Coal seam gas: The explosive debate

The mere mention of coal seam gas in many parts of the country causes the eruption of polarising debate.

Anti-CSG campaigners argue there is not enough scientific evidence the practice won’t harm water tables, the environment and the health of those living around wells.

Operators in the sector have come up against strong opposition to the development of CSG, with protestors doing their best to halt or slow operations.

Weighing into the debate, Origin Energy chief executive Grant King recently said people aren’t open to the facts about CSG and many who are against it are circulating mistruths.

"The answers are simple — they are clear and straightforward," King said.

"To the extent where people who are opposed, who are not interested in those answers because the basis of their opposition is not about those facts, that is where the greatest concern is – because they are then happy to propagate misrepresentations.

"My biggest concern is not the facts of the matter, it's that there is clearly a small group of people who have an ideological opposition to what is happening and who don't feel bound to that same level of facts that we do."

So what are the facts?

CSG has seen $60 billion in investment injected into new Queensland projects and created about 10,000 jobs in the past year.

Queensland’s coal seam gas sector has experienced significant growth over the past 15 years and has previously been earmarked by the Queensland government as the “forefront of Queensland’s petroleum industry”.

But Queensland’s coal seam gas sector has about 20 years on New South Wales.

AGL upstream gas group general manager Mike Moraza told Australian Mining Queensland is by far the most mature coal seam gas market in this country.

By contrast Moraza explained “New South Wales has a very immature coal seam gas industry”.

“The very first and only coal seam gas project in this state is the [AGL] project at Camden which was the very first petroleum production lease issued in this state,” he said.

While fellow gas producer Santos has 600 individual landowner agreements in place in Queensland – a feat that “has taken time” CEO David Knox recently stated.

He said developing CSG in Queensland has required “the right language” and explained the New South Wales equivalent is “much younger in the process”.

“We need to give it time and allow it to build,” he said.

Santos exiting chairman Peter Coates recently said the company needs to do a better job to educate communities about the positive impacts of natural gas.

Managing Director of BG Group's Australian subsidiary QGC, Derek Fisher, agrees saying the sector underestimated the power of misinformation distributed by opposition groups, including the "exaggerated" claims that the industry would contaminate the water tables and risk prime farming land.

"These past few years should cause the resource sector to seriously think about how it modernises its approach to public and policy advocacy, to constantly make and remake the case for our industry and the numerous advantages it is bringing to Australia," Fisher said.

On the back foot

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CSG producers have openly admitted to failing to accurately gauge the scale of the community uproar their activities would fuel and have seemingly been on the back foot dealing with genuine concerns.

“The reason we have the backlash is that we have is that people are afraid, worried and concerned about a range of issues,” Moraza said.

He explained gas producers “have probably failed to appreciate…the challenges of this industry are not really technical in nature, they are soft and social in nature”.

“The way that the industry has evolved has been through technical proficiency and professionalism and now we have now come to a place where it’s the social skills and community relations skills that are probably more important than the technical skills in order to make this industry successful,” he said.

Moraza said “misinformation is so rife that it has swayed public opinion” and recognised “operators have to very carefully understand and appreciate the concerns of communities, work through them, deal with them and resolve them”.

Vocal activists, including Lock the Gate have been incredibly mobile and active in voicing opposition, something Moraza was not willing to buy into.

“Those concerns have been created in peoples minds by very sophisticated activism. Sophisticated, fast moving, well resourced and by adopting a set of rules which we don’t play by,” he said.

“Those rules include the ability to put information out there that is emotional, sensational in nature, and a fact base which bares little resemblance to reality.

“That information has gone into the mainstream to such an extent that there is a perception and a view that this is a risky, dangerous, unhealthy industry, which is in fact the furthest from the truth.”

Moraza explained AGL has been operating a project in Camden for over 13 years, “where there has been no health impacts, no water contamination taking place, no fugitive emissions of any magnitude have been detected, so therefore the perception they’ve built up is far from reality, but the perception has driven public sentiment and in turn public policy”.

In July Apex Energy bore the brunt of anti-CSG sentiment driven public policy, being denied permission to drill 16 exploration wells within Illawarra water catchment areas.

The NSW Planning Assessment Commission (PAC) rejected the proposed drilling program, stating that more conclusive studies on the impact of CSG activities to drinking water were needed.

“We do have situations where governments respond to the community concerns, especially at the volume that it’s being articulated and they make policy decisions and announcements which unfortunately further drives community sentiment,” Moraza stated.

