Update on lifting of on-shore conventional gas moratorium

As of 1 July 2021, the moratorium on onshore conventional gas exploration and production that was put in place by the Victorian Government in 2014 was lifted, but a ban on fracking and coal seam gas exploration has been enshrined in Victoria’s Constitution.

The moratorium on carrying out on-shore petroleum exploration and petroleum production in Victoria, which was imposed in 2017, has been overturned by the Petroleum Legislation Amendment Act 2020 (Vic) (Petroleum Amendment Act) with effect from 1 July 2021. Consequential changes to the Petroleum Industry Regulations 2011 (Vic) (Petroleum Regulations) to deal with the lifting of the moratorium are expected to be released shortly for public consultation. The Department of Jobs, Precincts and Regions (Department) recently confirmed to us that a draft of the revised Petroleum Regulations and an associated Regulatory Impact Statement (RIS) will be published on the Victorian Government’s online consultation platform, ‘Engage Victoria’, towards the end of July 2021. Upon release of the draft Petroleum Regulations and RIS, the Department will accept public submissions and will post a number of questions through ‘Engage Victoria’ with respect to the draft Petroleum Regulations and RIS that will be open for responses from the public. The independent stakeholder advisory panel for the ‘Victorian Gas Program’ will also be invited to submit recommendations for changes to the Petroleum Regulations. We note that the existing Petroleum Regulations expired on 24 May 2021 and interim Petroleum Regulations which mirror the current Petroleum Regulations will apply up until the new Petroleum Regulations take effect.

Key changes to the Petroleum Act and Petroleum Regulations

Below is a ‘refresher’ of some of the material changes to the Petroleum Act 1998 (Vic) (Petroleum Act) effected by the Petroleum Amendment Act, and the necessary arrangements that holders of petroleum authorities will need to make in order to comply with the regulatory reforms:

• Further term for some authorities – retention leases and exploration permits in force immediately before the moratorium commenced will be reset as of 1 July 2021, meaning that the term of the permit or lease (as applicable) will be valid for a further five years, ending on 1 July 2026. Holders of an exploration permit or retention lease were also required to submit a new ‘work program’ by 1 January 2021 and have it approved by the Minister.
• Operation plans – under the Petroleum Act, authority holders will need to either vary their existing operation plan in relation to the petroleum operation or submit a new operation plan which replaces the existing operation plan. The holder of the authority must receive approval from the Minister for the new or varied operation plan (as applicable) prior to recommencing activities under a relevant authority on or after 1 July 2021.
• Imposition of ban on hydraulic fracking and coal seam gas exploration – on 16 March 2021, a permanent ban on hydraulic fracturing and coal seam gas exploration and extraction was enshrined in the Victorian Constitution. As we have previously noted in our June 2020 article on Insights, enshrining these bans in the Constitution will make it more difficult for the Victorian legislature to overturn them in the future. Such amendments would now require the approval of a three-fifths majority of each House of Parliament, rather than a simple Act of Parliament. As a result, we expect that title holders will be prohibited from using these petroleum exploration and extraction methods in Victoria for the foreseeable future.
• Well Management Code – the Petroleum Regulations will contain a new well management code, which seeks to implement technical specifications relating to well construction, design, safety and integrity. It will be based on the equivalent Queensland and Northern Territory ‘well management’ codes, both of which are based on the widely accepted Norwegian NORSOK standard D-010 for well integrity.
• Stakeholder and community engagement in determining grant applications – The Petroleum Amendment Act made a number of changes which relate to the grant of production licences and retention leases, which include:
  • Inviting public consultation on a potential tender - the Minister must now publish notice of intention to invite tender applications for a retention lease or production licence. This, among other things, must state that any person may make a written submission to the Minister about the proposed invitation and take into account any written submission received from the Victorian community during the public consultation process in deciding whether to invite such tender applications;
  • Notifying the Victorian community of application for certain authorities - an applicant for a production licence or retention lease must cause notice of that application to be published and require any public submission to be taken into account before the relevant authority is granted. In deciding whether to grant (or refuse to grant) the production licence or retention lease, the Minister must be satisfied that:
    • the applicant has addressed the matters raised in any submissions received from the Victorian community; and
    • the applicant has addressed the prescribed social, environmental and economic factors which are to be taken into account in relation to decisions to grant a production licence or retention lease.