Approvals for CSG water treatment facilities in NSW

Articles Written by Stephen Byrne (Partner), Tom Barrett

Introduction

On 14 March 2017, the Court of Appeal of the Supreme Court of NSW gave its decision in People for the Plains Incorporated v Santos NSW (Eastern) Pty Ltd [2017] NSWCA 46 (Case).

The Case considered the following legislation in relation to the necessary approvals for a water treatment facility that was proposed to be constructed to treat, manage and beneficially reuse water produced from coal seam gas exploration and appraisal activities:

  • Petroleum (Onshore) Act 1991 (NSW) (PO Act);
  • State Environment Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (NSW) (Mining SEPP); and
  • State Environment Planning Policy (Infrastructure) 2007 (NSW) (Infrastructure SEPP).

Ward JA gave the leading judgment in the Case, with Meagher and Payne JJA agreeing with her Honour’s reasons. This article examines the key findings of Ward JA.

Summary of the key matters

The key matters determined by the Case are:

  • The project to treat and beneficially reuse water produced from coal seam gas (CSG) exploration and/or appraisal activities should be regarded as activity for the purpose of “petroleum exploration” within the meaning of clause 6(d) of the Mining SEPP. Therefore the project did not require development consent under the Environmental Planning and Assessment Act 1979 (NSW) (EP&P Act). Whether other facilities should be similarly characterised will be a matter of fact and degree.
  • In characterising the purpose of development activity for planning purposes, the relevant development must be considered as a whole, not split into components. The purpose of a development, as characterised, need not be its sole purpose, but must be its dominant purpose.
  • A ‘purposive interpretation’ of section 33 of the PO Act is not permitted (given prior case law), such that section 33 will not authorise an assessment lease holder to prospect on the land of any exploration licence from which its assessment lease has been excised.
  • To the extent there is any inconsistency between the Mining SEPP and the Infrastructure SEPP in relation to an activity connected with mining, the Mining SEPP prevails.
  • The reference to “other land” in clause 18 of the Mining SEPP should be interpreted as meaning land other than that on which the whole of the development in question will occur. The effect of this is that clause 18 may not prevent waste (such as produced water and brine) from being transported from the area of one petroleum title to the area of another petroleum title if the operation in question is part of an integrated project or development.

Background facts

The first, second and fourth respondents in the Case (being the Santos parties) each hold interests in petroleum exploration licence 238 (PEL 238), petroleum production lease 3 (PPL 3) and petroleum assessment lease 2 (PAL 2) granted under the PO Act. The title areas of PPL 3 and PAL 2 are located within the boundaries of, and once were a part of, PEL 238. Those petroleum titles are in the Narrabri region of NSW.

The Case concerned an appeal by the People for the Plains Incorporated (Appellant) of the decision of Moore J in two sets of proceedings in the NSW Land and Environment Court.In those proceedings, the Appellant had sought to challenge the validity of approvals granted by delegates of the Secretary of the NSW Department of Industry, the third respondent in the Case, under the PO Act in respect of the “Leewood Produced Water Treatment and Beneficial Reuse Project” (Project) to be undertaken in relation to PEL 238, PPL 3 and PAL 2.

The Project was to involve the construction and operation on PAL 2 of “a purpose built, centralised water treatment facility…to treat, manage and beneficially reuse produced water from coal seam gas (CSG) exploration and appraisal activities”.2 The Project was the second phase of a two-phase approval process, the first of which involved the construction of produced water and brine management ponds on a property known as the “Leewood property”, and associated infrastructure on PAL 2.3 The water treatment facility the subject of the Project was a reverse osmosis desalination plant and brine treatment plant, which would treat water produced from the Santos parties’ CSG activities into water that could be beneficially reused.4

A condition (PAL 2 Condition) imposed on the grant of PAL 2 required that the Santos parties conduct their exploration and appraisal activities under an approved Petroleum Operations Plan and that the plan deal with the treatment and beneficial reuse of produced water.5 The Santos parties proposed to undertake the Project in satisfaction of the PAL 2 Condition.

Characterisation of the Project

One ground of appeal raised by the Appellant in the Case concerned whether the Project was “prospecting” for the purposes of section 33 of the PO Act and “petroleum exploration” for the purposes of clause 6(d) of the Mining SEPP.

Relevantly, section 33 of the PO Act grants an assessment lease holder the “exclusive right to prospect for petroleum…on the land comprised in the lease”. The PO Act defines “prospect” as “to carry out works on, or to remove samples from, land for the purpose of testing the quality and quantity of petroleum in the land and the potential to recover petroleum from the land…”.6

Clause 6(d) of the Mining SEPP has the effect that development for the purposes of “petroleum exploration” may be carried out without development consent under the EP&P Act. The Mining SEPP defines “petroleum exploration” as “prospecting pursuant to an exploration licence, assessment lease or production lease” granted under the PO Act.7 Relevantly, the Mining SEPP defines “prospecting” as including “the taking of samples, and the assessment of deposits, of…petroleum”.8

The Appellant contended, on a number of bases, that the Project should have been characterised either as a “resource recovery facility” or a “waste disposal facility” within the meaning of clause 120 of the Infrastructure SEPP, and not as “prospecting”.9 The effect of the Appellant’s contention was that the Santos parties were required to obtain development consent under clause 121 of the Infrastructure SEPP for the Project.

