PEL 120 and South Australia Year Annual Report...8/02/2010 230: Orroroo 4 P3 138 38 26.82 E 32 38 49.18 S. 369.88: 4/02/2010. 5/02/2010 71.7. Orroroo 4 P4 138 38 27.35 E 32 38 51.06

PEL 120

Walloway and St Vincent Basin

South Australia

Year 4

Annual Report

For the Period

3rd October 2009 to 2nd October 2010

CONTENTS

1. Introduction ............................................................................................................................ 3 2. Licence Summary .................................................................................................................. 3 3. Regulated Activities .............................................................................................................. 4 4. Compliance Issues ................................................................................................................. 6 5. Expenditure Statement ........................................................................................................ 25 Appendix 1: Expenditure Statement

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Year 4, Annual Report PEL 120

1. Introduction

Petroleum Exploration Licence (PEL) 120 was granted on the 3 October 2006 for a term of five

years. The Licence covers the St Vincent Basin and Walloway Basin, South Australia. This report

details the work conducted during Licence Year 4 (3 October 2009 – 2 October 2010 inclusive), in

accordance with Regulation 33 of the Petroleum and Geothermal Energy Act 2000.

2. Licence Summary

PEL 120 was awarded to SAPEX which currently maintains a 100% interest in the Licence.

In late October 2008 SAPEX Limited merged with Linc Energy Ltd. Following the merger and

changes to company structure, ongoing review of target areas in the Walloway Basin continues to

be a priority.

The original work commitments associated with the awarding of PEL 120 are detailed below.

Table 1: PEL 120 Original Work Commitments by Licence year Year of Licence Minimum Work Requirements

One Geological and Geophysical Studies

Two Drill two wells

Three Drill two wells

Four Geological and Geophysical Studies

Five Drill two wells

• On 12 June 2008 SAPEX signed a merger agreement with Linc Energy under which Linc Energy

proposed to acquire all of SAPEX’s shares, affected by schemes of arrangement which were

implemented on 15 October 2008.

• As a result of the merger some of the work commitments for Year 2 were deferred to Year 3, a

variation to work programs application dated 19 December 2008 was submitted to PIRSA and

approved.

• Activity approval for a drilling program within the Walloway Basin was given by PIRSA on 5

August 2009. The on ground activity adhered to the revised work commitments following the

variation of work program for Year 3. In total five (5) wells were completed between 18 Aug –

28 Sept 2009.

• On 11 December 2009, Linc Energy gain approval to undertake an extensive drilling program

consisting of 29 Wells, drilling activities commence 12 January 2010 and were completed 7

May 2010.

The following table displays the minimum work program for Year 4 and the actual work completed

up and to the end of licence Year 4.

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Table 2: Minimum work program and actual work completed Year 4.

Petroleum Exploration Licence

Minimum Work Program Year 4

Actual Work Carried Out

PEL 120 Geological and Geophysical Studies

• Drilling Program consisting of 29 wells which included 16 hydrogeological investigation wells

• Geological and Geophysical studies

3. Regulated Activities

Regulation 33 (2) (a):

Regulated activities conducted • Environmental Impact Report (EIR) for Exploratory Coal Seam Drilling and Statement of

Environmental Objectives (SEO) for Exploratory Coal Seam Drilling were completed and

officially gazetted on the 10 July 2008.

• ‘Notice of Entry’ letters were sent to landholders for on ground exploration and drilling

activities. Linc Energy utlised “consultation manger” a secure database designed to record all

correspondence and contact with landowners post and during ground activities.

• Activity notification and approvals for high level official supervision for proposed

commencement of on ground exploration activities and drilling in the Walloway Basin.

Approved by PIRSA on 11 December 2009.

- Drilling program consisting of 29 Wells, drilling activities commence 12 January

2010 and were completed 7 May 2010;

- Coal Exploration Wells : - Orroroo 2A, Orroroo 2B, Orroroo 5A, Orroroo 6, Orroroo 7, Orroroo 8,

Orroroo 9, Orroroo 10, Orroroo 11, Orroroo 12, Orroroo 13, Orroroo 14 and Orroroo 15

- Hydrogeological Investigation Wells - Orroroo 4P1, Orroroo 4P2, Orroroo 4P3, Orroroo 4P4, Orroroo 5P1, Orroroo

5P2, Orroroo 5P3, Orroroo 7P1, Orroroo 7P2, Orroroo 7P3, Orroroo 9P1, Orroroo 9P2, Orroroo 9P3, Orroroo 10P1, Orroroo 10P2 and Orroroo 15A,

• From the commencement of on ground exploration and drilling activities of 29 wells,

submissions of daily drilling reports, daily geological reports, wireline logs and down hole and

well head schematic diagrams were submitted to PRISA as per regulatory requirements.

• A Well Completion Report for each well, in accordance with the Petroleum and Geothermal

Regulations was submitted to PIRSA.

