Related Articles
Forward article link
Share PDF with colleagues

CBM face-off in New South Wales

Australia's CBM industry and NSW farmers are locking horns in court

The battle to curb New South Wales's (NSW) nascent unconventional-gas industry is heating up. Submissions to the NSW Legislative Council's Coal Seam Gas (CSG) Inquiry, which was called following mounting concerns about the role and safety of the industry, closed on 14 September.

On one side of the fence sits an oil and gas industry lobby group, the Australian Petroleum Production and Exploration Association (Appea). Appea included in its submission a study by Acil Tasman showing that the development of the state's gas industry is key to reducing spikes in energy prices and lowering greenhouse-gas emissions.

On the other side is the NSW Farmers Association, an industry body calling for the introduction of legislation for the right to veto land access. If successful, this would make NSW the first state in Australia to give farmers such rights in relation to oil and gas exploration.

Balance negotiations

NSW farmers' president, Fiona Simson, said such legislation would help balance negotiations between landholders and explorers. She added that this approach is, at present, almost industry practice in NSW. While the bigger coal-bed methane (CBM – also known as coal-seam gas) players consult landowners before work begins, Simson said that there can be difficulties when dealing with a multitude of very small CBM firms.

These outfits know that by law, the government gives them the right to explore and that right will be enforced through arbitration. Under Australian federal law, landowners have surface land rights, but the Crown owns mineral rights. Gas developers typically make land-access agreements with landowners to access the mineral resources beneath their land.

Simson added: "But landholders feel extremely powerless and we are seeing this powerlessness in some of the compensation agreements landholders will have to agree to."

Richard Bartlett, a director of the commercial mining and energy law centre of Western Australia believes policymakers at both the state and federal level should consider adopting the approach taken in Alberta, Canada, which balances the interests of industry and rural communities.

Unambiguous economic effect

Meanwhile, Appea commissioned forecaster Acil Tasman to look into the economic effect of freezing activity in the CBM sector, compared with allowing the industry to develop. It found there would be a substantial decline in gas consumption over the next 20 years if all activity in the CBM sector is frozen at present levels. Additionally, wholesale gas prices would be 20-25% higher in NSW, Victoria, South Australia and Tasmania by 2030, and up to 9% higher in Queensland.

The lack of development of the gas industry would also boost carbon emissions, as Australia's heavy reliance on coal-fired power generation would continue, resulting in an extra 4 million tonnes a year of carbon dioxide emissions by 2030, the study found. Consequently, electricity prices would be higher across the board, adding a further 7.4% to prices in NSW than would be the case otherwise.

On top of this, NSW would miss out on as much as A$6 billion ($6.3 billion) of capital spending on gasfield developments over the period to 2035, with a further A$3.9 billion of operating spending foregone. The NSW economy would be A$37.4 billion smaller in real terms, while missing out on the creation of as many as 4,800 jobs.

''I have less concern with locked gates than with locked minds,'' the association's executive director Rick Wilkinson said. ''The positive effect of CBM development in NSW is unambiguous.''

He added that the economic effect of Queensland's CBM industry is well understood. It has already created more than 8,500 jobs for the state economy, the sector supplies one-third of eastern Australia's gas supply, and it is set to contribute A$850 million a year to the state government in taxes.

But a growing backlash that began in Queensland, the hub of Australia's new gas rush, has seen landholders across the country uniting under a simple mantra: lock the gate. "This is the most radical transformation of rural Australia we've seen since the expansion of the pastoral frontier in the 19th century," said Drew Hutton, founder of the Lock the Gate alliance.

And Hutton said NSW's Hunter Valley, formerly the heartland of NSW's coal industry, but now a picturesque winemaking and hobby farm region to Sydney's northwest, will be the tipping point. "If CBM comes into this region, you can forget about it being an iconic area for farming, for vineyards, thoroughbred horse racing or tourism. It'll be a great big industrial wasteland," he claimed.

Fear for water

CBM opponents' fears, however, mostly centre on water. Many famers and graziers in Queensland and NSW rely on bores tapping the Great Artesian basin for water for crops and livestock. The basin – the world's largest underground aquifer, covering 1.7 million square km – sits above many of the coal measures being tapped as part of eastern Australia's CBM boom. On top of this, the basin is, for large parts of the continent, the only available, reliable source of water, not just for agriculture and livestock, but for residents as well.

Farmers and scientists fear CBM production could potentially devastate underground water supplies. But what is of greater concern to most is the unknowns. A recent benzene, toluene, ethylbenzene and xylenes (BTEX) chemicals scare at Arrow Energy's Queensland operations; a blowout at a well on the outskirts of Sydney; and a gas leak at a BG project in Queensland have reinforced public unease about the industry's untested environmental effects, according to the Greens mining spokesperson, Senator Larissa Waters, an environmental lawyer.

Waters also headed a federal government panel investigating the sector. The panel's recommendations, due in November, could also see water become an environmental protection trigger – this would take permitting and approval out of state-government hands, requiring the federal authorities in Canberra to review and approve all future CBM projects.

Moratorium calls

On 13 September, the Greens party moved for a Senate moratorium on CBM. The motion, which was voted down by 41-9, called on the federal government to implement an immediate halt on any new CBM project approvals until the long-term effects of the industry on groundwater, agriculture, rural communities, threatened species, the climate and the Great Barrier Reef are known.

In July, NSW temporarily banned hydraulic fracturing (fracking) on new CBM projects until the end of this year. The move was part of a new wave of rules engineered to address safety and environmental concerns raised by the community.

The fracking freeze is seen by many as an opportunity for the bureaucrats to better understand CBM development and the knock-on effects for the state. Unlike Queensland, which was, before becoming the mainstay of Australia's CBM sector, the country's onshore oil and gas powerhouse, NSW, has historically seen less upstream activity.

Also in this section
Latest licensing rounds
23 September 2020
The industry's most comprehensive list of current and recent rounds for onshore and offshore licences
Kosmos sheds frontier portfolio
22 September 2020
Explorer divests non-core assets to cut costs and focus attention on proven basins
Petrobras pulls back spending
18 September 2020
Spotlight falls on pre-salt production as Latin American NOC dials down capex