Characterisation of prospecting activities in NSW

WHO SHOULD READ THIS

• Resources companies operating in NSW, particularly those in the petroleum exploration sector.

THINGS YOU NEED TO KNOW

• Prospecting authorised by an exploration licence or assessment lease is capable of being extended to a different petroleum title.

WHAT YOU NEED TO DO

• Consider whether activities carried out pursuant to an exploration licence or assessment lease can be properly characterised as ‘prospecting’.

The Land and Environment Court’s recent decision in the case of People for the Plains Incorporated v Santos NSW (Eastern) Pty Limited and Ors [2016] NSWLEC 93 clarifies the scope of activities that can be characterised as ‘prospecting’ and carried out under a petroleum exploration licence or assessment lease, and without development consent.

In this case Justice Moore upheld the approval of the Leewood coal seam gas (CSG) wastewater treatment facility (Leewood Facility) near Narrabri and Pilliga State Forest granted by the NSW Department of Industry (Department) under the Petroleum (Onshore) Act 1991 (NSW) (PO Act).

Background

Santos submitted a Review of Environmental Factors to the Department in July 2015 seeking approval for a purpose built, centralised Leewood Facility which was to be constructed to treat, manage and beneficially reuse produced water and brine from CSG exploration and appraisal activities. Water to be produced at the Leewood Facility would undergo processes to separate the produced water into brine and “near-drinking-water-quality water”. The near-drinking-water-quality water was then to be pumped to nearby Santos land where it was to be used for irrigation of Lucerne crops.

The Leewood Facility was approved by the Department in August 2015 through an amendment to the existing operational plan.

People for the Plains Incorporated (Applicant) commenced the following proceedings challenging the Leewood Facility that was being constructed by Santos:

• judicial review proceedings challenging the validity of the Leewood Facility on the basis that the relevant approvals given under the PO Act were void and of no effect, and
• civil enforcement proceedings brought pursuant to section 123 of the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act) requiring consideration of how the production water project should be characterised for the purposes of determining the appropriate approval pathway.

Were all of the proposed activities “prospecting” within the meaning of the PO Act?

If the operations associated with the Leewood Facility (on both input and output sides) could be characterised as ‘prospecting’ and ‘petroleum exploration’, it would be permissible without development consent under clause 6 of the State Environmental Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (SEPP).

In deciding whether the activities on PEL 238 and PAL 2 were ‘prospecting’, His Honour applied the well known planning principles from Chamwell Pty Ltd v Strathfield Council [2007] NSWLEC 114 (Chamwell) that ‘a use must be for a purpose’ and ‘the characterisation of the purpose of development must also be done in a common sense and practical way’. On this basis, His Honour concluded that that the Leedwood Facility could be characterised as ‘prospecting’ on the following basis:

“It is clear… that the water that is to be transported to and dealt with at the Leewood Facility (at the least) is water that physically results from the activity of prospecting for petroleum or by the drilling and operation of pilot wells or assessment of what comes from them… The water rises to the surface as a necessary physical element of the prospecting process.”

However, His Honour decided that proposed commercial Lucerne cropping activities (which involved utilising water from PAL 2) were not activities for the purposes of ‘prospecting’ and therefore required separate planning consideration.

The validity of the approvals granted under the PO Act

After determining what activities were ‘prospecting’ within the meaning of the PO Act, His Honour then considered whether prospecting authorised by an exploration licence or assessment lease is capable of being extended to a different petroleum title.

His Honour adopted a purposive approach in interpreting the sections of the PO Act and in doing so read section 33 of the Act as follows:

“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 licence from which the lease has been excised and to assess any petroleum deposit on the land comprised in the lease.”

As such, His Honour concluded that the prospecting authorised by an exploration licence is capable of being extended to a different petroleum title. Therefore the water generated from boreholes on PEL 238 and transferred to PAL 2 was permissible without consent under clause 6(c) of the SEPP.

Associated Lucerne cropping activities

The only question left for his Honour was whether the Lucerne cropping activities could be regarded as development permissible without consent.

The proposed Lucerne cropping activities were proposed to occur on land zoned ‘RU1 Primary Production Zone’ under the Narrabri Local Environment Plan 2012 (Narrabri LEP). Under the RU1 Primary Production Zone, “extensive agriculture” was permissible without consent. The Court held that the Lucerne cropping fell under the definition of “extensive agriculture” in the Narrabri LEP and therefore was permissible without consent.

Key Lessons

• if an activity can be characterised as prospecting pursuant to an exploration licence, assessment lease or production lease under the PO Act, it will fall under the definition of “petroleum exploration” in clause 3(2) of the SEPP which is permissible without consent in accordance with clause 6(c) of the SEPP
• prospecting authorised by an exploration licence or assessment lease is capable of being extended to a different petroleum title, and
• cropping activities which do not fall under the definition of prospecting in the SEPP may, in certain circumstances, be permissible without consent under the relevant Local Environmental Plan which applies to the land within which those cropping activities are being carried out.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.