Coal seam gas benefits exagerated

ScreenHunter_1715 Mar. 18 09.49

By Leith van Onselen

Early last year, I wrote an article, “Fracking the countryside”, questioning the merits of extracting natural gas trapped in shale rocks or coal seams via the process of hydraulic fracking.

This process essentially involves drilling and inserting a pipe deep into the ground and then pumping millions of litres of high pressure water and ‘fracking fluid’ into the shale rock or coal seam, causing it to fracture and releasing stored natural gas where it is then captured for energy production (see below image).

While natural gas is a relatively clean burning fuel, the process of fracking is highly controversial as it risks contaminating nearby water tables with both methane and fracking fluid, which is known to contain a number of carcinogens.

In that article, I attached two videos from the USA and Australia highlighting some of the potential deleterious impacts of fracking on the natural environment (click here to watch).

Yesterday, progressive think tank, The Australia Institute, released a report entitled “Fracking the future”, which attempts to bust gas industry’s myths about coal seam gas (CSG), while at the same time highlighting the potential health and environmental risks. Below are some key extracts from the Summary of the report:

There is heightened public concern about the environmental and health impacts of CSG extraction and the industry has met fierce opposition from a range of different groups. It has also met resistance from policy makers, with several governments enacting restrictions aimed at CSG projects…

The Victorian government was sufficiently worried about the effects of CSG that in 2012 it introduced a moratorium on hydraulic fracturing of rocks to release coal seam gas, a process also known as fracking. The NSW government introduced two-kilometre CSG exclusion zones around residential areas and banned CSG extraction in the Sydney water catchment area due to fears it might contaminate Sydney’s drinking water.

Despite these new regulations, the federal government is pushing to devolve responsibility for approving resource projects, including CSG projects, to state governments. This is part of the government’s push to reduce regulation, or so- called ‘green tape’, in the resources sector.

Results from The Australia Institute’s November survey1 found that the general public has a very different view from the government on how CSG should be regulated.
When asked about which level of government should regulate CSG, 71 per cent thought that the federal government should do it. When asked about the level of regulation of the CSG industry, 56 per cent wanted more regulation, with only seven per cent thinking there should be less regulation. This puts the general public’s views at odds with the federal government’s views.

More CSG does not mean lower gas prices

The gas industry has claimed that the east coast of Australia is facing a gas crisis and that the solution is to fast track the expansion of CSG development. It claims the increase in supply will hold gas prices down. But these claims show a complete lack of understanding of what is causing prices to rise.

At the moment Australia’s eastern gas market, which includes Queensland, NSW, ACT, Victoria, Tasmania and South Australia, is not linked to the rest of the world. Eastern Australia has hitherto enjoyed low gas prices, since there was plenty of supply relative to domestic demand and no capacity to export gas from the east coast to international customers.

Recently, however, gas companies have begun construction on three large LNG facilities near Gladstone in Queensland. They will liquefy the CSG so that it can be shipped overseas. The overseas price of gas is far higher than the eastern Australian price and once the export facilities are completed, if customers in eastern Australia want to buy gas, they will have to match the overseas price minus the cost of liquefying and transporting the gas to Asia. This is also known as the export parity price. When the three export facilities are up and running this will triple the demand for gas.

While it is often the case that increasing supply of a domestic product will cause the price to fall, this is only the case, as economists say, ‘with all other things being equal’. In this particular case other things are not equal because eastern Australia is about to be connected to the much higher world price. The increase in supply will only reduce the price Australians pay if it lowers the world price, which is unlikely.

What’s really causing the price to rise?

What is interesting about the argument from the gas industry – that restrictions in supply are the cause of the rise in price – is that it was actually the increase in supply from CSG that led to the LNG export facilities becoming viable. Before CSG was discovered, the eastern market did not produce enough gas to make export a profitable venture…

With gas becoming far more profitable, it is not surprising that gas producers are keen to expand their supply. Blaming restrictions on CSG for coming price rises is a clever tactic, designed to turn public support against those restrictions and increase pressure for them to be removed. But these claims are little more than posturing and bear no resemblance to what is actually happening in the market…

Once Australia is linked to the world market, only factors that are capable of changing the world gas price will be sufficient to change the domestic gas price…

Evidence doesn’t support CSG as a solution to climate change

The claim that CSG will help Australia respond to climate change was rated as one of the top four benefits of CSG by the August survey respondents.3 The claim is that, when burnt, natural gas produces fewer greenhouse gas emissions than coal. While this is true, it overlooks concerns about greenhouse gas emissions associated with the extraction of CSG, chiefly fugitive emissions. There are also concerns about how methane, the main fugitive emission from CSG, is accounted for…

Health and environmental effects of CSG

The chemicals used in fracking are of public concern, especially given the quantities used. A CSG well in Australia will use about 18.5 tonnes of chemicals. These chemicals can have dangerous consequences, as was shown when an emergency room nurse died in the US after treating a patient who had been splashed with fracking fluid.

