14 Mar 2013

Major new controls on water impacts from mining and CSG projects

by Nick Thomas

Changes to NSW water laws, and a proposal for a new EPBC Act approval trigger for water impacts, will increase the regulatory burden for mining and coal seam gas projects

The last fortnight has seen two major developments in regulatory controls on water impacts from mining and coal seam gas (CSG) projects, which are likely to increase the regulatory burden for these projects.

On 1 March 2013 the NSW Government has activated a new section in the Water Management Act 2000 which specifically requires a water access licence for dewatering of mines and CSG wells. In addition, on 12 March 2013 the Commonwealth Government announced it would add a new approval trigger to the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) to require approval for a mining or CSG project with likely significant impacts on water resources. The Government followed this with the introduction of an EPBC amendment Bill into Parliament on 13 March. Given the importance of this development, we have commented on the Bill in a separate Alert.

Water access licence required for dewatering and water diversion

The NSW Government has "turned on" a new section in the Water Management Act (section 60I) which effectively states that a person whose current or former mining or petroleum exploration or production activity involves removal or diversion of water from a water source (even if the water is later returned to the same water source) or the re-location of water from one part of an aquifer to another part is "taking" water under the Water Management Act and therefore needs a water access licence (WAL).

Section 60I was introduced by the Water Management Amendment Act 2012 but had not commenced until 1 March 2013. Its commencement expands the scope of the requirement to obtain a WAL for mining and CSG projects.

It is not uncommon for a mining or CSG project to intersect with groundwater or a surface water source, and so require the removal of water from the project excavation (ie. dewatering) or the redirection of a water source (eg. a river or water channel) to avoid the project excavation. In some cases, some or all of the relevant water is not used for the project itself, but is simply relocated (by extraction and deposition elsewhere, possibly back to the same water source, or by redirecting water flows).

There has been doubt recently about whether all of these activities would constitute the "taking" of water under the Water Management Act and therefore trigger the need for a WAL to account for that water.

The NSW Government's recently released Aquifer Interference Policy sought to broaden the reach of the water take regime, as it had been understood. However, the meaning of the relevant parts of that Policy is unclear and, in any event, the Policy does not have legislative force.

Now section 60I seeks to makes it clear that mine dewatering or water source diversion is "taking" water, and expressly imposes a requirement for persons whose activities involve such effects to obtain WAL with sufficient units to match the volume of water which is dewatered or diverted.

What is a water access licence?

WALs are essentially entitlements to a share of water from a designated water source, and are like personal property which can be traded or securitised. Usually, a WAL will have a stated share component expressed as a number of "units", each of which relates to a specified volume of water. A person who proposes to take water from a water source regulated by the Water Management Act must apply to the NSW Water Minister for a WAL with sufficient units to cover the volume of water" take" or, if they cannot obtain one from the Minister (eg. because there is an over-allocation of water entitlements), purchase sufficient WAL units in the relevant water market.

How far does the new requirement go?

Importantly, section 60I refers not only to current mining or CSG activities but also to "past" activities. The government has not provided any guidance on what "past" activities means. However, there is a real prospect that decommissioned mines or CSG wells would still attract a requirement for WALs, and therefore tie up valuable water units, if those decommissioned mines or wells still involve a water intake or diversion.

It is interesting to note that section 60I does not cover quarrying activities, which do not involve the extraction of "minerals" under the Mining Act 1992.

Although the Government has described section 60I as a "clarifying" provision, it appears that section 60I goes beyond the law as it existed prior to March 2013, yet still leaves some uncertainty about the proper scope of the water "take" requirement.

What this means for miners and CSG producers

Operators of mining and CSG projects should review the effects their exploration and production projects have or are likely to have on water flows in light of section 60I, and consider whether they need additional water entitlements to cater for those effects. The review should also address past activities.

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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.