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Table 3: PEL 120 Exploration drilling program 2010

Well Longitude Latitude GL Spud Date Rig Release Date Depth

Orroroo 2A 138 39 10.94 E 32 36 7.86 S 356.02 12/01/2010 17/01/2010 138.2Orroroo 2B 138 39 10.69 E 32 36 8.39 S 356.17 18/01/2010 23/01/2010 243.1

Orroroo 4 P1 138 38 26.29 E 32 38 50.90 S 369.69 15/02/2010 18/02/2010 244Orroroo 4 P2 138 38 27.83 E 32 38 49.54 S 369.69 5/02/2010 8/02/2010 230Orroroo 4 P3 138 38 26.82 E 32 38 49.18 S 369.88 4/02/2010 5/02/2010 71.7Orroroo 4 P4 138 38 27.35 E 32 38 51.06 S 369.58 9/02/2010 15/02/2010 298.5

Orroroo 6 138 37 45.59 E 32 37 6.65 S 386.53 5/02/2010 9/02/2010 220.6

Orroroo 7 138 38 43.92 E 32 37 2.41 S 368.19 23/01/2010 5/02/2010 277

Orroroo 7 P1 138 38 45.65 E 32 37 1.06 S 367.71 19/02/2010 22/02/2010 262Orroroo 7 P2 138 38 45.34 E 32 37 2.31 S 367.72 22/02/2010 25/02/2010 210Orroroo 7 P3 138 38 45.22 E 32 37 2.96 S 367.76 25/02/2010 27/02/2010 190

Orroroo 10 138 40 14.34 E 32 38 2.54 S 356.60 28/02/2010 3/03/2010 273.5

Orroroo 10 P1 138 40 15.88 E 32 38 2.47 S 356.60 4/03/2010 6/03/2010 214Orroroo 10 P2 138 40 15.81 E 32 38 3.61 S 356.73 6/03/2010 6/03/2010 22

Orroroo 8 138 39 57.06 E 32 36 56.63 S 353.49 4/03/2010 13/03/2010 204.7

Orroroo 9 138 36 36.51 E 32 38 24.19 S 398.31 20/02/2010 3/03/2010 374.6

Orroroo 9 P1 138 36 37.03 E 32 38 24.71 S 398.21 16/03/2010 19/03/2010 306Orroroo 9 P2 138 36 36.54 E 32 38 23.00 S 398.86 20/03/2010 25/03/2010 330Orroroo 9 P3 138 36 35.57 E 32 38 23.34 S 398.81 25/03/2010 27/03/2010 283

Orroroo 15 138 37 5.39 E 32 40 27.69 S 383.23 14/03/2010 20/03/2010 279.4

Orroroo 15 P1 138 37 6.86 E 32 40 26.77 S 382.83 27/03/2010 29/03/2010 194

Orroroo 13 138 36 56.05 E 32 39 47.76 S 387.69 21/03/2010 4/04/2010 336.5

Orroroo 11 138 37 8.71 E 32 39 7.19 S 385.82 5/04/2010 16/04/2010 320

Orroroo 12 138 39 28.85 E 32 38 51.52 S 362.57 17/04/2010 22/04/2010 241

Orroroo 14 138 38 16.40 E 32 39 36.30 S 371.72 23/04/2010 1/05/2010 290.6

Orroroo 5 P2 138 38 26.29 E 32 38 6.58 S 372.82 20/04/2010 27/04/2010 202Orroroo 5P3 138 38 26.68 E 32 38 6.48 S 372.69 24/04/2010 25/04/2010 60Orroroo 5 P1 138 38 26.37 E 32 38 5.59 S 372.77 15/04/2010 20/04/2010 235

Orroroo 5A 138 38 26.76 E 32 38 5.52 S 372.61 5/05/2010 7/05/2010 271

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4. Compliance Issues

Regulation 33 (2) (b) (c):

Compliance with the Act, Regulations, Licence conditions and relevant statement of

environmental objectives, Actions to rectify non compliance

Licence Compliance

Work commitment for Year 4 was to undertake Geological and Geophysical studies as per licence condition 1, this was achieved.

• Geological and Geophysical studies have been undertaken throughout the term;

- Geological Appraisal of the Walloway Basin, South Australia: implications for the

Potential for Underground Coal Gasification by S Kwitko (Nov 2009).

- Processing and Interpretation of the gravity data Orroroo North, Walloway Basin by

Archimedes consultants.

• As part of Linc Energy’s environmental management system, site procedures were established

in order to achieve the requirements of the Statement of Environmental Objectives (SEO) for

Exploratory Coal Seam Drilling gazette 10 Jul 2008. These procedures were followed

throughout the drilling program and regularly checked by the project geologist and

environmental manager.

Licence Non Compliance

• There were no licence non compliance for this reporting period.

Regulatory Compliance

• Drilling program consisting of 29 Wells, drilling activities commence 12 January 2010 and were

completed 7 May 2010

• From the commencement of on ground exploration and drilling activities data submissions of

daily drilling reports, daily geological reports, wireline logs and down hole diagrams were

submitted to PRISA as per regulatory requirements.