The evidence shows that there are environmental and health risks from fracking fluids, but because of the current lack of research they are difficult to quantify.

There is significant public concern about the contamination of aquifers by fracking chemicals. The evidence suggests that while gas is actively being extracted from the well the chances of contamination are low, so long as it is managed properly. But there is concern, and a lack of information, about stranded fracking fluids, which are fluids left in the ground after the well has been abandoned.

Contamination of aquifers is a real possibility and, like much of the research into the environmental and health impacts of unconventional natural gas, there are still many unknowns. Aquifers are a vital source of water and are important for the production of food. Risks of contamination need to be taken seriously and more research needs to be done…

CSG extraction has the potential to cause harm to the environment, farming land, water resources and human health. August survey respondents raised all these concerns and the available evidence suggests they have good reason to be worried.

The lack of research that has been done into the environmental and health impacts of CSG is alarming. If the gas industry is keen to expand and the government wants it to, then it should commit far more funding to quality research in this area.

Given the big question marks over the safety of fracking, including the risks posed to ground water stored in Australia’s Artesian Basin and the agricultural industry more generally, Australia would be wise to proceed with caution on CSG.

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Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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Comments

  1. 5% of all well casings fail on first pour, a number that grows to almost 90% in 50 years. That said the geology around the OD of the casing is compromised faster than the casing its self.

    BTW who gets the bill for cleaning up the mess later on, the driller, the extractor or the land owner.

    Skippy… securitized orphaned wells anyone? Own the profit and hive off the risk.

  2. Those bloody greenies were right!

    Big environmental risks, the costs of which would be externalised and delayed while the gas producers took the resources and scarpered.

    The externalised costs would be borne by landowners, aquifer water users and probably taxpayers.

    There is a godd case to be made for progressive lodgement of environmental remediation bonds as resources are extracted.

    Just look at Googlemaps of the hunter valley and ask yourself
    1.how that land will ever be remediated,
    2. at what cost and
    3 will the miners actually be around to pay or will all the liabilities be in some venture specific company with no remaining value after the mining is completed?

    • Answers to your questions:
      1. It won’t be.
      2. No cost at all, see answer to 1.
      3. No.

  3. The fastest and least expensive method of extracting the most gas from a csg well is to lower the water table.
    It is the water pressure which is holding the adsorbed gas on to the particle of coal. If that water pressure is lowered the gas bubbles off, in theory. So should the gas flow from the well be lower than guessed, pumping the well out of water will ensure the most gas is extracted.
    With a well spacing of much less than 500m the water table will be lowered. what happens then??
    The CSG crews will ask questions later! WW

    • The water table returns to its natural hydrological level when pumping ceases. The scales of artesian basins are much greater than CSG fields. The coal seam is often the greatest contributor to recharge, as it is a highly permeable aquifer.

  4. University of Missouri researchers have found greater hormone-disrupting properties in water located near hydraulic fracturing drilling sites than in areas without drilling. The researchers also found that 11 chemicals commonly used in the “fracking” method of drilling for oil and natural gas are endocrine disruptors.

    http://medicine.missouri.edu/news/0214.php

    From a practical perspective, it will be impossible to clean up the area where the chemicals have been used. Think of the example of a toilet bowl after a bad day, it can take numerous flushes to clean that non porous surface, compare that to porous rocks underground soaked in chemicals. I’m sure the area will not get the necessary number of flushes to clean it up.

  5. “Hydraulic fracturing when conducted correctly is unlikely to introduce hazardous concentrations of chemicals into ground water or to create connections between fresh and coal-containing aquifers.” Geoscience Australia.

    As the AFR pointed out, “This advice is consistent with myriad US inquiries and a recent study in the UK that ended up encouraging its government to lift bans on unconventional exploration and production.”

    Of course, you can choose to ignore the experts.

    • Industry shrills masquerading as non biased experts???

      Pray tell why so much contra evidence is mounting when not industry affiliated.

      skippy… insert Upon Sinclare quote…

      • Well, as I said you can choose to ignore the experts. Or convince yourself that they are industry “shrills” [sic].

        Provide links to the opposing evidence and I’ll be happy to have a look at it.

    • Oliver! Don’t let facts get in the way of emotive outpourings!

      Gas prices are likely to continue upwards, guaranteed to exponentially if gas is in short supply.

