many reputable parties;
  • Benchmark farmer compensation agreements must not reduce the scope for flexible negotiation between the parties. They have the potential to create problems for gas companies and farmers alike, as they fail to recognise that every farm is different; and
  • The extension of ‘exclusion zones' is a clear case of arbitrary and politically driven regulation. The gas industry has no issue with the regulation of its activities, but the rules must be based on science and risk management principles.