• Additional data was supplied for wireline logs this being longitude and latitude coordinates

from the final well location survey data.

• A Well Completion Report for each well, in accordance with Petroleum and Geothermal

Regulations was submitted to PIRSA as per regulatory requirements. Additional data in

connection with wireline logs and well head diagrams was requested by PIRSA to be included

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in the report and such information was provided to PIRSA. See Table 5 showing all regulatory

data submissions.

Regulatory Non‐Compliance

• The submission of Wireline logs for Orroroo 8, 9 10 and 15 wells were overdue as PIRSA

requested coordinates in Longitude and Latitude taken from the final well location survey

which was not undertaken until the completion of the drilling campaign, May 2010.

• The submission of samples (Regulation 48) to PIRSA core library taken from 10 wells were

overdue the intention was to keep all well samples stored together as drilling was undertaken

on the same pads. The submission to PIRSA was made by Challenger Geological Services

following a full pallet of samples.

• The submission of Well head diagrams (Regulation 44) were submitted for all hydrological

investigation wells however ten (10) of the diagrams were overdue, due to interpretation of

the regulatory requirements for an additional Downhole diagram showing the well head for

hydrological wells, see Table 4 below.

PEL 120 Well Description of Data Submission Regulation Due Date Completed Date Compliant

Orroroo 1 Wireline logs Reg 39 15/10/2009 14/10/2009 Yes

Orroroo 5 Wireline Logs Reg 39 27/10/2009 14/10/2009 Yes

Orroroo 1 2 3 4 &5 Downhole Diagrams Reg 44 12/11/2009 25/11/2009 Yes

Orroroo 1 2 3 4 &5 Well Sample submission Reg 48 28/03/2010 1/03/2010 Yes

Orroroo 1 2 3 4 &5 Orroroo 1,2,3,4 and 5 ‐ Combined WCR Reg 40 28/03/2010 18/03/2010 Yes

Orroroo 2A Daily Drilling Report Reg 38 12/01/2010 ‐ 17/01/2010 Daily during drilling operations Yes

Orroroo 2A Daily Geological Report Reg 38 12/01/2010 ‐ 17/01/2010 Daily during drilling operations Yes

Orroroo 2B Daily Drilling Report Reg 38 18/01/2010 ‐ 23/01/2010 Daily during drilling operations Yes

Orroroo 2B Daily Geological Report Reg 38 18/01/2010 ‐ 23/01/2010 Daily during drilling operations Yes

Orroroo 2A Wireline Logs submission Reg 39 16/02/2010 16/02/2010 Yes

Orroroo 2A Downhole diagrams submission Reg 44 16/03/2010 11/03/2010 Yes

Orroroo 2B Wireline Logs submission Reg 39 22/03/2010 9/03/2010 Yes

Orroroo 2B Downhole diagrams submission Reg 44 22/03/2010 11/03/2010 Yes

Orroroo 2A 2B PEL 120 Combined WCR Orroroo 2A & 2B Reg 40 22/07/2010 22/07/2010 Yes

Orroroo 2A 2B Well Sample Submission Reg 48 22/07/2010 10/08/2010 No

Orroroo 4P1 Daily Drilling Report Reg 38 15/02/2010 ‐ 18/02/2010 Daily during drilling operations Yes

Orroroo 4P1 Daily Geological Report Reg 38 15/02/2010 ‐ 18/02/2010 Daily during drilling operations Yes





Orroroo 4P4 Daily Drilling Report Reg 38 9/02/2010 ‐15/02/2010 Daily during drilling operations Yes

Orroroo 4P4 Daily Geological Report Reg 38 9/02/2010 ‐15/02/2010 Daily during drilling operations Yes

Table 4: Compliance with Petroleum and Geothermal Energy Regulations

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Orroroo 4P1 Wireline Logs Reg 39 17/04/2010 9/03/2010 Yes

Orroroo 4P1 Downhole diagram Reg 44 17/04/2010 1/04/2010 Yes

Orroroo 4P1 Wellhead diagram Reg 44 17/04/2010 20/5/2010 No

Orroroo 4P1 Well Sample Submission Reg 48 17/08/2010 7/09/2010 No

Orroroo 4P2 Wireline Logs submission Reg 39 7/04/2010 9/03/2010 Yes


Orroroo 4P2 Downhole diagrams submission Reg 44 7/04/2010 1/04/2010 Yes


Orroroo 4P3 Wireline Logs submission Reg 39 4/04/2010 9/03/2010 Yes








Orroroo 4P1 ‐ 4P4 PEL 120 Orroroo 4P1, 4P2, 4P3_4P4 Combined WCR Reg 40 17/08/2010 17/08/2010 Yes

Orroroo 6 Daily Drilling Report Reg 38 5/02/2010 – 9/02/2010 Daily during drilling operations Yes