      Better get used to wind farms and solar cell fields scarring the landscape of Greensville and Eco Valley – and even then still expect the lights to go out.

      • Aesthetics and price [time dependent – cheap now massively expensive later] is the scientific method for some.

        skippy… Economic Sci Fi does ring a bell…

    • Oliver 47 is right that sufficient time has elapsed for epidemiological evidence of harm to human health to emerge. The peer review process takes time, but the science is now coming in on an almost weekly basis.

      There is no doubt – operating heavily industrialised gas fields in populated areas creates a high level risk of catastrophic health impacts that will affect communities for generations to come.

      A high price is being paid by Australians who are exposed to dangerous pollution where the gas is mined and processed. A complex mix of toxic, mutagenic, carcinogenic, and endocrine disrupting pollutants can seriously injure health even in minute quantities, measured in parts per billion.

      Of particular concern are the effects of exposure to massive amounts of pollutants that affect such basic functions as growth, reproduction, and the immune response. About 100 gas mining chemicals are known to be hormone-disrupting, and exposure to minute amounts of these substances increases the risk of birth defects, cancer, and other diseases, especially in children.

      A recent study by Kassotis et al (2013) found a strong association between unconventional gas mining and the presence of high levels of endocrine-disrupting chemicals in the Colorado River and aquifer systems used for human consumption. Exposure to these chemicals increases the risk of reproductive, metabolic, neurological, and other diseases, especially in children, by interfering with the body’s response to the reproductive hormones estrogen and testosterone.

      About a month ago, McKenzie et al (2014) found a relationship between heart and neural tube defects in newborn children and the distance that their mothers lived from gas wells.

      In south-east Queensland gas fields, toluene has been found in the air around Tara homes, and in 2013 a high level of a toluene metabolite was found in the blood of a young boy who lived in the Tara estates. Recent testing in Tara found the toluene metabolite and phenol, cresol, poly aromatic hydrocarbons and methyl ethyl ketone in urine samples taken from a number of people.

      To understand the gas field health threat, you have to think beyond wells and pipes to the pollutants created by the gas mining process. Gasfields themselves create enormous amounts of air pollution, but even this is dwarfed by that created by compressor and processing plants. These factories take CSG from a number of wells, remove water and “impurities”, and compress the gas.

      According to QGC, their Kenya processing plant in the south-east Queensland Tara area in one year vents into the atmosphere 47,000 kg of formaldehyde; 110,000 kg of volatile organic compounds including benzene, toluene, ethylbenzene and xylene; 840,000 kg of oxides of nitrogen, and much, much more. QGC plans to have 24 such plants operating by the end of this year.

      And this is just the air pollution from one processing plant for one year. Add in the air, water, and soil pollution created by waste water, drilling chemicals, substances liberated from coal seams, flaring, spillage, fugitive emissions etc and you have the recipe for an emerging public health disaster that will dwarf the damage done by asbestos.

  6. bolstroodMEMBER

    The Australia Institute has released a report today in conjunction with 350.org Australia & Market Forces.
    The report questions the wisdom of investing in the Fossil fuel industry.
    Health reports emerging from the USA which has years more experience with this Industry are concerning.

    http://350.org.au/climateproofing/

    • Don’t worry fossil fuels are not going to be replaced anytime soon!

      TAI really is a shoddy outfit. An arm of the left and unions that routinely calls for measures guaranteed to increase unemployment across the nation.

      • Absolutely correct, it will never be replaced 3d1k, as there is nothing like it or comes close in the natural capital formation register. Its basically stored sunlight, you should read up on it imo.

  7. moderate mouse

    If the ‘make good’ provisions in CSG licences actually carried some genuine risk of costly remediation activities, then I doubt the gold rush mentality that currently exists in this field would make sense financially.

    Witness the recent slap on the wrist received by Santos (or should that be feather under the chin?) of a $1500 fine levied by the NSW EPA after investigation showed Santos had been responsible for contamination of a nearby aquifer with toxic metals – including uranium.

    Such a fine provides about as much disincentive for reckless environmental management as a speeding fine would prevent James Packer from future speeding. Absurd.

    Australia needs nothing less than a dedicated federal body established to regulate this industry and ENFORCE strict compliance with such regulations.

  8. bolstroodMEMBER

    Is that it 3d? deflect & smear?
    How about taking on the issues & not playing the man?

    • CSG is just another example of green induced (potential) disaster. Demonising plant food (CO2) has created a litany disasters from wholesale destruction of rainforest for oil palm plantations, poverty and malnutrition due to food being diverted into biofuels, EPA exemptions for wind turbines that are allowed to shred protected species with impudence, not to mention the destruction of 3 real jobs for every green job created.

