You may have read about the Queensland Government's release of its “Blueprint for Queensland's LNG Industry” on 17 September 2009. A copy of the Blueprint can be downloaded here.

LNG Industry Unit

The Blueprint provides for the establishment of the Government's LNG Industry Unit within the Department of Employment, Economic Development and Innovation, outlined on page 2 of the Blueprint. One of the LNG Industry Unit’s roles is to be to "[assist] individual LNG projects with approvals, land tenure and infrastructure negotiations”.

The LNG Industry Unit can be contacted at:

LNG Industry Unit
Department of Infrastructure and Planning
PO Box 15009
Brisbane City East  QLD  4002

T  +61 7 3404 8206
E  lng.team@dip.qld.gov.au

Produced water

The Blueprint essentially replicates the Queensland Government's October 2008 policy on the treatment and disposal of CSG water. It remains unclear how this will be implemented in law, although there are two significant indications:

1. CSG producers will be required to prepare CSG water management plans; and
2. the proposed EPP (water) provisions will be supported by guidelines for environmental management plans and performance standards for beneficial uses of produced water.

This suggests that the policy will be given effect through amendments to the Environmental Protection Act and regulation. Consequential amendments to the Water Act and petroleum laws may also be required.

Groundwater monitoring, assessment and reporting

Requirements for groundwater monitoring, assessment and reporting have been included in the Petroleum and Gas (Production and Safety) Act since 2004. Although their implementation has not been pursued vigorously by the Government to date, this is set to change.

In addition, the Government will impose a new industry levy on CSG producers to fund a regional groundwater monitoring regime and an independent water monitoring body. The amount of that levy has not been announced. The Blueprint does not make it clear whether explorers will be exempt.

Gas reservation

Pages 5 and 6 of the Blueprint, under the heading “Maintaining Queensland's Domestic Gas Supply”, suggest that the Government is likely to adopt one of the two options set out in the Blueprint for domestic gas reservation. The basic options under consideration are:

1. a Gas Reservation Policy, whereby gas producers will be required to sell or make available to the domestic market the equivalent of between 10% and 20% of gas production; or
2. a Prospective Gas Production Land Reserve, which significantly includes a requirement for holding back from the market certain prospective gas production areas in order to amalgamate/secure areas for “orderly future use” (an undefined and highly malleable term).

No further details of these options are provided at this stage.

Royalties

The Government has decided to retain the current royalty rate of 10% of wellhead value. Although this is helpful, there are two significant qualifications.

One qualification is that the policy does not confirm whether the existing basis upon which wellhead value is determined will be retained (leaving aside the additional power that is given to the Minister described above). One suspects that the impact of potential changes to Queensland's CSG royalty regime on producers is by no means settled.

Another qualification is that the Government has announced that it will amend the Petroleum and Gas (Production and Safety) Regulations 2004 to allow the Minister to determine the components of wellhead valuation of petroleum commodities for royalty purposes - in essence, the Minister determines the wellhead value, not necessarily with a link to market pricing.

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