Among other things, the Santos parties submitted that a development may be for “petroleum exploration” within the meaning of clause 6(d) of the Mining SEPP without being “prospecting” within the meaning of the PO Act.10 They also argued that the right under the PO Act to “prospect” for petroleum within a petroleum title area implies the right to do all things necessary to exercise that right and that CSG exploration, by its nature, requires infrastructure to store, treat and dispose of produced water.11

Ward JA accepted that, in characterising the Project, the question to be determined was whether the dominant (as opposed to sole) purpose of the Project was “petroleum exploration”.12 Her Honour found that the Project was for the purpose of “petroleum exploration”. Critical to this finding was that the Santos parties were undertaking the Project in order to satisfy the PAL 2 Condition.13

Splitting of the Project into parts for consideration of its purpose

The Appellant contended that Moore J at first instance had erred in splitting the Project into two parts when determining the character of the Project. Moore J had held that the Project, other than components relating to crop irrigation, was for the purpose of petroleum prospecting and that the components of the Project relating to crop irrigation were for the purpose of commercial agriculture.14

Ward JA accepted the principle that in determining the purpose of a development for planning purposes the development must be considered as a whole (i.e. all components of a project).15

Given Moore J had determined, as outlined above, that different components of the Project had distinct purposes, Ward JA was of the opinion that Moore J had failed to consider whether the Project, as a whole, was for the purpose of petroleum exploration.16 However, given Ward JA’s finding outlined above, this finding was of no consequence.17

Purposive approach to interpretation of section 33 of the PO Act

At first instance, Moore J found that the treatment and disposal of water produced from the Santos parties’ activities on PEL 238 by the facilities constructed as part of the Project would be prospecting on PAL 2.18 Moore J came to this conclusion as his Honour adopted a ‘purposive interpretation’ of section 33 of the PO Act. Such an interpretation, in his Honour’s opinion, meant that section 33 of the PO Act should be read in the following manner:

The holder of an assessment lease has the exclusive right to prospect for petroleum on the land comprised in the lease and on the land of any exploration license from which the lease has been excised”.19

While not determining the matter given her Honour’s findings on related grounds of appeal raised by the Appellant, Ward JA noted that there was “considerable force” in the Appellant’s submission that a purposive interpretation of section 33 of the PO Act, as adopted by Moore J, was impermissible given prior case law.20

Application of the Infrastructure SEPP to the Project

The Appellant appealed Moore J’s decision at first instance on the grounds that his Honour had erred in finding that there was no need to consider the application of the Infrastructure SEPP to the Project. In doing so, the Appellant contended that the Infrastructure SEPP prevailed over the Mining SEPP such that the Project, even if it was properly characterised as “prospecting” under the PO Act, required consent under section 121 of the Infrastructure SEPP.21 The bases of the Appellant’s contention were that the Infrastructure SEPP commenced after the Mining SEPP and that it was a more specific instrument than the Mining SEPP, regulating specified classes of infrastructure.22

The Santos parties argued that there was no inconsistency between the Mining SEPP and the Infrastructure SEPP and that interpreting the Infrastructure SEPP as contended by the Appellant would lead to “fundamental elements” of mining (such as water storage ponds and tailings dams) being subject to regulation under the Infrastructure SEPP.23

Ward JA found that, to the extent there is any incontinency between the Mining SEPP and the Infrastructure SEPP, the Mining SEPP would prevail.24 The reason being that the former applies specifically to mining whereas the latter applies to various classes of infrastructure across NSW.25

Application of clause 18 of the Mining SEPP

The Appellant argued that Moore J had erred at first instance in not considering clause 18 of the Mining SEPP, which provides that nothing in the Mining SEPP “makes permissible (with or without consent) the use of land for the receipt or disposal of waste brought on to the land from other land”.

In response to the Appellant’s argument, the Santos parties contended that references to “land”, in a planning context, should be interpreted as the relevant parcel determined according to its use and occupation.26 As such, the Santos parties argued that in order to properly interpret the phrases “use of land” and “other land” in clause 18 of the Mining SEPP, it first must be determined the “land” on which the receipt of disposal of waste is to occur and that, for such a purpose, the relevant petroleum operation needed to be considered in its entirety.

 

In support of its argument, the Santos parties submitted, among other things, that PAL 2 and PAL 3 were within the boundary of PEL 238, that the water to be treated would be produced from integrated CSG exploration activities and that such water would be treated on the land that produced it.27

Ward JA agreed with the Santos parties’ argument and found that, as used in clause 18 of the Mining SEPP and in a planning context, “land” should be interpreted as meaning the land on which the whole development in question will occur, even if the relevant application is in relation to a specific petroleum title.28

 


1    People for the Plains Incorporated v Santos NSW (Eastern) Pty Limited and Ors [2016] NSWLEC 93.

2    People for the Plains Incorporated v Santos NSW (Eastern) Pty Ltd [2017] NSWCA 46 (PPI v Santos) at [64].

3    Ibid at [53].

4    Ibid at [13].

5    Ibid at [148].

6    Petroleum (Onshore) Act 1991 (NSW), s 3.

7    State Environment Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (NSW), s 3.

8    State Environment Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (NSW), s 3.

9    PPI v Santos at [90].

10   Ibid at [104].

11   Ibid at [105] – [106].

12   Ibid at [151].

13   Ibid at [148] and [152].

14   Ibid at [142].

15   Ibid at [139].

16   Ibid at [143].

17   Ibid at [144].

18   People for the Plains Incorporated v Santos NSW (Eastern) Pty Limited and Ors [2016] NSWLEC 93 at [77], [79] and [103].

19   Ibid at [73].

20   PPI v Santos at [156].

21   Ibid at [158].

22   Ibid at [159].

23   Ibid at [160] – [161].

24   Ibid at [186].

25   Ibid at [186].

26   Ibid at [166].

27   Ibid at [167].

28   Ibid at [187].

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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