Orroroo 6 Daily Geological Report Reg 38 5/02/2010 – 9/02/2010 Daily during drilling operations Yes


Orroroo 6 Downhole diagrams Reg 44 8/04/2010 11/03/2010 Yes

Orroroo 6 Well Sample Submission Reg 48 15/08/2010 7/09/2010 No

Orroroo 6 PEL 120 Orroroo 6 Well Completion Report Reg 40 15/08/2010 16/08/2010 Yes



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Orroroo 7 Wireline Logs submission Reg 39 4/04/2010 9/03/2010 Yes

Orroroo 7 Downhole diagrams submission Reg 44 4/04/2010 11/03/2010 Yes

Orroroo 7 Well Sample Submission Reg 48 26/08/2010 10/08/2010 Yes

Orroroo 7P1 Daily Drilling Report Reg 38 19/02/2010 – 22/02/2010 Daily during drilling operations Yes

Orroroo 7P1 Daily Geological Report Reg 38 19/02/2010 – 22/02/2010 Daily during drilling operations Yes

















Orroroo 7 7P1‐7P3 PEL 120 Orroroo 7, 7P1, 7P2, 7P3 Combined WCR Reg 40 26/08/2010 26/08/2010 Yes




Orroroo 10 Downhole diagrams submission Reg 44 2/05/2010 5/05/2010 Yes

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Orroroo 10 Well Sample Submission Reg 48 2/09/2010 7/09/2010 No



Orroroo 10P1 PEL 120 Orroroo 10P1 Wireline Logs Reg 39 5/05/2010 31/05/2010 No








Orroroo 10, 10P1 10P2 PEL 120 Orroroo 10, 10P1, 10P2 Combined WCR Reg 40 6/09/2010 6/09/2010 Yes



Orroroo 8 Downhole diagram Reg 44 12/05/2010 17/05/2010 Yes

Orroroo 8 Wireline Logs Reg 39 12/05/2010 31/05/2010 No Orroroo 8 Well Sample Submission Reg 48 13/09/2010 7/09/2010 Yes Orroroo 8 PEL 120 Orroroo 8 WCR Reg 40 13/09/2010 13/09/2010 Yes

Orroroo 9 Daily Drilling Report Reg 38 20/02/2010 ‐3/03/2010 Daily during drilling operations Yes

Orroroo 9 Daily Geological Report Reg 38 20/02/2010 ‐3/03/2010 Daily during drilling operations Yes


Orroroo 9 Downhole diagram Reg 44 2/05/2010 5/05/2010 Yes Orroroo 9 Well Sample Submission Reg 48 26/09/2010 10/08/2010 Yes Orroroo 9P1 Daily Drilling Report Reg 38 16/03/2010 – 19/03/2010 Daily during drilling operations Yes


No Orroroo 9P1 Downhole diagram Reg 44 18/05/2010 20/05/2010


No Orroroo 9P1 Wireline logs Reg 39 18/05/2010 31/05/2010

Yes Orroroo 9P1 Well Sample Submission Reg 48 18/09/2010 7/09/2010



Yes Orroroo 9P2 Downhole diagram Reg 44 24/05/2010 20/05/2010

Orroroo 9P2 Wellhead diagram Reg 44 24/05/2010 20/05/2010 Yes









Yes Orroroo 9 9P1‐9P3 PEL 120 Orroroo 9, 9P1, 9P2, 9P3 Combined WCR Reg 40 26/09/2010 26/09/2010

Yes Orroroo 15 Daily Drilling Report Reg 38 14/03/2010 – 20/03/2010 Daily during drilling operations

Yes Orroroo 15 Daily Geological Report Reg 38 14/03/2010 – 20/03/2010 Daily during drilling operations

Yes Orroroo 15P1 Daily Drilling Report Reg 38 27/03/2010 – 29/03/2010 Daily during drilling operations

Yes Orroroo 15P1 Daily Geological Report Reg 38 27/03/2010 – 29/03/2010 Daily during drilling operations

Yes Orroroo 15 Downhole diagram Reg 44 19/05/2010 17/05/2010

No Orroroo 15 Wireline logs Reg 39 19/05/2010 31/05/2010

Yes Orroroo 15P1 Wellhead diagram Reg 44 28/05/2010 27/05/2010

No Orroroo 15P1 Wireline logs 28/05/2010 31/05/2010

Orroroo 15P1 Well Sample Submission Reg 48 28/09/2010 7/09/2010 Yes

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Yes Orroroo 15 Well Sample Submission Reg 48 28/09/2010 10/08/2010

Yes Orroroo 15 15P1 PEL 120 Orroroo 15, 15P1 Combined WCR Reg 40 28/09/2010 28/09/2010




Yes Orroroo 13 Wireline logs Reg 39 3/06/2010 2/06/2010


Yes Orroroo 13 PEL 120Orroroo 13 Well Completion Report Reg 40 3/10/2010 5/10/2010



