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

New South Wales is finally grappling with issues in its burgeoning 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. Currently, gas makes up 10% of the NSW energy mix and more than 90% of that gas is imported from other states. But that is rapidly changing as companies attempt to exploit its rich 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 beginning to run into some stern resistance.

The Greens’ Jeremy Buckingham has introduced a private member’s bill in the NSW Upper House which proposes 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 done a 180 degree turn in opposition and now supports Buckingham’s moratorium. Labor leader John Robertson announced a new policy this week of supporting a moratorium on coal seam gas licences, the issuing of extraction licenses and applications to expand existing operations. Robertson said the Government should not be allowing CSG extraction to proceed until a water-tight regulatory framework is in place based on “independent scientific research and conclusive evidence”.

Their 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 are unlikely to change their mind and support the ongoing 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 new NSW Government is looking enviously at Queensland’s royalties.

When NSW Premier Barry O’Farrell was elected in March, he immediately 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 on the industry including banning the BTEX chemicals banned by Queensland, a continued 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 continues to tiptoe around the issue. He said it was important the inquiry heard all views, including that of industry. "Everybody's interests need to be looked at and considered including those of landholders, the industry and the government,” he said.

But the Libs have constituted an Upper House Inquiry conducting statewide public hearings 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 telling the Inquiry they are unhappy with the industry. Lismore City Mayor Jennifer Dowell told the Inquiry her council was opposed to CSG developments. Dowell cited issues such as produced water, evaporation ponds, irrigation groundwater contamination, methane leakage, loss of prime agricultural land, landholder agreements and social impacts. At the same hearing 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.

It is the proposed exploration well in the inner Sydney suburb of St Peters that is been particularly controversial because it is close to residential properties and the well would penetrate an aquifer. Dart Energy hold a Petroleum Exploration Licence for the Sydney Basin covering 2385 km2 of the Sydney Basin from Gosford on the Central Coast to Coalcliff south of Sydney. Sydney Mayor Clover Moore says they want a halt to the issuing of exploration licences. Sydney’s submission argues that 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."

Major industry player Santos fronted the Inquiry on Thursday. They have been producing CSG in Queensland since 1995. Not surprisingly their submission is in favour of coal seam gas mining. They said the practice was safe and environmentally sustainable. Of importance is the fact 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.

The word is that Santos needs NSW gas to meet their first train commitments in 2014-2015. Santos vice president for eastern Australia James Baulderstone told the hearing on Thursday Santos's acquisition of Eastern Star made it the principal CSG exploration and ultimately 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 issuing 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.