With this in mind, Moraza said AGL is working to build “trust, empathy and professionalism” in the areas it is working in, but with signs like “Go to Hell AGL”, it would seem they have a long way to go.

Lock the Gate president Drew Hutton told Australian Mining the organisation is “not opposed to CSG in principle but there needs to be an acceptance from all players, in particular governments, that there are no go zones”.

Those no go zones according to Hutton should include “good farmland and areas where there is vulnerable underground water, where there are important environmental areas and established urban areas”.

A sentiment the New South Wales government took note of in February, enforcing an exclusion zone, banning all CSG operations within two kilometres of residential or critical industry areas.

Boundaries aside, the other big challenge faced by the industry is to correct a plethora of misinformation that has found its way out into the public domain about this industry, Moraza told Australian Mining.

“It’s upon us as an industry player, and with industry advocate APPEA, to go through information campaigns to explain and bring the community along on the development challenges,” he said.

He also recognised producers need to “demonstrate an ability to operate at world’s best practice”.

“We know if you do operate with world’s best practice all of the risks, all of the challenges that confront the industry can be managed by using the right techniques with trained professionals working in the industry, and that’s a conclusion that Mary O’Kane reached in her preliminary report [on the CSG industry],” he said.

Hutton hit back at O’Kane’s findings and operators saying “if the mafia operates on world’s best practice they’d be alright to, world’s best practice is a mile away from what’s going on at present in the coal seam gas industry and I don’t think it’s achievable”.

Regulatory regimes

New South Wales has some of the strongest regulatory framework in the world when it comes to CSG but with mobile and vocal activists in the field, producers in the state face significant challenges if they continue to push ahead developing gas projects.

Moraza explained the importance of a robust regulatory regime which is able to provide oversight and support to the industry, but not advocacy, is a key take-home NSW can learn from established CSG sectors in other states.

“Governments provide regulation, approvals, they provide information, and they provide some stewardship of issues and issues management.

“In Queensland there is a sophisticated and deep experience because the oil and gas industry has been around for decades.

“So they’re a lot more regulated, they have a lot more bureaucrats that are able to deal with this industry.”

Fisher added to this.

"This is probably the most regulated industry in Australia and has had so much light shone on it that it's sunburnt — but this has not been enough for our critics," he said.

Queensland’s Curtis Island LNG project has more than 1500 state and federal environmental conditions, and at least another 8000 sub-conditions.

Vocal anti-CSG campaigner Hutton said Queensland’s LNG projects were given the go-ahead “before the community had a chance to assess the impacts, which is how they got a foothold”.

"The people in the rest of Australia, especially in NSW, have seen that happening out there and they don't like it and that has reinforced their determination to make sure it doesn't come into their area," he said.

He also accused the industry of being “self regulated”.

 “They’re [operators] are all trying to get in as quickly as they possibly can,” he said.

“The regulatory agencies are under resourced and underskilled, because all of their skilled people go off and work for the industry, and there’s no political will in government to exercise the full regulatory requirements.

“This is a self-regulated industry,” he said

Supply and demand

IMG_9295.JPGCurrent forward estimates predict gas supply won’t meet demand by 2017.

“New South Wales will run out of natural gas,” Moraza said.

Victoria, South Australia, Western Australia, the Northern Territory and Queensland are all 100 per cent self sufficient when it comes to gas supply.

 “We are an anomaly in the country of Australia because we import almost all – 95 per cent, of our natural gas from out of this state,” Moraza said.

“Both Queensland and Western Australia are already in the process of exporting large amounts of natural gas.

“The stand-out state in this country is New South Wales; it is not at all self sufficient and is almost entirely reliant on imports of gas from outside the borders.”

As global and national gas demands grow, there is not going to be enough gas to supply NSW, Moraza told Australian Mining.

“The other impact is the price of natural gas in New South Wales will rise and it will not have a downward pressure put on it by stimulating local production, it’s very simple, laws of supply and demand are formidable,” he said.

“No supply: prices go up. No supply: gas runs out.”

There are approximately 1.3 million gas connections in NSW, which without a steady gas supply will be hit by rising prices and already struggling sectors like manufacturing, a particularly heavy user, will endure more heartache.

The peak body for Australia’s oil and gas industry said millions of Australians support the CSG sector everyday, cooking with gas and using gas hot water systems and heaters.

On the face of it

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Origin Energy chief Grant King says scientific evidence discredits claims being circulated by opposition groups.

