Draft Surat Underground Water Impact Report - part 3: Bubbling gas issues

In the last couple of days, the Lock the Gate Alliance which represents a coalition of landholders opposed to coal seam gas in the Surat Basin released a video called Condamine River Gas Leak. It shows footage from an organisation called Gasileaks taken along the River at an “undisclosed location”. There was bubbling activity at the surface of the river and some kind of meter that went berserk when placed near the bubbles.

Frackman in Roma July 2010

The footage was filmed by local landholder Dayne Pratzsky who has been a long-term vocal critic of the industry. I remember Pratzsky as “frackman” for his wonderful attention-grabbing outfit he wore  when he heckled the State Government Community Cabinet in June 2010.  When we published the Lock the Gate footage on our Facebook page today (without comment),  a local man named Andrew Thomas pointed out this phenomenon was not uncommon in the gasfields region. “I grew up at a location near Orallo and all the bores would light up if you wanted them to - the gas comes out of most bore holes,” Andrew said. “It has been happening for well over 150 years around Roma and Surat and lots of other places - get a life and move on.”

It might be difficult for Pratzky and other blockies in the Lock the Gate Alliance to do exactly that. This is their life and they don’t want to move on. Yet I fear they – and others who want a moratorium of the industry – are placing themselves too far outside the conversation about how the industry should evolve. Origin Energy, the petroleum tenure holder in the location where Pretsky filmed (a fishing spot south west of Chinchilla known as the "coal hole") confirmed what Thomas told the Western Star on Facebook “According to local knowledge it goes back at least 30 years and naturally occurring gas has been a phenomenon in the Queensland Western Downs region for more than 100 years,” Origin said.

The public face of Lock the Gate Alliance is its media-savvy president Drew Hutton. He was the one who publicly announced  the Chinchilla leak.  Hutton, a prominent member of Queensland Greens, said he was unconvinced by Origin’s response and challenged them to prove it. Hutton said Origin should “release its seismic and other data...to establish whether or not the leak is linked to the company's coal seam gas operations.” Hutton said he consulted “several highly competent hydrogeologists” who told him there was a good chance the leaks were “linked to the de-watering of the coal seam aquifers and possibly fracking opening up pathways for the methane.” 

With neither Origin nor Hutton willing to offer their sources, it is difficult to know who is right. And water quality remains one of the great unknowns of this massive new industry. Yet this problem can be solved just as land access and now water depletion. The 2010 Queensland land access laws redressed the power imbalance between gas companies and landholders and the new Draft Surat Basin Underground Water Impact Report  which I reported about on Monday (Part 1) and Tuesday (part 2) deals with the water depletion issue. The report specifically ruled out a role for monitoring water quality. That prompted an anonymous respondent to my Tuesday piece to ask the legitimate question: if "It will not monitor water quality (eg for contamination from fracking)", who WILL monitor water quality?  

The answer to that question is the same as the answer to who will monitor water depletion: a mix of the Queensland Government Department of Natural Resources and Mining and the petroleum tenure holders themselves. Many in the Roma forum on the report I attended asked if this was not leaving the fox in the charge of the henhouse. The Queensland Water Commission’s response to that was to say, if they did something wrong, they’d be found out. There would be anomalies in the results that would stand out.

If this is correct then we need to maintain trust. Trust of the companies to do the right thing and trust of the regulator to pick up the anomalies if the companies don’t do the right thing. The gas majors all have the profit imperative but are bound by a number of strict rules and environment conditions they have to satisfy to get the green light for their enterprises. With the pressure to meet their export commitments once the gas comes online in 2014, those companies will need to ensure they are squeaky clean so the regulator does not have a reason to hold them up.

What does need to be looked at is the quick gobbling up of Australia’s natural resources.  According to mining critic Paul Cleary, Australia has the 12^th largest reserve of gas but is the world’s second largest exporter and heading towards number one. Gladstone Port in Queensland is the home of four of the eight big LNG plants and Incentives by the Bligh Government drove gas consumption for the local market. Now the high price of oil is driving this massive investment in coal seam methane for LNG. The problem is the price of natural gas on the New York-based Henry Hub has been declining for over a year and will mean the companies will have to reforecast earnings or else dig for more gas.  

With governments greedy for the royalties, knowing when that saturation point comes will be critical for the success of the industry and the regions they serve. As the Surat DWIR proves, having good legislation supported by science will be critical in keeping an even keel.

Surat Underground Water Impact Report - part 2

This is the second post on the subject of the Draft Surat Underground Water Impact Report now out for review after the Queensland Water Commission today took its finding to Roma yesterday and Chinchilla today. See yesterday’s post on the background to the report and the geological formations involved.

