PEP 11 - New South Wales Legislation

Source: 2/14/2024, Location: Not categorized

Bounty Oil & Gas NL (“Bounty”) refers to the media release “NSW introduces legislation to protect coastal waters from offshore drilling and mining” issued by several New South Wales (NSW) State Government Ministers on 6 February 2024 (the media release). A copy of the media release is attached. Until the proposed Legislation actually becomes NSW law and has been reviewed by our legal advisers Bounty is unable to provide any detailed comment except to say:-

PEP 11 – NSW Jurisdiction
1. The State of NSW and the NSW Government only have jurisdiction and the power to control exploration and extraction in coastal waters up to 3 nautical miles (4.83 km) offshore from the NSW coast. PEP 11 is beyond that 3 nautical mile limit and all such matters touching PEP 11 are under the jurisdiction of the Commonwealth of Australia (ie the Australian Government). Gas exploration operations including safety and environment are controlled by NOPSEMA (1) a Commonwealth of Australia authority.
2. The holders of PEP 11 intend to pursue gas exploration (by drilling around 26 km offshore) well beyond the limit of NSW coastal waters. No “mining” is proposed (see Media Release).
3. Bounty and BPH fully support protecting the coastal and offshore marine environment and note that in respect of PEP 11 any activity undertaken in the permit area would require specific approval of the independent regulator NOPSEMA. Extension and Variation Applications for PEP 11 Permit to Enable Drilling of Seablue 1 Gas Well at Baleen
4. In Asset Energy -v- Commonwealth Minister for Resources (Federal Court of Australia) 14 February 2023 the NSW State Government (as a member of the Joint Authority) was a Defendant and agreed to Orders directing them and the Commonwealth Minister to determine the PEP 11 extension et al applications according to law While the applications for the variation and suspension of work program conditions and related extension of PEP-11 are being considered, Asset is continuing to investigate the availability of a mobile offshore drilling unit to drill the proposed Seablue-1 well on the Baleen prospect and is in communication with drilling contractors and other operators who have recently contracted rigs for work in the Australian offshore beginning in the first half of 2024. Further updates will be provided to ASX.

PEP 11 continues in force under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (the Act) (Cth) and the Joint Venture is in compliance with the contractual terms of PEP 11 with respect to such matters as reporting, payment of rents and the various provisions of the Act.

The Importance of New Gas Projects and Gas Supply

Future Gas Strategy submissions (DISR)
The Australian Government’s Future Gas Strategy consultation closed on 27 November 2023, with submissions now available on the Department of Industry, Science and Resources (DISR) website. As outlined by DISR(2), the Future Gas Strategy aims to “provide a medium (to 2035) and long-term (to 2050) plan for gas production and consumption in Australia”.

Almost 300 submissions were made from a range of stakeholders, including industry, peak bodies, civil society, individuals and government. Submissions were provided by key gas and energy producers as well as a range of energy-intensive industries that rely on gas, including cement, aluminium and steel.

Across the submissions, there appears to be a trend that respondents– either producers or users of energy and gas – recognised the ongoing important role gas will play in providing secure, affordable energy on the road to net zero, including as a complement to renewable energy deployment.

Gas user submissions

Notable submissions from Australian gas users included:
Australian Chamber of Commerce and Industry | “Gas will continue to be required to support the electricity network and commercial and industrial gas-reliant businesses over the next thirty years and beyond.”

Australian Aluminium Council “The Australian domestic gas market needs additional diversity of supply to meet current and future needs until at least 2050.”

Cement Industry Federation | “Natural gas is a critical fuel source for domestic cement manufacturing.”

BlueScope Steel | “BlueScope requires 24/7 power supply and gas firming will feature in its energy mix going forward.”

Australian Energy Council “The East Coast Gas Market (ECGM) needs continuing development of new sources of gas supply.”

Australian Steel Institute “Government policy needs to act to ensure there is sufficient availability of natural gas such that there is a competitive market and commensurately affordable pricing that doesn’t disadvantage local competitors relative to international competition. The feedback from ASI members is that there is insufficient competition amongst suppliers to the domestic market, due to lack of volume available for domestic consumption.”

Energy Australia
“Without significant investment in new supply, we also face the risk of gas shortfalls on the east coast within a few years. Growing supply scarcity will put upward pressure on gas prices well before customers experience actual shortfalls.”

Energy Users’ Association of Australia
“Government needs to increase gas supply, through expanded and new supply.”

Business NSW
“Business NSW has long been concerned that decisions about gas supply, particularly in NSW and Victoria, have become detached from understanding of gas demand, leaving the potential for shor?alls and price rises from the middle of this decade.

For businesses for whom gas is a major input factor, there are significant risks of both physical supply interruptions (in the worst-case scenarios), and of gas becoming prohibited expensive for gas intensive businesses to be able to maintain operations in NSW.”

Abbreviations / References:
1. NOPSEMA: National Offshore Petroleum and Safety Authority
2. Future Gas Strategy: consultation paper - Consult hub (
DISR: Department of Science Industry and Resources (Cth)

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