'Underground water rights and make good agreements'

Tuesday October 7, 2014

The below article is by Laura Hogarth, Lawyer, Creevey Russell Lawyers.

When negotiating a conduct and compensation agreement (CCA) with a mining or petroleum company, many landholders are concerned about the impact on underground (artesian) water and bores.

Coal seam gas (CSG) production and other unconventional gas production methods generally have the highest impacts on underground water. Industry practice in Australia is generally not to reinject the ‘produced water’ after the gas has been extracted, but to remove it from the land for treatment. The ‘produced water’ is typically contaminated and is only permitted to be released onto the land (eg. for dust suppression on roads or use in construction) if it does not exceed the contaminant limits under the relevant Environmental Authority.

Some environmental advocates have expressed concern that drilling through multiple aquifers, may result in the depletion or contamination of aquifers used by landholders for agricultural purposes. Hydraullic fracture stimulation (fraccing) of tight gas wells has been identified as a particular risk for migration of brine and methane to contaminate aquifers.

So, what rights do tenement holders have to take underground water and what rights do you have to compensation if your water bore is affected?

Authority for taking water

Your right to take underground water from your bore is granted via a water licence, but petroleum tenement holders don’t need a water licence to take underground water as part of their drilling activities (produced water), because it is already authorised under the Petroleum and Gas (Production and Safety) Act 2004 and the relevant petroleum tenement.

The current mining legislation (Mineral Resources Act 1989) has different provisions to the petroleum legislation in relation to taking water. Some mines, but not all, are required to have a water licence in order to remove ‘associated water’, depending on whether or not the mine is in a groundwater regulated area. This inconsistency is currently under review by the Department of Natural Resources and Mines.

Will I be compensated for impacts on my water bore?

Most impacts of mining or petroleum activities on private land are regulated under the Mineral Resources Act 1989 or the Petroleum and Gas (Production and Safety) Act 2004 and compensated for under a Conduct and Compensation Agreement (CCA). However, impacts on underground water due to petroleum activities are regulated under Chapter 3 of the Water Act 2000 and are compensated for under a Make Good Agreement (MGA).

The Water Act 2000 does not currently apply to impacts on underground water due to mining activities. However, sometimes a water licence for a mine may require the company to enter into an MGA with the landholder in certain circumstances. As above, this position is currently under review, with new legislation expected to be tabled in Parliament in late 2014.

A petroleum company is only required to enter into a MGA with you if they identify that your bore has an ‘impaired capacity’ due to their activities. A bore with an ‘impaired capacity’ is a bore where, as a result of the decline in the water level of the aquifer (ie: quantity of water in the aquifer), the bore can no longer supply the quantity and quality of water it has done in the past for its authorised purpose or use.

However, the company goes through a number of steps before determining whether your bore has an impaired capacity. Companies are required to measure the impact on the underground water caused by their activities as follows:
1.Companies must undertake a baseline assessment of each water bore in their tenement (usually before commencing petroleum production or testing);
2.Companies must assemble the data in an Underground Water Impact Report, which is submitted for government review;
3.The Underground Water Impact Report must identify ‘immediately affected areas’ (ie: decline by more than 5m within the next three years) and ‘long term affected areas’ (ie: decline by more than 5m at any time).
4.Companies must conduct bore assessments for bores in immediately affected areas, to establish whether each bore has or is likely to have an impaired capacity.

Is my bore affected?

In the Surat and southern Bowen Basin multiple gas companies are operating so closely together that a single report, the Surat Underground Water Impact Report has been prepared providing a cumulative assessment of the impacts on the underground water.

The SUWIR has identified bores throughout the Surat and southern Bowen Basin that are or are likely to be affected. A copy of this report and other information is available here.

Negotiating a Make Good Agreement for water

The Water Act 2000 requires companies to ‘make good’ any impairment of a private bore water supply as a result of their activities. This may be through monetary compensation or non-monetary compensation, such as drilling a new bore to a different aquifer.

If the company agrees that your bore will have an impaired capacity, they must use best endeavours to negotiate and enter into an agreement with you about:
a.the reasons for the bore’s impaired capacity;
b.the measures they will take to ensure the bore owner has access to a reasonable quantity and quality of water for the authorised use and purpose of the bore;
c.any monetary or non-monetary compensation payable to the bore owner for impacts on the bore.

If the company does not agree that your bore has an impaired capacity (including if the company refuses to conduct a bore assessment because the bore is not in an immediately affected area), you may engage your own hydrogeologist to conduct an independent assessment (at your own cost).

Make good provisions may also be negotiated as part of a Conduct and Compensation Agreement (CCA) relating to resource activities on your land, if the company agrees. See our article on CSG CCAs here.

Click here for more information.


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