Sunday, 5 October 2014

The state of play in the coal seam and unconventional gas industry, according to the NSW Chief Scientist

Excerpts from the NSW Chief Scientist & Engineer Mary O’Kane’s Final Report of the Independent Review of Coal Seam Gas Activities in NSW (September 2014):

Stakeholders have significant concerns

* Land is a key issue and one that strikes an emotional chord due to the strong affinity
Australians have with their land and its central role in the livelihood of rural communities.
There is a perceived lack of support for rights of landowners in terms of access to their
land. Lack of consultation, inadequate compensation, property value decreases, and
potential legacy issues are also cited as major issues by landowners as are the negative
impacts on amenity and a lack of adequate benefits for their neighbours and their

* Water is another key issue. Primary producers and others fear that CSG developments
will negatively impact prime agricultural land by depleting aquifers and contaminating
groundwater reserves. They argue that it could result in reduced food production.

* Other major concerns, especially from community groups, are short- and long-term
negative environmental impacts (and who will pay to remediate land); managing
produced water and associated by-products such as salts; possible impacts on human
and animal health; the distributed nature of the industry (giving rise to concerns including
malfunctioning unattended wells and heavy traffic on minor roads); and the cost to the
taxpayer of regulating the industry.

* Certain processes such as fracture stimulation (‘fracking’) and, to a lesser extent,
horizontal drilling, are of particular concern in the context of CSG although the use of
these techniques in other industries (underground water access in the case of fracture
stimulation and infrastructure provision in the case of horizontal drilling) is more

* There is concern about lack of adequate and respectful consultation. Stakeholders cited
the failure of industry proponents and government agencies at all levels to engage,
provide information, communicate and address community concerns before proceeding
with development. On the issue of consultation and adequate information provision, the
Review notes that getting the balance right between overall benefit to society and impact
on individuals is a recurrent challenge for governments especially for issues as divisive
as CSG. While the Review found that consultation and information provision could be
significantly improved, it is clear that there are many in the community whose level of
concern is such that they are likely to remain opposed to CSG production in NSW under
any conditions.

* A large number of those who expressed their opposition to CSG to the Review also
made it clear that they were not opposed to CSG per se but were opposed to CSG
production in heavily populated areas and in areas of intensive agricultural production.

* Local councils, especially rural councils, are concerned that they are not receiving
adequate funds to cover rapid infrastructure upgrades (such as upgrades to local roads
and other amenities) necessary to deal with the CSG industry coming to a rural locality.

* The CSG industry is concerned that it is being adversely affected financially by what it
perceives to be an uncertain, often changing, and increasingly tough regulatory regime in

* There is a perception in some parts of the community that CSG extraction is potentially
more damaging and dangerous than other extractive industries. This perception was
heightened following the release of the American movie Gasland in 2010. The Review
examined this issue in detail and concluded that while the CSG industry has several
aspects that need careful attention, as do almost all industries, it is not significantly more
likely to be more damaging or dangerous than other extractive industries.

* Many perceive the CSG industry to be a new industry that is being fast-tracked without
adequate attention to significant concerns. CSG production has been happening at
significant levels in North America (where coal seam gas is generally referred to as coal
bed methane) for two decades and in NSW for 13 years (at Camden by Sydney Gas,
later AGL). CSG from NSW sources currently accounts for 5% of the NSW gas supply. In
the 1990s the Government introduced measures such as a five-year royalty holiday
(followed by a five-year incremental sliding scale of royalties from 6% up to 10%) to
encourage the petroleum industry. This benefit was removed at the end of 2012. Some
of the companies that began exploring during this time were responsible for incidents
that led to increased concerns about the industry generally.

* Complex and opaque legislation and complex regulatory processes. This concern was
raised repeatedly by community, the CSG industry and government agencies. It can lead
to considerable administrative burden for those needing to comply, those assessing
compliance and those trying to understand the legislative and regulatory regime from the
community for the purpose of investigating concerns. This complexity can also lead to
gaps, overlaps, contradictions and wasted time in inefficient oversight. The Review
agrees that the legislation and regulatory processes need to be addressed.

* Inconsistent legislation. Many industry and community groups have alerted the Review to varying legislative and regulatory regimes for things similar to those relating to CSG
extraction. Legislation and regulation covering the construction of wells and production of
gas from coal seams as part of coal mining activities is less stringent than that for CSG
production. Similarly a 2km buffer zone approach has been introduced for CSG
extraction, but no such zone is in place for conventional gas or other types of
unconventional gas extraction.

Lack of trust

* CSG companies are viewed as untrustworthy by some members of the community in
both urban and rural areas. This lack of trust seems to stem particularly from some CSG
exploration companies: being perceived to be in violation of land access regulations;
being perceived by some to bully vulnerable landholders; not managing sub-contractors
appropriately; engaging in questionable environmental practices; and not reporting
accidents to the regulator quickly enough.

* Despite the limited extent of CSG development across NSW, Government is perceived
by some as favouring the CSG industry for allowing it to proceed in areas where there
has been considerable community opposition. Government is also perceived by some as
not managing regulatory compliance effectively and not supporting compliance activities
with sufficient penalties where CSG companies have infringed regulations.

* Government and industry information about CSG is perceived by some as lacking
independence and, accordingly, is not trusted.

* Among groups trying to understand CSG impacts there is concern about lack of access
to raw data, and especially baseline data associated with a locality, before CSG
exploration and production commences. While the Government open data access
provisions of recent years go some way to addressing this concern, the fact that most
companies are not releasing this data in raw form (and are not required by Government
to release it) leads to increased suspicion.

* There is considerable social tension and animosity between some neighbours in some
local communities where CSG operations are proceeding or proposed. On the one hand
there are those who are concerned about potential negative impacts of CSG extraction
and see those who want its introduction as ‘selling out’ to CSG companies. On the other
hand, landowners and community members who are in favour of CSG often feel that the
debate has been ‘hijacked’ by environmental activists who are ‘using’ the community for
their own ends……….

There are things we need to know more about

* While Australia has a long history of working in the subsurface, there is still considerable
uncertainty associated with the development of any new resource province. Currently
CSG activities tend to be considered mainly at a site-specific level. A better
understanding of the industry impacts at scale and over time is needed. To enable better
planning decisions and better management of cumulative impacts, it will be necessary
that industry collects and provides to Government significantly more data than at present
including data from a wider range of sources. With a diverse range of resources,
including coal, CSG and underground water, hosted in our sedimentary basins, there is a
need to understand better how the different resources and their development regimes
interact. More detailed knowledge of the structure and composition (especially regarding
hydrogeology) of the sedimentary basins is needed to enhance productivity for the CSG
industry through more precise resource characterisation and better subsurface and
surface environmental management.

* There is a need to understand better the nature of risk of pollution or other potential
short- or long-term environmental damage from CSG and related operations, and the
capacity and cost of mitigation and/or remediation and whether there are adequate
financial mechanisms in place to deal with these issues. This requires an investigation of
insurance and environmental risk coverage, security deposits, and the possibility of
establishing an environmental rehabilitation fund. Doing this is essential to ensure that
the costs and impacts from this industry are not a burden for the community.

* Legacy issues, including better understanding of inappropriately abandoned wells, need

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