Yes Orroroo 11 Wireline Logs Reg 39 15/06/2010 2/06/2010












Orroroo 14 Well Sample Submission Reg 48 31/10/2010 13/09/2010 Yes

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Yes Orroroo 5A Daily Drilling Report Reg 38 5/05/2010 – 7/05/2010 Daily during drilling operations

Yes Orroroo 5A Daily Geological Report Reg 38 5/05/2010 – 7/05/2010 Daily during drilling operations

Yes Orroroo 5A Wireline Logs Reg 39 6/07/2010 2/06/2010

Yes Orroroo 5A Downhole diagram Reg 44 6/07/2010 2/06/2010

Orroroo 5A Well Sample Submission Reg 48 6/11/2010 7/09/2010 Yes



Yes Orroroo 5P1 Wireline logs Reg 39 19/06/2010 2/06/2010
















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General Reporting Regulation Due Date Completed Date Compliant

Quarterly Cased Hole Activity Report t 3 Jul ‐ Sep 09 Reg 41 30/11/2009 26/11/2009 Yes

Year 3 ‐ Annual Report PEL 120 Reg 33 2/12/2009 1/12/2009 Yes

Quarterly Cased Hole Activity Report Oct ‐ Dec 09 Reg 41 28/01/2010 28/01/2010 Yes

Serious Incident Report Orroroo 8 Reg 32(2)(a)(i) & 32(2)(b) 12/3/2010 & 4/6/2010 12/3/2010 & 4/6/2010 Yes

Serious Incident Report Orroroo 5P1 Reg 32(2)(a)(i) & 32(2)(b) 24/8/2010 & 16/11/2010 24/8/2010 & 16/11/2010 Yes

Incident Report Orroroo 5A Reg 32(1)(b) & 32(5) Quarterly ‐ 30 July 2010 7/5/2010 Yes

Incident Report Orroroo 10P1 Reg 32(1)(b) & 32(5) Quarterly ‐ 30 July 2010 7/5/2010 Yes

Quarterly Cased Hole Activity Report Jan ‐ Mar 10 Reg 41 30/04/2010 30/04/2010 Yes

Quarterly Cased Hole Activity Report Apr ‐ Jun 10 Reg 41 30/07/2010 31/07/2010 Yes

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Compliance with Statement of Environmental Objectives

The drilling activities undertaken during this reporting period and all field assessments undertaken for the notification and activities approval process were carried out in accordance to the objectives of the Statement of Environmental Objectives (SEO) for Exploratory Coal Seam Drilling, as detailed in the table below

Table 5: Compliance with Compliance with Statement of Environmental Objectives

Objective Assessment Criteria Compliant/Non‐Compliant

Comments

1. Avoid disturbance to sites of cultural and heritage significance

No impact to sites of Aboriginal or non – indigenous heritage significance without approval under the Aboriginal Heritage Act 1988 and Heritage Places Act 1993

Compliant / Achieved Work Area Clearances (WACs) with the relevant native title group have been carried out.

Activities were confined to the areas cleared by the WAC’s

2. Minimise disturbance to native vegetation and native fauna

Any sites of rare, vulnerable and endangered flora and fauna have been identified, flagged and subsequently avoided.

Significant remnant vegetation has not been cleared without specific consultation with PIRSA, Native Vegetation Council and DEH prior to activity approval.

The attainment of either 0, +1 or +2 GAS criteria for ‘Minimise disturbance to native vegetation’ objective for well site construction .

The attainment of 0, +1 or +2 GAS criteria for “Re‐establish native vegetation on abandoned well sites and access tracks”

No fires during drilling activities.

Fuel and Chemical Storage and Handling

Waste Management

Compliant / Achieved Assessments indicated that significant (or rare or threatened) flora and fauna are not present or likely to occur at the sites.

Vegetation clearance was minimised and the clearance of long‐lived/significant species avoided, in accordance with standard procedures.

Previously disturbed areas were selected for the drilling sites. Access tracks and drilling sites have been rehabilitated and remediated according to industry standards (e.g. as outlined in the EIR (Section 6) and the SEO). Rehabilitation signoff has been finalised.

The storage, use and disposal of hazardous material were in accordance with legislative requirements.

Fire risk formed part of the onsite induction and fire fighting equipment appropriate to the site and seasonal conditions was present. Sparse vegetation poses minimal fire risk.

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3. Avoid the introduction or spread of exotic species and implement control measures as necessary

Weeds are not introduced into, or spread in, operational areas as a consequence of activities

Compliant / Achieved Landholders were consulted regarding weed management.

Equipment brought to site was free of soil or weed material. Any equipment that had been operating outside the Walloway Basin or in an area of weed infestation was thoroughly inspected and washed down before going to site.

Good housekeeping practices were followed to discourage pest animal species.

4. Minimise disturbance and contamination to soil resources

The attainment of 0, +1 or +2 GAS criteria for ‘Minimise impacts to soil’ No construction activities are carried out on salt lakes, steep slopes or in areas of boggy coastal soils.

