Are bonds the answer to managing environmental liabilities?
Scott Cawrse A B , Dominic Pepicelli A , Nick Panagopoulos A , Piotr Sapa A and Daniel Broadbridge AA Department for Energy and Mining, 11 Waymouth Street, Adelaide, SA 5000, Australia.
B Corresponding author. Email: scott.cawrse@sa.gov.au
The APPEA Journal 61(1) 1-11 https://doi.org/10.1071/AJ20135
Submitted: 22 December 2020 Accepted: 16 March 2021 Published: 2 July 2021
Abstract
Traditionally the requirement for meeting environmental liability obligations for regulated activities has focused on financial security. A single or blanket bond covering many licenses of an operator is often used to cover a state’s financial exposure to the environmental liabilities from disclaimed licenses in the event of operator insolvency. Less attention has been given to changes in regulated activities, operator risk and market changes, and management of wells over the life cycle. The Department for Energy and Mining (DEM) in South Australia has revised its policy for managing the environmental liabilities from petroleum and geothermal activities to be more holistic, risk and evidence based. Operators are now required to account for the status of all licensed activities in annual reporting, or for any change in ownership. Wells and infrastructure that have not been in production for over 24 months require an assessment based on prescribed future use criteria. If a future use can be demonstrated with sufficient evidence, the activity is categorised as ‘inactive’. Inactive wells are subject to an annual fee that finances the rehabilitation of legacy wells that may become orphan. If no future use is established, the activity is categorised as ‘expired’, and a rehabilitation plan of a minimum number of wells, or equivalent expenditure on infrastructure rehabilitation, is required. DEM also review the inventory of licensed activities and financial capacity of operators to meet environmental rehabilitation obligations to determine the amount of financial security required. This approach allows for risk-based financial security commensurate with regulated activities.
Keywords: environmental liability management, financial assurance, rehabilitation liability, decommissioning, well lifecycle, future use, orphan well, risk-based financial security, rehabilitation planning, petroleum.
Scott Cawrse is a results-oriented project manager and social development practitioner. He is employed as a senior policy adviser in the Department for Energy and Mining in South Australia. He brings diverse project experience from assignments on the PNG LNG and Abadi LNG projects, Simandou Iron Ore and Tampakan Copper-Gold projects. Scott provides practical expertise in policy development and implementation. His qualifications in education, business, and project management combined with his diverse experience provide tested leadership skills to deliver great outcomes. |
Nick Panagopoulos joined the Minerals and Energy Resources Group in the South Australian Department for Energy and Mining as Director Resource Royalties in April 2013, having previously undertaken a project while working for Deloitte to review and re-structure the royalties function and merge the previous minerals and petroleum teams. Nick was recently appointed the Deputy Executive Director of Energy Resources, supporting Barry Goldstein, and continuing to oversee the royalties’ side of the new Department, help support a broader whole of department commercial focus and the financial assurance changes being considered for rehabilitation liabilities. Before returning to Adelaide, Nick spent 13 years based in Sydney working in the property industry, where he was the Chief Risk Officer for the GPT Group, one of Australia’s largest diversified property groups, and as Asia Pacific Regional Risk Manager for Lend Lease. |
Dominic Pepicelli is employed as Principal Reservoir Engineer within the Energy Resources Division of the Department for Energy and Mining in South Australia where he has worked since 2010. His duties include the regulation of the upstream petroleum sector in South Australia and advice to the State regarding petroleum and carbon capture and storage reservoirs. Dominic has a Bachelor of Petroleum Engineering with First Class Honours from the University of Adelaide. He also contributes to technical committees through the Society of Petroleum Engineers (SPE), International Energy Agency (IEA), the American Association of Petroleum Geologists (AAPG) and International Organisation for Standardisation (ISO). |
Piotr Sapa joined the Department for Energy and Mining in 2012 as a Petroleum Engineer, and currently holds the position of Principal Engineer – Drilling and Well Operations. He graduated from the University of Adelaide with a Bachelor of Engineering (Petroleum) degree with Honours and undertook various assignments as a Project Engineer in the USA, Indonesia and Australia for a private services firm focusing on well technologies prior to joining the Department. His current duties involve regulation of the upstream petroleum and geothermal industries with a focus on well lifecycle regulation and works closely with co-regulators at both State and Federal levels. He participates in various technical committees including the Society of Petroleum Engineers (SPE) and the International Organisation for Standardisation (ISO) through Australia’s mirror committee. |
Daniel Broadbridge joined the Government of South Australia as a Graduate Officer at the Public Trustee in 2001 where he assisted in managing the financial affairs of people who were unable to do so on their own. He moved to the Energy Resources Group in the South Australian Department for Energy and Mining in 2008 as a Royalty & Finance Officer. In his current role as a Senior Royalties Investigator he plans, organises and undertakes complex audits of petroleum and mineral producers to verify their royalty payments. Daniel holds a Bachelor of Business (Administrative Management) degree and a Graduate Diploma in Professional Accounting both from the University of South Australia and is an Associate of the Institute of Internal Auditors – Australia. |
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