"The two concerns with the water issue is contamination of reservoirs using toxic chemicals that will contaminate aquifers and the other is it will drain the Great Artesian Basin," King said.

"It's just factual that we don't use toxic chemicals, so there cannot be contamination from fracking or drilling activities. It's that simple."

The extraction of CSG in Australia is quite different from the extraction of shale gas in the US which requires the use of different chemicals and involves more force to draw the gas out from harder rocks.

In Australia many of the seams which hold the gas are comprised of softer rock, which doesn’t require significant amounts of fracking when compared to the US.

King explains recent CSIRO reports on the Great Artesian Basin show the impact of CSG production will be slight.

"If we aren't willing to accept the work of the CSIRO and Queensland Water Resources Commission using science that is not controversial, I'm not sure where we go,” he said.

“People can make as many claims as they want but the science of aquifer modelling is not controversial; it's been done for years."

The production of both conventional and unconventional gas has been happening for 40 years in Queensland, the difference today is the amount of larger projects being developed, The Australian reports.

"That increase in scale impacted more people and created more concerns and we might not have addressed those concerns as quickly and as effectively as we should have," King said.

With this in mind, Origin set out to drill a 1500m well in the Surat Basin, removed the rock section, and cut it into lengths to demonstrate where the aquifers are and where the company extracts the CSG from.

"We've taken that to Canberra and had the expected level of interest at a political and technical level from the Coalition and the Government, but not one Green politician accepted our invitation to have a look," King said.

Drinking the issues

IMG_9308.JPGThe loudest concern regarding CSG activities is water including water availability, quality, and impact, closely followed by emissions, and health impacts.

“Water tends to be the biggest concern,” Moraza said.

Hutton claims the opposition group’s main concerns which include water and fugitive emissions have not been resolved.

“The main criticisms we have made they have no answers to,” he said.

“They don’t know what the impact on underground water will be.”

AGL explained that it is committed to working transparently with government and communities to build a world class CSG sector in NSW.

“AGL has developed an industry first water and air emissions testing program for its Camden Gas Project, planned and designed in partnership with the local community and industry experts,” the company said. 

At its Gloucester gas project AGL is implementing a water quality testing program which will have a total of 45 monitoring bores, and also provided funding to the Gloucester Shire Council for an independent water scientist.

“The biggest risk that we spend a lot of time considering is the interference with aquifers, ground water in particular is our number one risk that we manage with well design, techniques and the way that we operate,” Moraza said.

He also explained managing flammable gas and emissions are key priorities in the company’s risk plans.

 “Gas leaks, a release of a flammable gas into the atmosphere as well as some greenhouse ramifications for discharging gas into the atmosphere, the equipment that we use, the steel pipeline that we use, the valves, the way that we set our equipment out are the ways that we deal with that,” Moraza stated.

Moraza said if the company’s operations posed a risk to health risks “then quite frankly we would stop what we were doing and we wouldn’t do it anymore”.

“The risks with health is something that we are quite vigilant about but that I am quite confident, and our track record demonstrates this, that there is nil, if not negligible, health impacts caused by our industry,” he said.

“But we are ever vigilant about it and we are doing everything we can to minimise any health risk.”

Co-existenceIMG_9388.JPG

For a healthy CSG industry to take off in NSW a model of coexistence must be adopted, Moraza explained.

In NSW the location of CSG projects are closer to developed urban areas or intensive farming areas, a fact Moraza said is shaping the way the company interacts with residents, and communities in order “to be respectful of their needs, their businesses and ensure co-existence”.

 “Our projects co-exist alongside a variety of land uses. In Queensland the land uses are predominantly agriculture and to some extent some overlapping tenures with coal mining companies,” he said.

Australian Mining recently visited AGL’s Gloucester operation, which while not in the production phase, does have 12 production test wells running.

IMG_9289.JPGWhat stood out was the small footprint of the wells, which when operational take up a 40 meter squared space.

AGL is currently running irrigation trials, growing Lucerne and triticale with water drawn out of the coal seam during the extraction process.

“Getting new water from coal seams, which was never going to be obtained, blending it with other water, we’ve cracked it,” Moraza said.

In NSW coal miners are already removing gas from coal seams, flaring or venting the gas directly into the atmosphere, CSG producers are attempting to capture the methane for use in industry and domestic houses.

IMG_9420.JPGSpeaking to a number of local famers in the Gloucester region their biggest concern is around the affects CSG production will have on water.

One farmer said allowing AGL land access has given him a guaranteed income of about $4000 a year per well, which he said provides a little security especially when cattle and dairy markets falter.

