Native title and the petroleum industry: Recent developments, options, risks and strategic choices

The Native Title Act 1993 (NTA) introduces a new dimension to Australia's land tenure systems; new property rights are established for native title parties via the creation of a 'right to negotiate' (RTN) with respect to future acts on land where native title might be determined. There is growing recognition that, legal uncertainties about the potential co-existence of native title on pastoral leases aside, there are elements of the NTA that are resulting in suboptimal outcomes for the petroleum industry. Within a Coasian analytical framework, it is demonstrated that, owing to unclear property rights, transactions costs for negotiating exploration and production with native title parties are high. Recognising this, the Commonwealth government has proposed a package of amendments that attempt to address industry concerns while balancing these against Indigenous interests. These recommendations include a once-only RTN, a higher threshold for registration of claims, automatic renewal of existing production leases and mandatory statutory functions for Native Title Representative Bodies that will require them to resolve competing native title claims and to sign off agreements with resource developers. Noting that strategic behaviour by industry, Indigenous parties and especially State governments have hampered effective operations of the NTA, the paper ends by considering the choices available to the petroleum industry to ensure that statutory amendments are in its best interests

Compensation for Coal Seam Gas Occupation: Assessing the Harms

Coal seam gas (CSG) extraction is expanding in eastern Australia. However, while the body of knowledge relating to compensation for partial taking is well established, the theory concerning the valuation of landholder compensation for occupation by CSG infrastructure is in an embryonic stage. In order to further the development of theory in this important area, this research investigates the harms that are inflicted upon landholders and their property by CSG occupation. As indicated in the Queensland mining case of Peabody West Burton Pty Ltd & Ors v Mason & Ors [2012] QLC 23, the assessment of compensation begins by enquiring as to the acts or events that occasion loss. In order to identify and assess the relevance of harms that may be inflicted upon landholders, this introductory research analyses key judgments relating to compensation for CSG and mining projects and takes advantage of the material created by the 2011, NSW and Australian Senate inquiries into matters related to CSG. Some aspects of CSG occupation are unusual. In land affected by CSG works, the property occupied is handed back to the landholder at the cessation of extraction: moreover, the actual term of occupation is difficult to determine at the outset of occupation. The research concludes that the harms inflicted by CSG occupation depend upon the interaction of the CSG project with the property occupied, its uses and its topography. Importantly, the “harms” caused by the occupation by part of land can extend outside the land occupied by the CSG work. The potential loss in value to “balance lands”, disturbance costs and potential for longer term blight are issues that need close consideration in assessing compensation

Coal Seam Gas Extraction: Does Landholder Compensation Match the Mischief?

Coal seam gas (CSG) extraction is set for expansion in New South Wales. However, controversy accompanies its introduction in that the present law grants miners access to private lands for the purposes of exploration and production. The NSW Petroleum (Onshore) Act 1991 regulates compensation for land access, and a number of questions have been raised about the adequacy of its compensation provisions. Additionally, compensation for coal seam gas poses a challenge for the valuation profession in that valuation theory has yet to be developed in this emerging sphere of practice. This paper compares the legal and physical impacts of coal seam gas infrastructure on private lands with the current provisions of the NSW Petroleum (Onshore) Act 1991 and questions if the present compensation provisions match the injury inflicted upon the holders of private land by coal seam gas occupation. The paper reviews the NSW legislation and case law relating to coal seam gas acquisition to identify the legal affects, whilst field observation and remote sensing techniques identify physical effects. The physical effects are then categorised according to the heads of compensation that apply to the compulsory taking of parts of property in Australia. A comparative analysis determines if all of the various “harms” that result from coal seam gas occupation are compensable under the current law. The research indicates that “severance” and “injurious affection” are key issues for landholder compensation where CSG plant occupies parts of land; however, the right to claim for “injurious affection” is unclear in the present legislation

Identification of fault and top seal effectiveness through an integration of hydrodynamic and capillary analysis techniques

Fault and top seal effectiveness has proved to be a significant risk in exploration success, and creates a large uncertainty in predicting reservoir performance. This is particularly true in the Australian context, but equally applies to exploration provinces worldwide. Seals can be broadly classified into fault, intraformational, and top seal. For geological time-scale processes, intraformational and top seals are typically characterised by their membrane seal capacity and fracture threshold pressure. Fault seals are typically characterised by fault geometry, juxtaposition, membrane seal capacity, and reactivation potential. At the production time scale, subtle variations in the permeability distribution within a reservoir can lead to compartmentalization. These are typically characterised by dynamic reservoir models which assume hydrostatic conditions prior to commencement of production. There are few references in the seals literature concerning the integration of hydrodynamic techniques with the various aspects of seal evaluation. The research for this PhD thesis by published papers includes: Methodology for characterising formation water flow systems in faulted strata at exploration and production time scales; a new theory of hydrodynamics and membrane (capillary) seal capacity; and case study evaluations demonstrating integrated multidisciplinary techniques for the evaluation of seal capacity (fault, intraformational and top seal) that demonstrate the new theory in practice. By incorporating hydrodynamic processes in the evaluation of total seal capacity, the evidence shows that existing shale gouge ratio – across fault pressure difference (SGR-AFPD) calibration plots need adjustment resulting in the calibration envelopes shifting to the centre of the plot.This adjustment sharpens the predictive capacity for membrane seal analysis in the pre-drill scenario. This PhD thesis presents the background and rationale for the thesis topic, presents each published paper to be included as part of the thesis and its contribution to the body of work addressing the thesis topic, and presents related published papers that are not included in the thesis but which support the body of published work on the thesis topic. The result of the thesis is a new theory and approach to characterising membrane seal capacity for the total seal thickness, and has implications for an adjusted SGR-AFPD calibration to be applied in pre-drill evaluations of seal capacity. A large portion of the resources and data required to conduct the research were made available by CSIRO and its associated project sponsors including the CO2CRC

Offshore Petroleum Facility Incidents Post Varanus Island, Montara, and Macondo: Have We Really Addressed the Root Cause?