No soil contamination as a result of drilling activities.

Fuel and Chemical Storage and Handling ‐ Soil in areas affected by any spill is removed and/or bioremediated.

No soil contamination as a result of fuel and chemical storage and handling.

Waste Management

Compliant / Achieved The area utilised for drilling was restricted to the smallest practicable.

Unnecessary/unauthorised off‐road driving or creation shortcuts were avoided.

No sensitive land systems (salt lakes, steep slopes or boggy coastal areas) were present.

Topsoil from the sump was stockpiled separately and respread on reinstatement.

Areas of compaction ripped where appropriate in accordance with industry standards (e.g. EIR (Section 6) and SEO).

Rehabilitation signoff has been finalised.

Drilling muds were water‐based and low‐ or non‐toxic. Ground water and associated drilling mud/fluids contained within designated sumps.

Bunding and/or polythene lining for fuel and chemical storage, refuelling etc were adequate to contain spills and meet legislative requirements (e.g. EPA guidelines). Drip trays used for refuelling and underneath any parts of the rig that may pose a potential leak or spill hazard. Appropriate spill response equipment was maintained on site.

Linc and/or contractor procedures covered spill response. Material Safety Data Sheet (MSDS) information was readily available on site.

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5. Minimise loss of reservoir and aquifer pressures and avoid aquifer contamination

No aquifer contamination as a result of drilling, completion or production testing activities.

No uncontrolled flow to surface (i.e. blow out). Sufficient barriers exist in casing annulus to prevent crossflow between separate aquifers or hydrocarbon reservoirs.

Activities No crossflow behind casing between aquifers, and between aquifers and hydrocarbon reservoirs unless approved by the Department of Water, Land and Biodiversity Conservation.

Hole casing, cementing and abandonment in accordance with SEO requirements.

A properly balanced mud system was utilised and monitored..

On completion of drilling the following occurred:

• cement back to surface.

• cap well head 0.5m below ground.

6. Minimise disturbance to drainage patterns and avoid contamination of surface waters and shallow groundwater resources

Wellsites and access tracks are located to maintain pre‐existing water flows (i.e. channel contours are maintained on floodplains and at creek crossings). The attainment of 0, +1 or +2 GAS criteria for ‘Minimise disturbance to drainage patterns’

No contamination of surface waters and shallow groundwater resources as a result of drilling activities.

No contamination of surface waters and shallow groundwater resources as a result of fuel or chemical storage and handling.

Waste Management

Compliant / Achieved Drainage at sites mostly local; interception of flows by drill sites will be minor to negligible.

Sump adequately sized to prevent overflow.


Surface water flow directed away from sump. Release of groundwater and drill mud beyond the designated drilling area avoided. Sumps backfilled with at least 0.5m cover.

Bunding and/or polythene lining for fuel and chemical storage, refuelling etc adequate to contain spills and meet legislative requirements (e.g. EPA guidelines).

Drill rig generators and fuel tanks appropriately bunded (e.g. located in polythene lined bunded areas) to contain any oil spills.

Fuel tanks and delivery systems regularly inspected by Linc Drilling Supervisor and rejected if found unsuitable.

The storage, use and disposal of hazardous material was undertaken in accordance with legislative requirements. Material Safety Data Sheet (MSDS) information will be readily available on site.

7. Minimise risks to the safety of the public, employees and other third parties

No injuries to the public or third parties as a result of drilling, completion and initial production testing activities

Compliant / Achieved Health and Safety plans, Drilling Program, Emergency Response Plan developed and implemented by Linc and its contractors in accordance with legislative requirements, SEO and industry standards (e.g. as outlined in the EIR (Section 6).

All employees undertook a safety induction prior to commencing work in the field. Warning signage (and fencing if necessary) erected to deter unauthorised third party access.

The public was not permitted to access to the drill sites.

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Traffic warning signs and/or traffic management implemented when drilling in road reserves (e.g. adjacent to Johnburg‐Orroroo Road).

Rig moves and significant transportation events were communicated to affected parties.

Fire prevention equipment, inductions and emergency response plans were in place. Fire risk formed part of the onsite induction and fire fighting equipment appropriate to the site and seasonal conditions was present. Sparse vegetation poses minimal fire risk.

The sump and any other hazards were fenced following drilling to minimise public safety risks.

Site rehabilitation works were in accordance with the SEO and EIR (Section 6).

8. Minimise disturbance to stakeholders and associated infrastructure

No adverse impact (outside agreed disturbance/compensation areas) on livestock or crops as a result of activities. No reasonable concerns raised by stakeholders are left unresolved.

Compliant / Achieved Landholders (including the District Council) have been consulted regarding the drilling and any issues raised were incorporated into the planning of the drilling program.

Formal notices of entry were issued to landholders. Close consultation was maintained with landholders regarding issues such as stock management and use of tracks and water bores, to ensure that drilling activities are undertaken in a way that minimises disruption.

