To CSG or not to CSG, that is the question for NSW

New South Wales is finally grappling with growing issues in its coal seam gas industry that Queensland has had to deal with for several years. As early as 2008 Lucas Energy described NSW as “full of opportunity” for CSG companies. But the state was slow to catch on. Gas makes up 10% of NSW’s energy mix and more than 90% of that gas is imported from other states. That is changing as companies exploit rich local resources to feed the Asian and local gas market. The State Government has approved exploration wells and extraction projects in Gunnedah, the Hunter Valley and Sydney’s southwest, and applications are in place for the Illawarra and Gloucester. But as the industry flexes its muscles, it is running into stern resistance.

The Greens’ Jeremy Buckingham has introduced a private member’s bill in the NSW Upper House proposing a 12 month moratorium on “the granting of exploration licences for, and the production of, coal seam gas; and for other purposes”. It also wants an end to mining in the Sydney area. NSW Labor has changed in opposition and now supports Buckingham’s moratorium. Labor leader John Robertson announced a new policy this week supporting a moratorium on coal seam gas licences, and the issuing of extraction licenses and applications to expand existing operations.
Robertson said the Government should not allow CSG extraction to proceed until a water-tight regulatory framework is in place based on “independent scientific research and conclusive evidence”. Party comrades north of the Tweed are still in government but face opinion polls of 39-61 and are likely to lose next year’s election. With three major projects approved, the incoming Queensland LNP government are unlikely to change their mind and support moratorium calls from farm and environmental groups. And a NSW moratorium won’t succeed without the support of the NSW Liberal Government. The voters may be uneasy about CSG, but the Libs are looking enviously at Queensland’s royalties.When Barry O’Farrell was elected premier in March, he announced a 60-day moratorium on CSG exploration licences citing concerns about the contamination of prime agricultural land. When that expired, NSW Resources and Energy Minister Chris Hartcher imposed further regulations including banning the BTEX chemicals already banned by Queensland, a moratorium until the end of the year on fracking, the need for water licences, a ban on evaporation ponds and new public consultation guidelines. Hartcher said it was important the inquiry heard all views. “Everybody’s interests need to be looked at and considered including those of landholders, the industry and the government,” he said.

The Upper House Inquiry conducting statewide public hearings begins on on August 5. It was tasked to “inquire into and report on the environmental, health, economic and social impacts of coal seam gas activities” and also examines CSG’s role in “meeting the future energy needs of NSW”. Its report is due on April 6, 2012.

Local government officials are unhappy with the industry. Lismore City Mayor Jennifer Dowell told the Inquiry her council was opposed to CSG citing produced water, evaporation ponds, irrigation groundwater contamination, methane leakage, loss of prime agricultural land, landholder agreements and social impacts. Ballina Mayor and presidential of the regional group, Phillip Silver, agreed with Lismore but recognised an inconsistency in that resolution; “Similar to climate change, fluoridation and other scientific matters there probably never will be a unanimous scientific view,” Silver said.

The proposed exploration well in the inner Sydney suburb of St Peters is particularly controversial because it is close to homes and the well would penetrate an aquifer. Dart Energy hold a Petroleum Exploration Licence for the Sydney Basin covering 2385 sq km of the Sydney Basin from Gosford on the Central Coast to Coalcliff in the Illawarra. Sydney Mayor Clover Moore says they want a halt to the issuing of exploration licences. Her submission said aquifers and groundwater systems could be significantly impacted. “Gas can help us transition to a greener future, but that can’t happen unless the environmental safeguards are in place,” Moore said. “Gas is not greener if we destroy our farmlands to get there.”

Santos fronted the Inquiry on Thursday. They have been producing CSG in Queensland since 1995 and their submission is in favour of mining. They said the practice was safe and environmentally sustainable. Santos have bought NSW leading player Eastern Gas for just under $1 billion which builds on Santos’ existing interests in the Gunnedah Basin. Eastern Star Gas Limited’s Narrabri Power Project supplies gas from the 11.3 PJ Proved and Probable gas reserves at the Coonarah Gas Field, (12 km west of Narrabri), to the Wilga Park Power Station, under a 10 year agreement with Country Energy.

Santos needs NSW gas to meet their first train commitments at Gladstone in 2014-2015. Santos vice president for eastern Australia James Baulderstone said their acquisition of Eastern Star made it the principal CSG exploration and production business in NSW. Baulderstone said Santos have withdrawn the controversial 270km Mullaley pipeline from Narrabri to the Wellington power station.

However he argued strongly against a moratorium on CSG exploration until more scientific data is available, as CSG opponents have requested. “Let’s be frank, many of those that oppose our industry know that stopping exploration now will stop the long-term development of the industry in NSW,” Baulderstone said. “Ongoing exploration activity provides the additional scientific data and knowledge of the geology and water resource that everyone agrees is needed.” Barry O’Farrell will have to decide come April, if as is likely, the Government doesn’t support the private member’s bill.

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