      And thats before you even consider opportunity cost.
      2 million deaths per year from malaria, preventable with a $15 mosquito net. That is 34 million people who have died in the 17 years the IPCC have just admitted than no statistical global warming has taken place. The greens also fail to understand that Coal would replace wood in the third world as their major energy source, a massive benefit for the environment.

      • Air pollution
        Eagle Ford

        According to an investigation into air quality and Eagle Ford oil/gas wells by the Center for Public Integrity:[21]

        there has been a 100-percent statewide increase in unplanned toxic air releases associated with oil and gas production in the region since 2009;
        only five permanent air monitors are installed in the 20,000-square-mile Eagle Ford region;
        drillers of thousands of wells are allowed to self-audit their emissions without reporting them to the state, and the Texas Commission on Environmental Quality (TCEQ) does not know some of the facilities exist. An internal agency document acknowledges that the rule allowing this practice “[c]annot be proven to be protective”;
        companies that break the law are rarely fined: of the 284 oil and gas industry-related complaints filed with the TCEQ by Eagle Ford residents between Jan. 1, 2010, and Nov. 19, 2013, only two resulted in fines despite 164 documented violations. The largest was just $14,250;
        the Texas legislature has cut the TCEQ’s budget by a third since the Eagle Ford boom began, from $555 million in 2008 to $372 million in 2014.

        Dish, TX

        By 2009, residents of DISH, Texas living near 11 natural gas compression stations became concerned about the odor, noise and health problems they were experiencing, including headaches and blackouts, as well as neurological defects and blindness in their horses. Their mayor reported the accounts to Texas regulators and eventually hired a private environmental consultant, who in 2009 found that air samples contained high levels of neurotoxins and carcinogens.[22]
        VOCs

        The Texas Commission on Environmental Quality has reported that storage tanks used in the exploration and production of natural gas and oil are the largest source of VOCs in the Barnett Shale.[23]
        Ozone

        Ground-level ozone (smog) is formed when nitrous oxides (NOx) react with volatile organic compounds (VOCs) in the presence of heat and sunlight.

        According to a 2009 Environmental Defense Fund report, the natural gas and oil industry in the Barnett Shale area produced more smog-forming emissions during the summer of 2009 than were produced by all motor vehicles in the Dallas Fort Worth metropolitan area.[24]

        Using computer models, the Houston Advanced Research Center estimated that emissions from natural gas compressor stations and flares may be contributing significant amounts of ground-level ozone and formaldehyde in the Dallas-Fort Worth area.[25]

        San Antonio, Texas has violated federal ozone standards dozens of times since 2008, and U.S. Environmental Protection Agency could designate the city a nonattainment area for ozone. Local officials are waiting for the results of a state-funded study to pinpoint the source of the pollution. Preliminary numbers from the study indicate that much of the problem lies in the Eagle Ford.[26]
        Silica

        In July 2012, two federal agencies released research highlighting dangerous levels of exposure to silica sand at oil and gas well sites in five states: Colorado, Texas, North Dakota, Arkansas, and Pennsylvania. Silica is a key component used in fracking. High exposure to silica can lead to silicosis, a potentially fatal lung disease linked to cancer. Nearly 80 percent of all air samples taken by the National Institute of Occupational Safety and Health showed exposure rates above federal recommendations. Nearly a third of all samples surpassed the recommended limits by 10 times or more. The results triggered a worker safety hazard alert by the Occupational Safety and Health Administration.[27]
        Benzene

        The non-profit group Shaletest.org monitored gas drilling sites in Texas’s Barnett Shale in 2012 and found elevated levels of several chemicals, including toulene and the carcinogen benzene.

        The Texas Commission on Environmental Quality found airborne benzene near Barnett Shale wells at levels of up to 500 to 1,000 parts per billion — more than five times higher than allowable limits. The commission’s results came shortly after tests conducted by Deborah Rogers, who runs an organic goat farm in west Fort Worth and by the town of DISH in Denton County. Those privately funded tests showed, along with benzene and other chemicals, high levels of carbon disulfide, which can lead to neurological problems. Honeycutt said the commission began finding plumes of volatile organic compounds at Barnett oil and gas sites as far back as 2007.[28]

        http://www.sourcewatch.org/index.php/Texas_and_fracking

  9. “A 2012 paper was published in the journal, Environmental Health Perspectives, examining the composition of state and federal advisory committees tasked to consider the potential environmental and health effects of fracking in the Marcellus shale region. The researchers found that there was not one health expert among the 52 people comprising the various state and federal commissions and boards, even though public health was specified in the executive orders creating the committees.”

    http://serc.carleton.edu/NAGTWorkshops/health/case_studies/hydrofracking_w.html