Drill sites were located away from houses, bores and yards. Vehicles driven at appropriately slow speeds to avoid undue disturbance.

During site restoration, suitable fencing was erected to isolate the sump. The sites were restored according to industry standards (e.g. as outlined in the EIR (Section 6) and SEO). No reasonable stakeholder concerns / complaints were left unresolved.

9. Minimise the visual impact of operations

The attainment of 0, +1 or +2 GAS criteria for ‘Minimise visual impact’ objective for wellsite restoration listed in Appendix 2.

Compliant / Achieved Previously disturbed areas were selected for drilling, which minimised the visual impacts.

Minimal vegetation clearance and earthworks were required for site and access preparation.


Sites were ripped where compaction was evident. Sumps backfilled when dry, surface contours restored and stockpiled topsoil respread over the sump area.

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10. Minimise the impact on the environment of waste storage, handling and disposal

No soil, surface water or ground water contamination as storage and disposal a result of waste

All wastes have been disposed of at an EPA licensed facility with the exception of drilling fluids, drill cuttings and other fluids disposed during well clean‐up.

The attainment of 0, +1 or +2 GAS criteria for ‘Site to be left in a clean, tidy and safe condition’

Compliant / Achieved Covered bins were available on site for the capture of all solid waste materials and waste securely transported to an approved disposal facility.

Portable, self‐contained toilet facilities were located on site, and sewage transported off site and disposed in accordance with Health Department regulations.

Litter cleaned up during and post drilling.

Drill cuttings/chippings and muds disposed of in drill sump.


11. Remediate and rehabilitate operational areas to agreed standards

The attainment of 0, +1 or +2 GAS criteria for ‘Minimise visual impact’, ‘Re‐establish native vegetation on abandoned wellsites and access tracks’ where the revegetation of native species is required and ‘Site to be left in a clean, tidy and safe condition’ objectives listed in Appendix 2

Compliant / Achieved Access tracks and drilling sites rehabilitated and remediated according to industry standards and SEO requirements. Refer also to Objectives 2, 4, 5, 6, 7, 8, 9, 10. Linc EMS procedures address quality of rehabilitation prior to contractor sign‐off.

Rehabilitation signoff and GAS assessment still to be finalised.

Regulation 33 (2) (d):

Management System Audits

No Management System Audits were conducted during the term.

Regulation 33 (2) (e):

Table 6: Reports generated during the Licence year

Kwitko .S., (Nov 2009). Geological Appraisal of the Walloway Basin, South Australia: implications

for the Potential for Underground Coal Gasification. Australian School of Petroleum, University of

Adelaide and Linc Energy Limited.

Linc Energy Limited (Nov 2009). 2009 Drilling Activity Notification Part 1 Walloway Basin PEL 120,

South Australia.

Due Date N/A Date Submitted 23 Nov 2009 Compliant Yes

35 days prior to beginning on ‐ ground activities

Linc Energy Limited (Dec 2009). 2009 Drilling Activity Notification Part 1 Additional Information

Walloway Basin PEL 120, South Australia.

Due Date N/A Date Submitted 10 Dec 2009 Compliant Yes

• Linc Energy Limited (Nov 2009). 2009 Drilling Program Bridging Document PEL 120 Walloway

Basin, South Australia.

Linc Energy Limited (Nov 2009). 2009 Drilling Activity Notification Part 2 Application to Conduct Operations – PEL 120, Walloway Basin, South Australia.

Due Date N/A Date Submitted 23 November 2009 Compliant Yes

Reports generated for drilling activity notification;

• Carver .G.(November 2009). Work Area Clearance Survey with the Adnyamathanha Traditional Lands Association Aboriginal Corporation of a drilling program on PEL 120 proposed by SAPEX / Linc Energy, South Australia

• RPS Environment & Planning (November 2009). Environmental Assessment Report PEL 120 Walloway Basin – Drilling and Pumping Tests, South Australia.

• Thompsons Drilling Company (Nov 2009). Health, Safety and Environment Manual.

• Thompson Drilling Company (Nov 2009). Drilling Standard Operating Procedures Manual.

• Thompson Drilling Company (Nov 2009). Job Safety Analysis (JAS) Manual.

SAPEX Ltd / Linc Energy Ltd, (2009). Annual Report PEL 120 Walloway Basin South Australia for the Period 3 October 2008 to 2 October 2009.

Due Date 1 December 2009 Date Submitted 1 December 2009 Compliant Yes

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Regulation 33 (2) (f):

• Serious Incident Orroroo 8 well 14km NNE of Orroroo, SA on 6 March 2010

• The Orroroo 8 well flowed water to surface after penetrating a transmissive unit in the

Lower Tertiary sequence at a depth of approximately 153 metre and was subsequently

killed by pumping kill mud.

