The NT opens the door to onshore gas exploration drilling and fracking

By Nicole Besgrove, Margaret Michaels

08 Aug 2019

With the announcement of no-go zones and release of the Monitoring and Compliance Strategy, onshore gas exploration drilling and fracking can recommence in the Northern Territory, but production approvals are still on their way.

After lifting the moratorium it imposed on hydraulic fracturing in the Territory, the NT Government has been working to implement the 135 recommendations from the final report of the independent Scientific Inquiry into Hydraulic Fracturing of onshore unconventional reservoirs in the Northern Territory.

On 24 July, the NT Government announced no-go zones for gas exploration and production and released the Monitoring and Compliance Strategy which rounds out the 31 recommendations which the Inquiry Panel recommended be implemented before exploration (including hydraulic fracturing) can recommence.

No-go zones for fracking

Under Recommendation 14.4 of the Inquiry’s Final Report, areas that fall within seven categories of land had to be declared reserved blocks as a prerequisite for further exploration approvals. Petroleum reserved blocks, or the no-go zones, are areas declared under the Petroleum Act 1984 where exploration or drilling for petroleum resources cannot occur.

The NT Government has now released its Petroleum Reserved Block Policy, setting out the assessment criteria that will determine whether an area falls into one of the following categories to qualify as a reserved block and the process for declaration:

  • Category 1 – Parks and Reserves;
  • Category 2 – Towns and residential areas;
  • Category 3 – High conservation value;
  • Category 4 – Indigenous Protected Areas;
  • Category 5 – Areas of cultural significance;
  • Category 6 – High tourism value; and
  • Category 7 – No petroleum potential.

Importantly, these categories slightly differ from those recommended – there is now a "no petroleum potential" category, parks and reserves have been combined, and "high ecological value" is now described as 'high conservation value". The Policy does not apply to exempted areas, which are those areas where there are existing operating and production licences and retention licences over conventional resources that have been operating for decades and provide an energy source to Alice Springs. 

Essentially, when determining whether or not to declare a petroleum reserved block the NT Government will consider:

  • the category of the area;
  • whether the area overlaps a granted exploration permit (EP); and
  • whether the area is on Aboriginal Land Rights Act (ALRA) land.

After applying the Policy, the NT Government has now announced a number of petroleum reserved blocks, which include the municipalities of Katherine and Alice Springs. These reserved blocks will need to be formally established under the Petroleum Act and will be declared in a four stage tranche:

  • Tranche 1 (immediate declaration): this includes areas from Categories 1, 2, 3 and 7 which do not overlap any granted EPs and, except for Tjuwaliyn (Douglas) Hot Springs Nature Park, are not on ALRA land.
  • Tranche 2 (declare after notice to relevant Board of Management for the park or reserve): comprises jointly managed parks and reserves on and off ALRA land.
  • Tranche 3 (Declare after negotiation with relevant petroleum companies): comprises areas that overlap granted EPs. The NT Government will need to negotiate with the relevant petroleum companies regarding the relinquishment of these areas and declare reserved blocks accordingly.
  • Tranche 4 (Consult with relevant Land Council): comprises approximately 60% of the total area to be declared and will occur when the Land Councils advise the Minister for Resources that either:
    • they support the declaration of proposed reserved blocks on ALRA land; or
    • they have not consented to the grant of an EP under section 42(1) of the ALRA.

Compliance and Monitoring Strategy

Recommendation 14.26 of the Inquiry's Final Report required:

"That prior to the grant of any further exploration approvals, the Government develops and implements a robust and transparent compliance and monitoring strategy, having regard to the principles set out in the [Australian National Audit Office] ANAO Administering Regulation: Achieving the right balance guide, and the policy in SA [South Australia]."

The NT Government has now implemented this recommendation with the release of the Monitoring and Compliance Strategy for onshore petroleum. The Monitoring and Compliance Strategy states that it has been developed as a risk management tool to be used by regulators to explain what the expectations for, and obligations on, the onshore gas industry and to inform the public about how the NT Government will monitor and address non-compliance with the key legislative and regulatory requirements of the Petroleum Act, the Petroleum Regulations 1994 and the Petroleum (Environment) Regulations 2016, as well as other interrelated legislation.

Recommendations 14.27 to 14.33 (inclusive) in the Inquiry's Final Report also require that prior to the grant of any production approvals a number of new compliance and enforcement provisions be enacted. The Monitoring and Compliance Strategy states that the policy development in relation to these recommendations has commenced, will be completed prior to shale gas production activities commencing and will be reflected within the Monitoring and Compliance Strategy upon completion.

Next step: getting ready for production approvals

The NT Government has released a document setting out the status of its Action Items for the implementation of each of the 135 recommendations from the Inquiry's Final Report.

While the NT Government has implemented the necessary recommendations required for recommencing exploration along with several additional recommendations, further work is still required to implement key recommendations before any production approvals can be granted.

If you would like to understand more about the no-go zones, the Monitoring and Compliance Strategy or onshore gas exploration in the NT more broadly please contact us.

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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 communication. Persons listed may not be admitted in all States and Territories.