He said the company has also built new access roads on his property and provide job opportunities to the region.

APPEA director of external affairs Michael Bradley said local support for CSG is stronger than many realise.

"More than 3500 agreements have been negotiated between Queensland farmers and gas developers. It is no longer a question of can agriculture and gas production work side by side – it [already] does," he said.

Hutton said he doesn’t accept co-existence will be the answer, saying “this is a high impact activity”, with gas fields requiring “heavy infrastructure” which will eat up prime land.

NSW CSG

IMG_9281.JPGIn an initial report on NSW CSG prospects, released in August, chief scientist and engineer Professor Mary O’Kane said misinformation is fuelling many CSG concerns.

O'Kane reiterates there are wide-ranging community concerns about CSG and suggests tougher regulation, increased penalties for breaches and more environmental research be conducted.

Premier Barry O'Farrell ordered O'Kane to start the study earlier this year after announcing a ban on all CSG activity within two kilometers of residential areas and critical industry.

"CSG is a complex issue which has proven divisive chiefly because of the emotive nature of community concerns, the competing interests of the players, and a lack of publicly-available factual information," O'Kane said.  

She explained that the polarising CSG debate has been fuelled by unanswered community concerns “surrounding landholders' legal rights, land access and use; human health; the environment, particularly relating to impacts on water; engineering and operational processes; and industry regulation and compliance”.

"The challenges faced by government and industry are considerable and a commitment from all parties will be required to improve the existing situation and build trust with the community," she said.

While O’Kane recognises CSG extraction, like all forms of energy production, poses human health and environmental challenges, she explains that many of the issues can be offset by ensuring engineering best practice, transparent compliance checks conducted by regulators, and rapid response plans formulated should an incident occur.

The report found the government can build public confidence and support for the sector by implementing industry best practice for all stages of CSG extraction, including stringent compliance inspections, monitoring efforts, and imposing hefty penalties for licence breaches.

O’Kane recommends the state government  conducts a subsidence survey going back 15 years "and that, from 2013 onwards, an annual whole-of-state subsidence map be produced so patterns could be traced for the purpose of understanding and addressing any significant cumulative subsidence".

The report states a complete environmental database should be established which includes all data collected around water management, gas extraction, mining, manufacturing, and chemical processing activities.

"As the review continues, the team will be undertaking further work in relation to landholders' legal rights; examining appropriate levels of industry insurance; conducting a full industry compliance study; reviewing government best practice in the management of CSG extraction; and analysing in-depth the methods for CSG risk and assessment," she said.

The report highlights training is a critical step, recommending all CSG workers, including subcontractors complete mandatory certification requirements.

"The issue of CSG is a very tough one and requires a commitment from government to sound policy implementation based on highly developed data," she stated.

O'Kane said the gas sector is still evolving and as the science advances major companies should be prepared for rolling changes and new regulations.

"Further research will also be essential to filling knowledge gaps," she added.

APPEA spokesperson Michael Bradley said many of the recommendations laid out in the report are already being adopted by gas producers.

''APPEA is committed to working with the Chief Scientist throughout the next phase of this process to find a solution to the state's impasse, as NSW consumes almost a quarter of the east coast gas supply but produces less than one per cent of that supply,'' he said.

Currently developing CSG operations in Gloucester and the Hunter Valley, gas producer AGL said it is in agreement with O’Kane’s findings, with Moraza describing them as “comprehensive”.

 “AGL agrees with Professor O’Kane that CSG concerns ‘can be effectively managed through high standards of engineering, rigorous monitoring and supervision of operations’,” a company spokesperson said.

“We hope that the report will help ease the concerns expressed by the community and enable the NSW Government to support the CSG industry and its significant economic benefits.”

The independent review will continue well into next year.

"There is indeed more work to be done," O'Kane said.

The fact that the first ever scientific review of NSW CSG took place this month the question begs has industry and government done enough science to date to build the confidence and trust in the community?

Moraza said “a fair answer is no”.

“More science needs to be done,” he said.

“More trust building needs to be done.

“I think it can be done and it will be done.

“I’m hoping that that fact base, that scientific base, that information base goes a long way towards correcting that misinformation that is out there and goes a long way to providing evidence and support to the theory that we believe that our industry can produce natural gas quite safely.”

Hutton said middle ground can be established between opposition groups and producers through the establishment of “no-go zones which meet community expectations as to where you put high impact, heavy industry”.

 

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