By Emma Young
Australian taxpayers will have to fork out more than $500 million towards cleaning up a Chevron oil field off the WA coast.
In May, Chevron ended around 60 years of oil production on the operation that has run alongside its Gorgon gas project on Barrow Island off the Pilbara coast. It has begun dismantling the 800-plus wells and connecting pipelines spread over the Class A nature reserve.
As well as an ageing oil operation, Barrow Island is home to Chevron’s massive Gorgon liquefied natural gas plant fed by offshore fields.Credit: Bloomberg
Chevron and partners ExxonMobil and Santos have shipped 335 million barrels of oil and paid about $1 billion in royalties to the federal and WA governments.
But the royalty agreement requires governments to refund royalties equal to 40 per cent of clean-up costs in the four years after production ends. That means the higher the clean-up cost is, the more the governments must pay back.
In 2022, this masthead obtained a Chevron document estimating the clean-up bill at $2.3 billion, with $1.3 billion of that to be spent in the first four years, putting the state and federal governments on the hook for more than $500 million.
The split is 75 per cent federal and 25 per cent WA – as per the royalty income split – with WA to pay $125 million.
At the time of the first report, the magnitude of the bill was news to what was then known as the WA Department of Mines, Industry Regulation and Safety, which administers the royalty agreement and said it was “carrying out preliminary calculations”.
Now, with decommissioning having begun and the refund imminent, documents obtained by energy news publication Boiling Cold under freedom of information laws, and seen by this masthead, indicated Chevron has told the government the clean-up cost would be even higher than the $2.3 billion reported in 2022.
A spokesperson for the department – now the Department of Mines, Petroleum and Exploration – said the official total would not be known until the final royalty returns were submitted, and Chevron’s rehabilitation and decommissioning costs were reviewed and audited.
The Centre of Decommissioning Australia has previously estimated the total cost to clean up Australian waters from all offshore oil and gas projects at the end of life could total up to $US40.5 billion ($58 billion) to 2050.
“It is scandalous that Australian taxpayers are paying the clean-up costs for the enormous environmental damage caused by foreign-owned oil and gas corporations who get most of the gas they export for free and frequently pay little if any tax,” said Mark Ogge, principal advisor at The Australia Institute.
“Not only are our governments giving them our resources for free and allowing them to avoid paying taxes in Australia, now we find out if they do pay any royalties or resource rent tax, taxpayers will be required to return much of it to pay for their immense decommissioning costs.
“Our governments have let these companies trash Australia with virtually no consequences.”
A Chevron Australia spokesperson said while the company’s costs may be partially refunded, Chevron and its joint venture partners would continue to pay the vast majority of the decommissioning costs, according to the agreement.
They would continue to engage with state and federal governments in relation to the clean-up and administration of the royalty regime.
Chevron Australia was also a significant contributor to the country’s economy, the spokesperson said. As the country’s fourth-largest company taxpayer, it has paid more than $15 billion in company taxes over the past 15 years
Projects end, but gas continues to ‘migrate’
The news follows recent revelations that Chevron and neighbouring oil and gas producer Santos, as they each decommission infrastructure in WA waters, are finding and reporting new instances of environmental pollution whose impacts and implications are as yet unknown.
Chevron earlier this month confirmed to Boiling Cold that unknown amounts of hydrocarbons, primarily gas, were seeping to the surface and waters of Barrow Island from the wells.
Hydrocarbons include the highly polluting methane.
The Chevron spokesperson said the company took its stewardship of Barrow Island seriously and was committed to responsible environmental management.
They said as part of detailed planning for decommissioning, analysis had indicated an environmental risk from the hydrocarbons’ “migration”.
The company had informed regulators and would continue to work with them to investigate.
“We recognise the importance of the timely decommissioning … and continue to progress the responsible plugging and abandonment,” the spokesperson said.
The WA regulator said the full extent of the gas migration had not yet been determined, and DMPE was investigating.
As an initial step towards possible compliance action, DMPE had issued Chevron with an Environment Regulation 19 notice, which gave the minister power to require a revised environment plan.
This week, Santos also confirmed to The Wilderness Society that gas was seeping into the ocean from 13 sites where decommissioning is being progressed at its Varanus Island operations off the Pilbara coast, from around wellheads, conductors, platform legs or the adjacent seabed.
It confirmed an unknown number of leaks from this operation in 2023.
Wilderness Society campaigner Fern Cadman said the instances region pointed to systemic regulatory failure and called for a widespread investigation.
She said on May 8, in the same region, Australian offshore regulator NOPSEMA approved Santos to delay decommissioning of its Reindeer facilities while the company developed a proposal to sequester carbon by pumping it beneath the sea floor.
“The Wilderness Society believes carbon pollution dumping should be off the table in a region plagued by leaking wells,” Cadman said.
On the Reindeer decommissioning, the NOPSEMA spokesperson said the timeframe to submit further plans was considered reasonable, and pointed to a statement of reasons on its website.
A Department of Mines, Petroleum and Exploration spokesperson said the department was aware of the seepage and Santos had developed a gas monitoring program, which would include studies of seepage rates, well integrity assessments and management measures. Santos had not yet submitted the results of the monitoring program to the department.
Samantha McCulloch, chief executive of industry body the Australian Energy Producers, said the oil and gas industry was committed to safe and efficient decommissioning, with decades of expertise and a highly skilled workforce.
She said this was one of Australia’s most productive sectors and contributed $105 billion annually to the economy while supporting 215,000 jobs.
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