NSW puts the clamp on coal seam gas

ScreenHunter_1826 Mar. 27 10.35

By Leith van Onselen

In a move that is certain to infuriate the oil and gas lobby, the New South Wales Government has announced that it will freeze coal seam gas (CGS) exploration applications for six months, review existing licences, and significantly increase licencing fees. From The Guardian:

The Premier, Barry O’Farrell, accused the former Labor government of granting petroleum exploration licences “like confetti” and warned that the government would also audit existing licences.

“We’re taking decisive action to ensure the state’s resources are developed for the people of NSW…

O’Farrell said the former Labor government granted 39 exploration licences, while his government had yet to grant a single one…

The premier said the licences granted under Labor were handed out with “virtually no oversight and clearly no thought”.

He slammed Labor for only charging $1000 for exploration applications… That fee is now being raised to $50,000.

This is a wise move by the New South Wales Government. The granting of CSG exploration licenses appears to have moved well ahead of the Government’s ability to meaningfully monitor the process, and the freezing of the application process, along with reviewing current applications, should allow it to catch-up.

The New South Wales Government’s caution is also warranted in light of the environmental risks posed by the CSG extraction process. Earlier this month, a Santos CSG project in northern New South Wales was found to have contaminated a nearby aquifer, with uranium at levels 20 times higher than safe drinking water guidelines.

And in a report last year by 60 Minutes, several examples were cited of gas leakages from wells and possible poisoning of ground water in Queensland. Queensland’s Mines Minister, Stephen Robertson, was also shown having absolutely no idea about the chemicals being pumped into the ground in the process of mining CSG, instead relying on industry assurances.

[email protected]

www.twitter.com/Leithvo

Leith van Onselen

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.

Latest posts by Leith van Onselen (see all)

Comments

  1. The contamination doesn’t seem to have been caused by fracking as you have implied.
    As the story you link to notes:

    “EPA chief environmental regulator Mark Gifford confirmed the contamination was caused by water leaking from the pond and that lead, aluminium, arsenic, barium, boron, nickel and uranium had been detected in an aquifer at levels ”elevated when compared to livestock, irrigation and health guidelines”.

    Mr Gifford said the metals are ”not additives” and occur naturally in the surrounding soil and water.

    ”However, the leaking pond has mobilised the elements and moved them into the aquifer, increasing their concentrations,” he said. ”Importantly this water is not used for livestock, irrigation or human consumption.”

    The $1500 fine ”reflects the level of environmental impact, which was small”, he said.

    • No but it has been caused by the CSG extraction process, whereby processes were lax:

      “The investigation concluded there was no evidence contractorsfollowed strict rules when building a pond to hold waste water and brine produced when gas is extracted. The investigation concluded the pond liner was of ‘poor quality, which resulted in the integrity of the liner being questionable'”.

      Granted, I should have said “CSG extraction process” instead of “fracking process” (now changed), but it hardly changes anything.

      • So the extraction has caused higher concentrations of naturally occurring elements in an aquifer that is not used by livestock, irrigation or human consumption.

        Given the apparently benign leakage has in any case been attributed to a pond liner of “questionable integrity” installed by the previous operator, I think the $1500 fine may have been a bit harsh.

        • Pat. It highlights lax processes, as does the 60 Minutes investigation (and examples in the USA where fracking has gone bad). Sure, the outcome might have been benign on this occasion, but next time?…

          Poisoning of ground water is what really concerns me. Once it is poisoned, there is no turning back.

    • Pat,
      Congratulations on your efforts in going behind the headlines, and highlighting the facts of this minor incident. You might also have noted that the problem was not due to Santos’s activities, but those of contractors to Eastern Star Gas (ie. the previous management). If there are changes needed to SOPs around retention ponds, I am sure Santos will implement them rather than put their Gladstone LNG investments at risk

    • Pat, E. coli and typhus are also naturally occurring “elements” but I’m sure you would be concerned about finding them in your water supply due to someone accidentally allowing for the mixing of sewer and drinking water. Aside from the needed chemicals and increased water usage of fracking operations, fracking allows for increased water circulation in the rocks resulting in: increased dissolution of minerals; higher microbial activity in rocks; mixing of water bodies at different levels. The question is if fracking can be controlled so as to avoid these incidents and it seems unlikely. So taking a break in granting licenses to assess the situation is, at the very least, the appropriate course of action.

  2. Lets see there’s a pattern here somewhere that I’ve seen before

    Increase demand, especially foreign demand…tick
    Clamp down on all new domestic supply……tick
    Celebrate our new found Aussie wealth….tick
    Borrow heavily to enable exports development …..tick
    Blame the Global market for domestic price hikes……tick

    If a maths major found two different industries with exactly the same dynamics he’d call it correlation, I wonder how much more correlation is needed before we start calling the political actions that create this situation causation.

    Is the Aussie public really this dense?

      • No, the Australian people are not dense. They delegated these matters to government, to be decided in the common good. It is called representative democracy.

        Government has access to the best minds to guide its decisions. They choose not to listen, or prefer sub-optimal outcomes to advantage vested interests. There is the problem.

      • Your Party system working for you. Would you like blue or red well marketed stupidity and greed this time Mr Voter

    • GunnamattaMEMBER

      Yes, Australia is a dictatorship of dullards.

      Dont fight it, embrace it.

      There has never been a better time to buy

      • “The pen is mightier than the sword” hardly applies in the case of a dictatorship.

        Here we are, nigh on 6 years post GFC kick-off and what has changed…? Words have been useless.

      • Yea, All that’s missing from this narrative is Obied’s name a few hookers a dead body and GR claiming he cant decipher any of the details on RM’s tape. Heck even with this level of doggy deals the NSW public still doesn’t have a single significant conviction, disgusting.