This post looks at how the model was derived and examines the monitoring regime put in place by the QWC.  There were three key steps in designing the flow model: conceptualisation, construction and calibration.  In the conceptualisation phase, the designers took into account geological data and formation contacts in databases held by the Geological Survey of Queensland and the Department of Natural Resources Groundwater Database.

They also took into account the distribution and depth of the geological layers of the Walloon Coal Measures based on previous studies and developed hydraulic parameter estimates based on pump and drill tests, existing models and reported results.

They devised 19 model layers based the formations from the shallowest (Condamine Alluvium) to the deepest (Permian Sediments) and mapped out the groundwater flow between the layers. The layers are recharged by rain in the outcrop areas on the edges of the Basin. The model is further complicated by the Walloon Coal Measures (the main CSG bearing formation in the Surat Basin) which itself contains various layers of sediment of varying permeability. The model allocates three layers to the Walloon for simplicity.

The model covers an area 550km x 660km each divided into a 1.5sq km cell stacked into 19 layers.  Once constructed with initial hydraulic parameters, the model was calibrated to replicate pre-CSG conditions in 1995.  It was calibrated using groundwater levels from 1,500 bores in the groundwater database.  The model was designed to make predictions from the 1995 data both including and excluding petroleum impacts.  They added uncertainty analysis to provide 200 different predictions of drawdown for each model cell at different time periods. The upper and low five percent of the 200 were discarded as outliers and the maximum value of the remaining predictions was used in the report. 

The report estimates the CSG industry will draw an average of 95,000 megalitres of water a year over the life of the industry.  It will be higher in the next three years as the industry expands with the QWC with an average of 125,000 ML a year over the period.  This is why getting the water monitoring strategy right is so important. 

The water monitoring strategy involves monitoring of water levels in coal seams and surrounding aquifers. It will not monitor water quality (eg for contamination from fracking) or the volume of water extracted from wells. QWC will not conduct the monitoring – that will be left to the gas companies. Someone said to me today that was like leaving Ned Kelly in charge of the bank vault but the QWC assures us the companies have legal responsibilities and any anomalies will quickly be exposed.

The monitoring has six broad objectives. 1. Establish background trends not attributable to CSG. 2.Identify changes in aquifer conditions in petroleum development areas. 3. Identify changes in aquifer conditions near critical groundwater use (eg towns that rely on groundwater), 4 Identify changes in aquifer conditions near springs. 5. Improve future groundwater flow monitoring 6. Improve understanding of connectivity between aquifers.

There will be a regional monitoring network which will have 142 monitoring sites across the region (27 already exist) which will have 498 monitoring points (104 already exist). These sites will target different strata of the Surat and Bowen Basin including the Condamine Alluvium, Main Range Volcanics, Mooga Sandstone, Orallo Formation, Gubberamunda Sandstone, Westbourne Formation, Springbok Sandstone, Walloon Coal Measures, Hutton Sandstone, Evergreen Formation, Precipice Sandstone, Clematis Sandstone and Bandanna Formation.

At each site, water data is collected at least once a fortnight.  Queensland’s regulatory requirements provide for the UWIR to be updated every three years but there will also be an annual report.

Draft Surat Underground Water Impact Report - part 1

Surat Cumulative Management Area

I had much underground water on my mind today.  That was because I attended both sessions today in Roma where the Qld Water Commission were explaining their Draft Underground Water Impact Report (pdf, 8 meg) for the Surat Cumulative Management Area to the public.  The quick and dirty bottom line is that I don’t think the data supports a moratorium of the industry and as a worst-case scenario says the impact is moderate and manageable. However this is the first of several posts that will drill down into the report in some detail.  

The Surat Cumulative Management Area is a rough triangle drawn between Emerald in the north, Roma in the west and Toowoomba in the south-east. The geology of the region is complicated as the nature of the water. I had several concepts challenged including what are the Bowen and Surat Basins, what is the Great Artesian Basin and where is the gas stored. The Great Artesian Basin is not a continuous geological formation but a hydrogeological basin across many alternating geological layers. Similarly I used to think the Bowen Basin as the land roughly inland of Mackay including all the big coalmining areas of Emerald and Moranbah. The Surat Basin roughly went from Dalby to Roma.  But it turns out my understanding is that is faulty too. The Bowen Basin lives below the Surat Basin, it is only in the strip-mining areas at Moranbah where its coal formations come to the surface. 

Petrol and gas is a different mining process to coal and covered by different legislation.  The Draft Underground Water Report was required because the law allows petroleum tenure owners to explore for petrol and gas on private property and by necessity, there is some interference with the water on those tenures including the removal of the water. This is particularly so in coal seam gas production which works by reducing water pressure in the seams to release the gas. In the Surat Cumulative Management Area most of the mining is done in the Walloon Coal Measures (Surat Basin) or Bandanna Formation (Bowen Basin) which are geological layers of the Great Artesian Basin which have low permeability rocks alternating with high economic value aquifers and feed important springs.

