Freedom of Information (FOI) documents obtained by Broome conservation group Environs Kimberley reveal the McGowan Government slugged WA taxpayers with a multimillion dollar clean-up bill for a gaswell after the fracking company behind it went bust, and then gave incorrect information to parliament about the matter.

The FOI documents also show that the Mines Department actively lobbied against the full implementation of the state’s 2018 Fracking Inquiry Recommendations, pushing against recommendation 39 for the establishment of a pooled petroleum rehabilitation fund.

Media has reported this morning that the McGowan Government has backflipped on earlier plans to make companies contribute to such a fund that would protect taxpayers in the event a company behind a gasfield went bust and was unable to meet its rehabilitation requirements.

Key points:

• New Standard Energy Pty Ltd (NSE) was allowed to relinquish exploration permits (EPs), leaving taxpayers with a multi-million dollar liability; 
  
  
• The Mines, Industry Regulation, and Safety Department (DMIRS), WA’s frontline regulator of fracking, knew that allowing NSE to relinquish its EPs would expose taxpayers; 
  
  
• DMIRS pushed against Fracking Inquiry Recommendation 39 for the establishment of a pooled petroleum rehabilitation fund, in doing so exposing the public to future payouts; 
  
  
• Minister Bill Johnston was shown to have given misleading information in answers to questions in Parliament, claiming no cost estimate for NSE well clean-up existed. 

The FOI documents show the state’s Mines Department was effectively unable to force fracking company New Standard Energy (NSE) to pay for the clean-up and plugging of its Nicolay 1 well - estimated at more than $1.5M. As a result, taxpayers have been forced to pick up the bill.

That’s despite the department also demanding, via directions notices, that the company rehabilitate the Nicolay 1 site in 2018. These notices appear to have been completely ignored by the company.

The department then appears to have allowed NSE to relinquish its exploration permits despite knowing that in doing so the company would evade legal sanction under WA’s Petroleum Act, leaving the public with the multimillion dollar bill.

There are five additional NSE sites in the Kimberley that are yet to be rehabilitated, meaning the total cleanup bill for taxpayers is likely to be much greater than the $1.5M for Nicolay 1.

Strangely, responding to questions in March 2019 during Estimates, Mines and Petroleum Minister Bill Johnston said he was not aware of the cost of rehabilitation of Nicolay 1, despite having received a briefing from the department two months earlier suggesting it would be $1.5M.

Environs Kimberley Director Martin Pritchard said the documents proved that, contrary to McGowan Government claims, the government was incapable of regulating a large-scale fracking industry. 

“NSE has been allowed to walk away from its petroleum wells in the Kimberley/Canning basin region, leaving a $1.5 million clean-up bill for just one of the wells,” he said.

“These documents also reveal that DMIRS has enabled the company to relinquish its Exploration Permits without the required rehabilitation work in the full knowledge that in so doing there would be no legal recourse under the Petroleum and Geothermal Energy Resources Act 1967 to recover the millions of dollars in clean-up costs. 

“The FOIs and QoNs further reveal that DMIRS has campaigned against a key recommendation of the WA Fracking Inquiry – the establishment of a pooled petroleum rehabilitation fund to cover future liabilities across the fracking industry. 

“In response to DMIRS’ pro-industry lobbying, the McGowan Government has announced it is merely going to provide a wider range of ‘financial assurance’ options for companies, with no up-front cash contributions. 

“DMIRS has bizarrely argued to the McGowan Government that the industry is ‘too small’ and the risks ‘too low’ to justify such a pooled fund. As shown by NSE this is clearly not the case. 

“NSE was previously in partnership with petroleum and gas multinational behemoths, Conoco Philips and PetroChina. It wasn’t short of funds, and could easily have made an upfront insurance payment.

“This example of regulatory failure and failure of ministerial oversight reveals that the McGowan Government is incapable of regulating an industry with a cavalier corporate culture that is financially and environmentally high-risk. 

“DMIRS is clearly continuing to put fracking companies' interests ahead of the public interest.

“Ideally, fracking would not be permitted in an iconic and environmentally sensitive region like the Kimberley. Despite this the McGowan Government is forcing it through without implementing all of the Fracking Inquiry’s recommendations.

“Fracking companies must be forced to contribute to a cash fund to cover liabilities.

“If DMIRS and the Minister can’t manage half a dozen wells, the WA taxpayer faces a massive financial burden if the industry proliferates as it plans to the point of thousands of fracked wells pockmarking the landscape.”

Background:

Recommendation 39 of the Fracking Inquiry Recommendations states: The Government should require appropriate financial assurances or insurances to cover potential environmental liabilities, as well as contributions to a fund to cover liabilities defaulted by other unconventional oil and gas petroleum operations associated with hydraulic fracture stimulation in Western Australia. 

ENDS