This Article analyzes the role of offshore petroleum legislation in contributing to offshore facility integrity incidents in Australia’s offshore petroleum jurisdiction. It examines the regulatory framework that existed at the time of the Varanus Island, Montara, and Macondo facility incidents, determining that the regulatory regime contributed to each of these incidents. Assessing the response of the Commonwealth government to the regulatory framework existing at the time of the events, particularly the integration of well regulation as part of the National Offshore Petroleum Safety Authority’s (“NOPSA”) functions and the establishment of a national offshore regulator, this Article determines that while the integration of well management into NOPSA’s functions has been a valuable and a significant improvement. There is still a likelihood that differing standards applied to the regulation of petroleum facilities (“Safety Case Regime”) and wells (“Good Oilfield Practice”), multiple regulators, and regulatory disjuncture may continue to contribute to facility incidents. This Article concludes that the establishment of the National Offshore Petroleum Titles Authority, the retainment of the Joint Authority, and the enhancement of NOPSA’s functions to include environmental management have created a regulatory framework that is complex, increasingly convoluted, and has not addressed the root cause of facility incidents in Australia’s offshore petroleum jurisdictions

Offshore Petroleum Facility Incidents Post Varanus Island, Montara, and Macondo: Have We Really Addressed the Root Cause?

This Article analyzes the role of offshore petroleum legislation in contributing to offshore facility integrity incidents in Australia’s offshore petroleum jurisdiction. It examines the regulatory framework that existed at the time of the Varanus Island, Montara, and Macondo facility incidents, determining that the regulatory regime contributed to each of these incidents. Assessing the response of the Commonwealth government to the regulatory framework existing at the time of the events, particularly the integration of well regulation as part of the National Offshore Petroleum Safety Authority’s (“NOPSA”) functions and the establishment of a national offshore regulator, this Article determines that while the integration of well management into NOPSA’s functions has been a valuable and a significant improvement. There is still a likelihood that differing standards applied to the regulation of petroleum facilities (“Safety Case Regime”) and wells (“Good Oilfield Practice”), multiple regulators, and regulatory disjuncture may continue to contribute to facility incidents. This Article concludes that the establishment of the National Offshore Petroleum Titles Authority, the retainment of the Joint Authority, and the enhancement of NOPSA’s functions to include environmental management have created a regulatory framework that is complex, increasingly convoluted, and has not addressed the root cause of facility incidents in Australia’s offshore petroleum jurisdictions

Changing petroleum engineering education to meet industry demand

The Department of Petroleum Engineering at Curtin University had its inception in 1998. For the last 10 years,it lectured the Masters in petroleum engineering course to local Australian and international students, graduatingmore than 200 students. The rapid increase in the price of oil during 2006/7 saw a sudden and substantial growthin industry employment opportunities, which resulted in the department losing over half of its staff to industry. At the same time, the supply of local students reduced to less than 10% of those taking the course. This loss in both student numbers and staff at the same time threatened the department’s future, and resulted in the need for a new focus to return the department to stability.A number of new initiatives were introduced, which included: bringing industry into the decision-making processes; introducing a new two-year Masters program to assist high quality migrant students obtain Australian permanent residency; increasing the advertising of petroleum engineering as a career option to schools and industry; linking with UNSW, UWA and Adelaide universities to establish a joint Masters program; introducing a new Bachelor’s degree in petroleum engineering; changing the block form of teaching to a semester-based form; and having the Commonwealth recognise the new Masters program for Commonwealth funding of Australian students as a priority pathway to a career as a petroleum engineer while the Bachelors program gathered momentum. This paper maps the positive changes made during 2008/9, which led to a 100% increase in student numbers, a 50% increase in staff to stabilise teaching, a 400% increase in active PhD students, and industry projects to deliver an increasing stream of high quality, industry-ready, graduate petroleum engineers over the next 10–20 years into the current ageing population where the average age of a petroleum engineer is 51

Getting gas right: Australia’s energy challenge

The global gas revolution is poised to significantly raise bills for Australian households and some gas-using businesses, but government should resist calls to protect domestic households and businesses from high gas prices. Getting gas right: Australia’s energy challenge finds that development of Australia’s liquefied natural gas export industry, which could be the world’s largest by the end of the decade, could lead to price rises for households of up to $170 a year. For years local prices have been low by world standards, but when suppliers can get a higher price exporting than on the domestic market, the domestic price will rise to the export level. The change will not be popular, especially when electricity prices have also been rising, but it is a natural consequence of an evolving market. Calls for a moratorium on new LNG developments or the reservation of a proportion of gas for domestic consumption are pleas for protectionism. They will lead to distorted price signals, inefficient industries, lower investment and, ultimately, higher prices. The report examines the creation of an east coast gas export market – which will join with Western Australian exports to produce an estimated$50 billion-a-year industry by 2017 — and Australia’s role in a gas revolution created by surging demand in Asia and new discoveries of shale gas in the United States. The report also examines Australia’s possible shortage of supply, arguing that government must resolve the impasse over coal seam gas in New South Wales, while industry must ensure that enough infrastructure is built to ensure that gas flows. Governments should also move to create a more transparent and competitive market by accelerating the development of gas trading hubs, introducing a published price index, freeing up trading in pipeline capacity and more tightly constraining joint marketing arrangements by gas producers. For three decades, Australia has thrived from opening trade and removing protection. It should not turn the other way now