Changes to the Water Act – Can you comply with your new obligations?

Jul 2016 |

A two part series: Make Good Agreements and new obligations under the Water Act

Within the next 6 months, both petroleum and mining tenure holders will be impacted by new obligations under the Water Act 2000 (Qld) (Water Act).

In this two part series, we will firstly examine the obligations on petroleum tenure holders to enter into make good agreements, which is particularly relevant with the draft Underground Water Impact Report (UWIR) being finalised shortly. In the second part of our Water Act series, we will focus on the changes to the Water Act and examine the new obligations on holder of mining tenure.

Part 1 – Make Good Agreements

Chapter 3 of the Water Act requires petroleum tenure holders to monitor and assess the impact of their activities on groundwater. Where there is an impact on groundwater (or where there may be in the future), petroleum tenure holders are required to enter into agreements with owners of affected water bores to ensure that the owner’s water supply is not affected. These agreements are known as ‘Make Good Agreements’ (MGAs), and the measures that the petroleum tenure holder will undertake to ensure water supply to the water bore owner are known as ‘make good measures’.

The Water Act sets out the circumstances where petroleum tenure holders must enter into MGAs with water bore owners. These circumstances include, where:

  • A cumulative management area is declared, and a petroleum tenure holder is nominated as the ‘responsible tenure holder’ for that particular bore;
  • The chief executive requires the petroleum tenure holder to undertake a bore assessment of a water bore;1 and
  • There is no cumulative management area, the petroleum tenure holder reasonably believes that the water bore may have impaired capacity.2

By December 2016, Chapter 3 of the Water Act will apply to all resource authority holders, so both petroleum and mining proponents will be subject to the requirements to monitor ground water impacts and enter into MGAs pursuant to the Water Act.

Bores within cumulative management areas

To ensure that the impacts from multiple projects in one area are understood and assessed, cumulative management areas can be established under Chapter 3 of the Water Act. Once a cumulative management area is established, the Office of Groundwater Impact Assessment (OGIA) must prepare an UWIR which assesses the impacts of the projects within the area, and develops an integrated management arrangement for that region. A UWIR must be revised every three years.

Due to the intensity of the CSG industry in the Bowen and Surat basins, the Surat Cumulative Management Area (Surat CMA) was established in 2011, and the first Surat UWIR was published in 2012. Among other things, the UWIR:

  • Determined which areas or bores within the Surat CMA were likely to experience water level impacts within three years (those bores within an ‘Immediately Affected Area’, known as an IAA Bores);3 and
  • Identified the individual petroleum tenure holder nominated as the ‘responsible tenure holder’ for each IAA Bore.

The party nominated in the UWIR as the ‘responsible tenure holder’ for each IAA Bore is required to make good any impact on that bore, caused by declining water levels. Make good measures can include:

  • Ongoing monitoring (where there is no actual immediate drop of water level or where supply is not affected);
  • Making alterations to the bore;
  • Establishing a replacement water source; or
  • Compensation.

The 2012 Surat UWIR listed 85 IAA Bores and the corresponding responsible petroleum tenure holder. The new Surat UWIR has been released in draft format, and includes an additional 64 IAA Bores.

Within 60 business days of the 2016 Surat UWIR taking effect, each responsible tenure holder must undertake a bore assessment of each IAA Bore not already the subject of a MGA.4

Direction to undertake a bore assessment

A petroleum tenure holder can be required to undertake a bore assessment on a bore if the chief executive reasonably believes that the water bore can no longer supply a reasonable quantity or quality of water for its authorised purpose.

The petroleum tenure holder can, within 20 business days, make submissions as to why it should not be required to undertake a bore assessment. Where no submission is made, the bore assessment must be undertaken within the time frame set out in the notice.

Bore assessments

To undertake a bore assessment, the petroleum tenure holder must first give the bore owner at least 10 business days notice that the assessment will take place and provide the details of who will undertake the assessment.5 The bore owner must comply with any reasonable request of the petroleum tenure holder regarding the subject bore, providing information regarding its location and any other information required in order to undertake the bore assessment.

The bore assessment must determine whether the bore has an impaired capacity, or whether the bore is likely have an impaired capacity in the future.

Once a bore assessment is completed in accordance with the Water Act,6 the petroleum tenure holder must provide a notice of the outcome of the bore assessment to the bore owner and OGIA within 30 business days of undertaking the assessment.7

What is impaired capacity?

An existing water bore has impaired capacity if:

  • There is a decline in the water level of the aquifer because of the taking of water by petroleum tenure holders in the area; and
  • Because of that decline, the bore can no longer be used for its authorised purpose.

If a bore assessment concludes that the relevant bore has impaired capacity, ‘make good measures’ are required to be undertaken by the relevant petroleum tenure holder to ‘make good’ the bore owner’s access to water.

What are make good measures?

Make good measures can include:

  • Bore enhancement, such as deepening the bore;
  • Constructing a new bore;
  • Providing an alternate water supply;
  • Undertake monitoring; and
  • Monetary or non-monetary compensation.8

These make good measures are only examples, and the commercial agreement reached between the petroleum tenure holder and the bore owner is at the discretion of the parties.

Negotiations with the bore owner

Where a bore assessment has been undertaken (regardless of whether the assessment determined that the relevant bore had impaired capacity or not) the petroleum tenure holder must use its best endeavours to enter into a MGA within 40 business days of the bore assessment being undertaken9 (which is 10 business days after the results of the assessment are provided to the bore owner and OGIA).

The responsible petroleum tenure holder is obligated to reimburse the bore owner for any accounting, legal or valuation costs the bore owner necessarily and reasonably incurs in negotiation or preparing a MGA.10

If the bore owner and the petroleum tenure holder cannot reach agreement on the terms of the MGA, including whether or not the bore has impaired capacity, either party can ask the chief executive to call a conference between the parties to facilitate a resolution (conference), or call the other party to agree to enter into an alternative dispute resolution (ADR) process.

If the ADR process or conference is called, then the parties must take all reasonable steps to conclude the process within 30 business days. This time frame can be extended by agreement.

If the parties fail to reach agreement within 30 business days (or an agreed extended period) either party may apply to the Land Court to decide the terms of the MGA. If the Land Court includes a provision for compensation to the bore owner, the compensation can only be for the diminution of any value of the land on which the bore is located, or the authorised use of the water from the bore, and any cost suffered by the bore owner if the bore has impaired capacity.

What is next?

For petroleum tenure holders operating within the Surat cumulative management area, the UWIR is expected to be released within the coming months. Accordingly, within a very short timeframe, the petroleum tenure holders must undertake bore assessments, determine whether capacity is impaired and then enter into MGAs with each owner of an IAA Bore.

For holders of mining and mineral tenure, these obligations will apply to your operations by the end of the year.

In particular, petroleum and mining companies should closely consider any direction to undertake a bore assessment and a desk top study of the proposed bore as soon as possible to determine whether the water bore is one that Chapter 3 applies to.

How can we help?

Carter Newell can provide cost effective support to resources companies to comply with your Water Act obligations, including preparing submissions, preparing and negotiating MGAs, including representation in an ADR process, conference or Land Court proceedings. Please contact us for more information.

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1 Section 418.
2 Section 406.
3 The trigger thresholds are five metres for consolidated aquifers and two metres for unconsolidated aquifers.
4 Section 417, and unless the chief executive agrees to a later date.
5 Section 415.
6 These requirements have changed since the 2012 UWIR.
7 Section 419.
8 Section 421.
9 Section 423.
10 Section 423(3).

This article may provide CPD/CLE/CIP points through your relevant industry organisation.