In an interesting test for Australia’s regulation of the oil industry, a company has today announced that it wants to walk away from its contractual obligation to drill an oil well off Perth’s beaches, siting environmental concerns and changing public opinion.
Five years ago Nexus Oil bid for the lease that sits offshore from Perth, stretching from holiday destination Rottnest Island along Perth’s long white beaches to the northern suburbs. To win the lease they had to outbid other companies in the amount they were willing to spend on drilling.
Since then a lot has changed. There have been major oil spills in Australia off the Kimberley Coast and then the devastating Gulf of Mexico oil spill. They surely would have witnessed the outrage after the recent release of a new oil lease offshore from Margaret River earlier this year.
More on this story via the Australian Financial Review:
It’s an interesting situation for the Government – will they try to force a company seeking to be environmentally responsible to ignore their concerns? Would doing so set a precedent where other companies can cite environmental concerns to avoid lease obligations? What if they push the company to drill and a spill occurs devastating Perth’s marine life, beaches, tourism, diving and fishing?
Then, if they allow the company out of their lease arrangement, will they allow another company with lower standards to pick up the lease and undertake that high risk drilling project?
Clearly if the company is concerned, the risk is much higher than the potential reward. A decision to drill wouldn’t find much support in Perth.
The best outcome would be to graciously accept the withdrawal and quietly close this very marginal lease. It’s unlikely anyone would complain. Still, pro-development Resources Minister Martin Ferguson will also have an eye to the impact on the bidding process for oil leases in Australia and it has put him in a difficult position.
Watch this space… Whatever the outcome, it should at least make them think twice about future oil leases in environmentally sensitive areas, such as offshore from Margaret River in an area being considered for new marine sanctuaries.