The problem is that when water is removed, it affects a wide area around the gas well. This is compounded if there are a number of nearby wells also drawing out water. Today most of the groundwater in the Surat Region that comes to the surface is used by agriculture, industry, stock and domestic – some  215,000 megalitres a year. CSG is only responsible for 17,000 ML at the moment but that will rise sharply in the coming years as the four big projects (Santos GLNG, Origin APLNG, British Gas QCLNG and Arrow Surat Gas Project) take off.

When water is removed from the coal formations, water from surrounding aquifers will flow in.  So when the water pressure is reduced, it doesn’t necessarily mean less water. However it does mean there will be a decline in the water level of the bore that taps that aquifer.  The question is by why how much and to answer that question the Queensland Water Commission developed a groundwater model to predict the impacts of the CSG industry. They used vast reams of already known data on water levels and bores which they added to the known plans of tenure holders plus some science about the way underground water moves through the region.

The resulting flow model was complex. There are 19 interacting layers and three million individual cells in the model. It was calibrated to get close matches with known 1995 results from bores giving the team a high degree of certainty they were in the ballpark. They also added ‘uncertainty analysis’ taking the 95 percentile of 200 different predictions for each well. In other words,  they were taking the worst case scenario in 20.

For each well the QWC set a trigger threshold of drawdown.  For consolidated aquifers such as sandstone, the trigger was five meters, it was two metres for unconsolidated (shallow alluvial) aquifers such as the Condamine Alluvium and just a 0.2 metre drop for springs, including watercourses connected to springs.

If the modelling showed the “Immediate Affected Area” (an IAA) of that well exceeded that threshold in the next three years, then the responsible CSG company must undertake restoration measures to restore the bore’s capacity to supply water, or provide the bore owner with an alternative water supply.  This is known in the legislation as “make good" requirements. It could mean adjusting the bore, improving the pressure, drilling a new bore or finding an alternative source. QWC have identified 85 bores in the Surat Region which will exceed the trigger, all of them in the Walloon Coal Measures.

There was also a secondary measure of long-term impact if an IAA exceeded the threshold at any time in the future. This modelling identified 528 bores affected, mostly in the Walloon but some in the Springbok Sandstone (104), Hutton Sandstone (23) and Gubberamunda Sandstone (1).  It is less clear what the Commission expects to happen with these bores though the Roma session talked about gas tenure holders being “proactive” with bore owners in this category.

Part 2 of this will discuss the monitoring regime QWC is putting into place to determine the trigger points.

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.

Too Much Luck: Paul Cleary skewers Australia's mining boom

Eight years into a seemingly never ending resource boom, Australia is now plundering a million tones of minerals every year from the ground. New industries such as LNG have signed contracts to quadruple exports in the next 10 years and will soon rival coal and iron ore in export earnings. It is a vast and vital natural resource that governments appear to be willing to fritter away frivolously at disgracefully low tax rates. That is the central thesis of Paul Cleary’s new book “Too Much Luck: The Mining Boom and Australia's Future”. Cleary was at QUT in Brisbane last Wednesday to speak about the problems his book addresses.

Paul Cleary is a senior writer with The Australian newspaper and a researcher in Indigenous development at the Australian National University. In a career spanning 20 years he has reported on politics and economics in the Canberra press gallery and worked as a correspondent in Southeast Asia and as a political adviser. He was awarded a Chevening fellowship by the UK Foreign Office to study at the University of London’s School of Oriental and African Studies and became an adviser to government of newly-independent East Timor in the early 2000s.

Cleary says Australia could learn from East Timor in how to deal with mining companies who have undue influence on public policy. Australia needs to make changes in savings, taxation and regulation if it is to make the most of the boom. East Timor has an oil resource fund as has Norway with its North Sea Oil Fund and Chile with its Pension Reserve Fund based on copper profits. This fund is critical for infrastructure, schools and health needs when the boom finally ends and Australia will have considerably less by way of natural resources to pay for them.

That will require a change of thinking and a way of “pollie proofing” the profits, as Cleary puts it. In the last 3 years leading up to the GFC, the Howard Government blew $334 billion in additional revenues on needless tax cuts and middle class welfare. The result was a spending binge that forced interest rates up by 3 percent. The new Labor Government was forced to borrow $106b to stave off recession. Similarly the Queensland Government was forced to borrow big to pay for the flood and cyclone recovery this year. By contrast Chile used its foreign currency wealth funds to avoid recession and rebuild after a massive earthquake “without racking up a single peso of debt.”

