Victoria unprepared for unconventionals: AGO

THE entry of Victoria’s Auditor-General’s Office intervention the state’s ongoing unconventional gas debate was unconventional itself, with Auditor-General John Doyle saying that the state is unprepared to deal with any risks or negative impacts of the industry if the three-year-old moratorium is lifted.

Haydn Black

The AGO is usually reassuring taxpayers their money is being spent efficiently and effectively by the government, but last week it prepared a report concluding that the risks connected with unconventional gas activities had "not been comprehensively identified, prioritised or assessed", that there is too little information about the potential resources that might be developed, and that there is imbalance between the bargaining positions of landowners and the oil and gas industry.

He found that the Department of Economic Development, Jobs, Transport & Resources did not sufficiently assess the risks or regulation of these activities prior to 2012, but had improved since then, and as the industry us at an immature stage, so it was the perfect time to establish a robust regulatory framework

The report identified weaknesses in DEDJTR’s approach to administering the system, particularly with its work plan approval and compliance activities.

Its licences and work plan approvals did not sufficiently address risks or monitoring requirements.

Its compliance activities were poorly informed and planned, and not always executed effectively. There were examples where—despite identifying poor licensee practices—action was not taken to review or change its approach, or to reconsider whether existing controls were adequate.

The report found there are risks to the landscape, land use, air quality and human health associated with unconventional gas that need to be studied.

The Victorian government put place a ban on CSG exploration in 2012, which has since spread to shale gas and tight gas, and now covers all onshore drilling operations.

A report designed to mark a way forward is expected to be delivered next year.

Between 2000 and 2012 some 100 licences allowed some degree of unconventional gas exploration or production, including 60 CSG licences and the 40 licences that allowed tight and shale gas exploration were granted between 1999 and 2013.

There are now less than 20 valid petroleum licences and application areas recognised across Victoria, confined to the Gippsland and Otway basins.

At least 73 wells were drilled on around 26 licences, although some of these targeted conventional gas, with fracking approved between 2001 and 2009 for what was unsuccessful CSG exploration, and Lakes Oil’s promising Wombat tight gas and gas discovery.

The report found that 23 fraccing operations have taken place at depths between 600m and 3600m, with the CSG zones sitting in the main aquifer, however tight and shale gas bearing rocks are below the water table.

Doyle said the commercial feasibility of the state's unconventional gas resources was not known and the energy supply and economic reasons for developing the industry were not clear.

He also warned there would be "major problems with applying the current regime for regulating earth resources to unconventional gas activities" in Victoria because there were weak environmental controls, little consideration of the competing interests for land use, and apparently a lack of early community engagement.

If the industry goes ahead he wants ministerial discretion scaled back and greater transparency around the decisions.

He called for the identification of regions that can support the unconventional oil and gas industry, mandatory risk-based impact assessment and approval processes, including an assessment of the cumulative impacts of projects, proactive information disclosure and improved and earlier community engagement

But the report also found that scientific reviews had concluded the risks could be managed by improved regulation.

Australian Petroleum Production & Exploration Association spokesperson Paul Fennelly welcomed the report but said that Victoria, a state with 1.8 million gas users, will never know how much gas is available unless it allows exploration.

“We need to get serious about determining the size of gas resources and plan accordingly," he said.

Two months ago the Victorian Farmers Federation called for a five-year moratorium on onshore gas activities, while the Greens Part wants a permanent ban.

Companies such as Lakes, Beach Energy and Armour Energy just want to drill wells, even conventional wells.

The state parliamentary committee examining the unconventional gas industry has been asked to present a final report by December 1.