A petroleum company’s attempts to offload stricken oil and gas infrastructure on an environmentally sensitive peninsula within the National Heritage-listed King Sound for a fraction of the value it was estimated to be worth should ring alarm bells for the WA Cook Government.

Environs Kimberley and Lock the Gate Alliance say the situation highlights the risks the fracking industry poses to the unique Kimberley region.

Deteriorated and inaccessible by vehicle: the causeway to the Point Torment well site. Photo: supplied.

Rey Resources is attempting to offload its Kimberley-based assets and 100%-owned subsidiary Gulliver Productions to an overseas company called China Guoxin Investment Holdings, after writing down the value of its assets from nearly $5 million to about $400,000. In response to this announcement, the ASX sent a series of questions to Rey probing the company's financial situation was sufficient to warrant its continued listing and expressing uncertainty over “the group’s ability to continue as a going concern.”

Documents obtained by Environs Kimberley under Freedom of Information reveal that in 2021, the three King Sound gas wells were a mess, with oil staining on the ground and wellhead corrosion, among 44 possible breaches departmental officials identified. It is unclear what, if any, remediation work Rey has undertaken since inspection. 

Environs Kimberley and Lock the Gate Alliance fears there is a significant risk that if Rey Resources successfully offloads its assets, they will be abandoned and the hefty rehabilitation bill will fall to the WA taxpayer, as has recently occurred with New Standard Energy and Advent Energy projects in the Kimberley. The stranding of these wells resulted in multi-million cleanup bills and potentially “profound” ecological damage.

Rey Resources' cleared drill pad at Point Torment. Photo: supplied.

Shortly before announcing this planned “disposal” deal to the ASX, Rey Resources also lodged a state petroleum exploration application to clear grid lines more than 3000 km long for seismic testing across a 5058 km2 tenement near Derby and south east of its existing wells in the Kimberley. Under current WA rules, these tenements are able to be fracked, should Rey apply to do so. This tenement is included in the proposed offload deal. 

Environs Kimberley recently wrote to the Foreign Investment Review Board, urging it to reject Rey’s attempts to offload its subsidiary and Kimberley assets. This followed letters to WA Mines and Petroleum Minister David Michael expressing concerns over the company's plans. 

Environs Kimberley Executive Director Martin Pritchard said, “It was a reckless decision to allow drilling for oil and gas in the mangrove lined flats of King Sound in the first place. The cost of cleaning up the mess left behind in this remote and sensitive location will run to millions of dollars.

“The Department of Mines and Petroleum has let the drill sites deteriorate to the point where one of them is now inaccessible by vehicle and they’ve had to chopper in staff to investigate. 

“The department seems to let these oil and gas companies get away with poor management without consequences. The Petroleum Minister David Michael needs to take charge of the situation to make sure taxpayers aren't footing the clean-up bill for another oil and gas company. 

“It’s really clear that fracking in these areas would be an absolute disaster when the government departments can’t manage three wells and make companies accountable for poor practices.”  

The Stokes Bay well site. Photo: supplied.

Lock the Gate WA Coordinator Claire McKinnon said, “No oil and gas company should ever have been given permission to drill in an area as environmentally significant as the National Heritage listed King Sound.

“Rey must be forced to fund the decommissioning and closure of all the wells on its tenements. The WA taxpayer must not be left to once again pick up the clean up bill for an oil and gas company.

“This concerning situation shows why it’s so important that the Cook Government ban fracking in the Kimberley. 

“The high cost of unconventional gas extraction means it’s likely that if a fracking company was able to get a project going in the Kimberley, it would result in the drilling of many hundreds if not thousands of wells. 

“This sorry situation shows the Cook Government is not up to the task of adequately regulating a mere three conventional wells, let alone thousands of frack wells”.

The WA Government has quietly approved a groundwater extraction licence that would allow an overseas-based fracking company to take 100 million litres of groundwater each year.

While the state’s water department (DWER) approved Black Mountain Energy’s water licence on May 2, no public statement was issued, and the only way to find evidence of the licence’s approval is by searching the company’s Australian subsidiary, Bennett Resources, on the WA Government’s Water Register website.

The licence gives Black Mountain permission to access the groundwater for “the maintenance of unconventional gas wells, dust suppression, mining camp purposes, stock watering and rehabilitation purposes”.

However, the company’s “Valhalla” exploratory gas fracking project is still undergoing environmental assessment, and a public consultation process still needs to be conducted.

Dead duck in Buru Energy wastewater pond

If Valhalla is approved, Black Mountain would drill 20 exploration wells between 2 km and 4 km deep and hydraulically fracture them in up to 70 stages each. It would also require an additional two billion litres of groundwater.

Valhalla is also only an exploration project. Black Mountain’s website makes it clear the company wishes to expand to full scale production. If this occurs, it would require the drilling and fracking of many hundreds of wells. An export-scale project would also require a 1100km high-pressure gas pipeline to the Pilbara, processing facilities, pumping stations, flare stacks, and heavy-vehicle access roads. 

Mount Hardman Creek where Black Mountain oil and gas wants to drill and frack

Environs Kimberley Director of Strategy Martin Pritchard said, “If Black Mountain goes into full production with hundreds of wells, the volume of precious groundwater required would be unimaginable.

“This incremental threat of enormous levels of precious groundwater extraction shows why fracking must not be allowed to take-off in the Kimberley. 

“Fracking uses toxic chemicals that can pollute our clean water here in the Kimberley, why would we risk that?”

“Giving Black Mountain’s Valhalla Project the go ahead risks opening up the Kimberley to full-scale industrialisation by petroleum companies eager to get at the unconventional gas within the Canning Basin. This would ignite a carbon bomb, at a time when increasingly severe heat waves caused by the burning of fossil fuels and resulting climate change is putting the Kimberley at risk of becoming unliveable.”

Overflow at Buru Energy wastewater pond in the Kimberley

Read local media's reporting on the approval here.