- Cause;

The cause of the incident was found to be that the weight of the drilling fluid was

insufficient for the artesian head of the aquifer at the Orroroo 8 Location

- Impact;

an assessment of the impact of the water flow from an environmental perspective

was assess to be negligible as no waterways, habitats of significance or other

sensitive receptors were impacted by the single, small scale discharge of tertiary

aquifer ground water within or around the Orroroo 8 site

- Rehabilitation;

The site has been rehabilitated by removal of sand fines from the soil surface and

scarification in accordance with normal operating procedure and SEO rehabilitation.

- Corrective Actions;

1. The UCG hydrological data should be used to update the geological risk

assessment for all future Walloway Basin wells. Achieved

2. Processes should be put in place to ensure adherence to best operating

practices in relation to continuous monitoring of pit levels and mud weights.

Achieved

3. Site inductions should be amended to cover a list of events that constitute

‘Serious Incident’ under the Act and Regulations. Achieved

4. The incident report form should be modified to include ‘Serious Incident’ and

details in accordance with Regulation 32(3). Achieved

• Serious Incident Orroroo 5P1 well 9km NNE of Orroroo, South Australia on 16 August 2010

• During a monthly well condition inspection of Orroroo 5P1, 16 August 2010, evidence of a

leak at the headworks valve was noted. During repair further investigation noted the leak

to be coming up the annulus between the PVC casing and the cement. The well was

successfully killed with drilling mud on 2 September 2010.

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- Cause;

The cause of the incident was identified to be a design flaw in the well construction

of Orroroo 5P1

- Impact;

An assessment of the surface and groundwater impacts from Orroroo 5P1 incident

will have negligible effect on the receiving environment as no waterways, habitats

of significance or other sensitive receptors were impacted by the single, small scale

discharge of saline groundwater within or around the Orroroo 5P1 site.

- Rehabilitation;

The well was killed with drilling mud and the site rehabilitated by backfilling

attempted repair works.

- Corrective Actions;

1. Steel casing to be used on all future standpipe piezometer wells drilled under a

Petroleum Exploration Licence in South Australia.

2. All future cement jobs to contain 3 to 5% of expansive additive to prevent micro

channeling in cement annulus.

3. Cement bond logs to be run on all peizometer production casing strings prior to

rig release

4. Linc Energy will continue fortnightly inspections of the hydrological well heads

for further leaks

5. A written report of the incident to be submitted to PIRSA in accordance with

Regulation 32(2)(b) of the Petroleum Regulations.

6. The findings of this investigation report should be distributed to all drilling and

UCG teams in order to increase awareness of new procedural matters.

Table 7: Serious Incidents reported to the Minister under the Act

Date Incident Well Reported PIRSA

Reg 32(2)(a)(i)

Incident Report PIRSA

Reg 32(2)(b)

Compliant

6 Mar 2010 Serious incident Orroroo 8 12 March 2010 4 June 2010 Y

16 Aug 2010 Serious incident Orroroo 5P1 24 August 2010 16 November 2010 Y

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• Reportable Incidents, which occurred on PEL 120 during the drilling campaign, that were

investigated and not determined to be a serious incident as defined in the Statement of

Environmental Objectives (SEO) for Exploratory Coal Seam Drilling, are listed below.

- Issues were raised by a PIRSA environmental compliance officer during a site

inspection of Orroroo 5A and Orroroo 10P1 in regard to suspected leaking well

heads. Linc Energy provided an explanation and corrective actions to PIRSA in a

letter dated 7 May 2010.

- PIRSA was notified of a suspected leaking well head on Orroroo 4P4, 2 July 2010. As

requested by PIRSA a comprehensive risk assessment was undertaken and the well

killed and abandoned.

Table 8: Reportable Incidents

Date Incident Well Reported PIRSA

Reg 32(1)(b) & 32(5)

Compliant

30 Apr 2010 Release of drilling fluid onto pad Orroroo 5A 7 May 2010 Y

30 Apr 2010 Suspected leaking well head Orroroo 10P1 7 May 2010 Y

Regulation 33 (2) (g):

Foreseeable threats that present a hazard to facilities or activities

• No facilities in licence areas.

• No threats to activities which are not already covered in the relevant EIRs for exploration

drilling.

Regulation 33 (2) (h):

Operations proposed for Year 5

Table 9: Petroleum Exploration Licence planned work program – Licence Year 5

Licence Planned Work Program (Year 5)

PEL 120 Geological Studies

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5. Expenditure Statement

Regulation 33 (3):

An annual report must be accompanied by a statement of expenditure on regulated activities

conducted under the Licence for the relevant licence year, showing expenditure under each of

the following headings:

(a) drilling activities;

(b) seismic activities;

(c) technical evaluation and analysis;

(d) other surveys;

(e) facility construction and modification;

(f) operating and administration expenses.

Commercial in Confidence

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Documents

PEL 120 and South Australia Year Annual Report...8/02/2010 230: Orroroo 4 P3 138 38 26.82 E 32 38 49.18 S. 369.88: 4/02/2010. 5/02/2010 71.7. Orroroo 4 P4 138 38 27.35 E 32 38 51.06