Australia is heading towards the bottom of the quarry with no plans for what to do when it empties, Cleary said. The high dollar is killing off other export industries and tourism which employs far more people than the mining companies. This eventually leads to Dutch disease and the paradox of the two-speed economy. But those industries don’t have the political power of the resource lobby who work on politicians devoted to the quick fix of mining royalties. The State Governments in particularly are hooked on these royalties which make a mockery of their dual role of industry regulator. Cleary said Australia plans to be world’s second largest exporter of coal seam gas (via LNG) despite only having the world’s 12th largest gas reserves and despite the fact that impacts on salinity and groundwater reserves are not fully known.

Cleary said if the States were less cash strapped, they would not be in such an unseemly rush to approve mining developments. He said reforms were needed to share the profits and remove the disincentive to wait for the production revenues. The “third world” taxation system also needed to be fixed to create a future fund and to ensure that governments only spend the average revenue. As Cleary explained to ABC PM that means, taking the 20 year average of mineral revenue as a spending limit and anything above that gets locked away and gets saved into these funds. As Cleary says, failure to do so is effectively stealing from our grandchildren. “We are enjoying an inflated standard of living based on running down an entirely finite amount of non-renewable resources,” he said.

BTEX throws a spanner in the Queensland CSG works

The fraught relationship between mining companies and landowners in rural Queensland took another blow with the mysterious discovery of an illegal poison in eight Origin Coal Seam Gas drilling wells about 350km west of Brisbane. The find of the banned toxic chemical BTEX last week comes just months after the Queensland Government ordered Cougar Energy to shut down its Underground Coal Gasification plant near Kingaroy when water tests detected similar compounds of benzene and toluene in groundwater monitoring bores.

CSG is a very different technology to the unproven UCG. However, the BTEX find puts a cloud over an industry that is about to take off in the mineral-rich Surat Basin energy province. On Friday Federal Environment Minister Tony Burke gave conditional approval to the GLNG (jointly owned by Santos, Petronas and Total) and BG plan to export $30 billion of CSG to Chinese markets via Liquefied Natural Gas plants in Gladstone in the coming 20 years. Neither company were directly affected by the BTEX find which occurred at eight Australia Pacific LNG (jointly owned by Origin and ConocoPhillips) coal seam gas sites in an area between Miles and Roma.

The industry has been on the defensive over the outbreak. APLNG is likely to be the next major CSG player to have its environmental impact assessment tested by government. Their Environmental Impact Assessment has been with the Queensland Coordinator General Colin Jensen since January this year. Jensen has been holding off his decision awaiting the Federal Government on GLNG and BG. Landholders in particular in coal seam gas areas have not been happy about the impacts to their land and water. Given that Burke imposed more than 300 strict conditions on GLNG and BG, it is likely the Origin/ConocoPhillips project will have to address these also.

The BTEX contamination is an added headache. The problem came to light last Tuesday when Origin released a statement to the ASX saying they had found traces of BTEX in fluid samples taken from eight exploration wells. They said they advised relevant landowners, Western Downs Regional council (but not apparently the Roma-based Maranoa Council which was also affected) and the Queensland government of the find. The company told Queensland Minister for Sustainability and Climate Change, Kate Jones there was no evidence of environmental harm or risk to landholder bores. However Jones has requested confirmatory testing by an independent service provider.

The finds come just days after the Queensland Government banned BTEX from all coal seam gas operations. Minister for Natural Resource Mines and Energy, Stephen Robertson told parliament BTEX petroleum compounds were not used in Queensland CSG operations but have been used in overseas oil and gas operations in the fraccing process. Fraccing is the controversial process that involves pumping fluid at high pressure into a coal seam to fracture the seam to allow gas to flow readily into gas wells. The Australian Petroleum Production and Exploration Association say chemicals make up less than 1 percent of fraccing fluid and the risk to public health at those levels was negligible.

Which is just as well, as BTEX is extremely toxic. As well as being a cancer-causing compound, there is a documented history of harmful effects on the central nervous system. Because of the solubility of the majority of the BTEX components they are also prone to leaching into the underground waterways polluting areas larger than the original contamination site.

BTEX gets its name from its make-up: petroleum compounds containing benzene, toluene, ethylbenzene and xylenes. They are aromatic hydrocarbons which occur naturally in crude oil at low levels. In the 1970s the oil industry invested so heavily in BTEX it comprised 35 percent of all US gasoline (petrol) by 1990. When the EPA found excessive benzene concentrations in city air, the culprit was identified as the aromatics. While the percentage was subsequently decreased, it still makes up a significant component of petroleum.

Origin say they have no idea how it was found at their wells last week but admit it may have been contained in lubricants used at the site. While its use in fraccing is illegal, they may be used on a drill bit which remains legal. APLNG's executive general manager of oil and gas, Paul Zealand told the Courier-Mail the traces were barely detectable, did not enter the water table and may be naturally occurring. "It is isolated from water courses and livestock," he said. "The company will undertake further testing in consultation with landholders in the coming days."