        Political parties change but the process of self enrichment remains the same. Reminds me of Africa where nobody wants to fix corruption because it might set a precedent that’d impact their own get-rich-quick plans.

      • bolstroodMEMBER

        Thank you UE for shining a light on this issue

        David Collyer ,”The Govt. has access to the best minds to guide its decisions”
        You mean the best minds that money can buy.

        The going rate for a politician is……how much?

        The Govts. tightening on CSG mining has to do with the approaching state election. There is a growing revolt in regional NSW to the imposition of CSG on to rural communities .

        Watch for news from the Northern Rivers in the coming week.

        Hundreds of protectors are girding to face off with police riot squads at Bentley, half way between Lismore & Casino, to prevent CSG Miner Metgasco from installing a drill rig on Prime agricultural land.

        At Narrabri farmers & clergymen are locking on to machinery to prevent Santos from expanding there CSG operations on to the best farm land in Australia.

        Community surveys are reporting 95% + opposition to CSG mining in NW NSW. Similar results have been returned in the Northern Rivers.

        This is a huge issue for the Govt.

  3. We have stranded assets in coal fired power stations, particularly the Vic brownies. Yallourn is allegedly the dirtiest generator in the world.

    Without easy access to land for frackers, the whole class of LNG plants risk the same fate, or at least be inefficiently used – and they are brand new!

    Meanwhile Australians will now have to pay world prices for gas. Great policy outcome, guys!

  4. Well done to O’Farrell. Now let’s see him start funding a dedicated body to oversee this risky experiment. Other states take note.

    And keep up the good coverage too UE.

    • O’Farrell has announced a “freeze on coal seam gas exploration applications in NSW” for 6 months and “that existing licences would be audited” (as usual, by the EPA and Dept of Resources and Energy). He is obviously responding to landowners agitation against the CSG industry, and his NSW Nationals coalition partner.
      Looks like the action of a cautious, conservative Premier, but NSW and the rest of Australia cannot afford to lock away the energy wealth that CSG offers.

      • moderate mouse

        “….but NSW and the rest of Australia cannot afford to lock away the energy wealth that CSG offers.”

        Maybe.

        What NSW and the rest of Australia DEFINITELY cannot afford is long term damage to ground water resources.

        We also DEFINITELY cannot afford to rely largely on the platitudes and conflicted assurances of industry in controlling the risks associated with fracking.

        Santos, Origin Energy and others should welcome any attempts to ensure that this industry is properly regulated and policed. Unless of course, they have something to hide.

  5. O’Farrell best implement a Gas Future Fund. Going to get very pricey when competing with international markets to buy back your own gas.

    • Are you suggesting that increased Australian production would meaningfully reduce the international price?

      Or are you instead suggesting that the government should force local producers to sell below the (international) market price?

      I can’t think of a different interpretation of your comment (other than frack baby, frack – with apologies to Sarah Palin).

  6. There is a multitude of chemicals both injected, and generated as a by-product of the CSG extraction/fracking process which will find their way i.e. migrate broadly with no real boundary down and across the residing watertables near extraction wells- so for completeness in research:
    1)does anyone have a comprehensive list?
    2)has anyone got a comprehensive risk analysis of this chemicals list on contamination/poisoning of watertables ?
    3) most of the major manufacturers in the chemical industry are signed on to a Responsible Care program – so who are the major suppliers of chemicals to the CSG industry? , and how are they monitoring use and disposal of their chemicals in the CSG application/indusry?

  7. “NSW puts the clamp on coal seam gas” ? No, there is no clamp on the gas flowing from CSG wells in NSW. The orderly development of NSW’s CSG resources continues, despite the noise from NIMBY landowners.
    Does anyone in their right mind believe that we should discard the basic principle behind our mining laws? Ie., that land ownership only extends to the right to use the land’s surface, and does not include a right to obstruct mining. All mineral resources belong to the State, who may license individuals and companies to explore for, and exploit those resources.

    • Does anyone in their right mind believe that we should discard the basic principle behind our mining laws?

      Yes. There are many people who question current laws and the principles behind them. Most of these people are not mentally defective.

  8. bolstroodMEMBER

    Even if that means rendering the property & enterprise that occupies the surface untenable ?

  9. What about underground coal gasification then? Knocked on the head by one or other Queensland government fairly recently. Usually no need to frack and no water pumped down holes to come up contaminated and then be dumped in holding ponds that apparently turn out to be full of holes sometimes. If you want domestic gas then UCG is the way to go. But if you feel the need to peddle methane offshore, then you are stuck with CSG.

    • bolstroodMEMBER

      azxylon what is given off when you burn coal?

      UCG was tried around Kingaroy about four years ago & was found to pollute nearby farmers ground water wells .
      with BETX chemicals. The aquifers are interconnected
      Some of the best farm land around Kingaroy was compulsorily purchased, including Joh B’s home farm.
      Nearly all the farming land in that area relies on ground water.
      UCG is dirty technology & quite rightly banned.

      • There is no evidence that the trace of benzene derivatives found at one bore hole on the Kingaroy site was due to contamination by the UCG process. There is some evidence from sampling around the district that traces of benzene derivatives found away from the UCG site are more likely related to previous farming activity.

        The farmers in the Kingaroy district generally do NOT rely on ground water for their livestock, and there is no evidence that the UCG project at Kingaroy penetrated any aquifers. And if you think UCG is worthy of banning what is your view about banning CSG activities? I’ll answer that one for you; if you ban UCG then logically you must ban CSG activities as well. CSG is many orders of magnitude “dirtier” than well-managed UCG.

        As for what are the constituents of gas produced by UCG: why, CH4, CO and H2 of course. It’s just coal gas after all, isn’t it? Scrub out the CO and burn the H2 and CH4, don’t you?