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Fracking ban extended in New South Wales

Growing political momentum to slow the development of coal-bed methane

The decision to extend a ban on hydraulic fracturing (fracking) in New South Wales (NSW) will strike a blow to investor confidence in the state, says the Australian Petroleum Production & Exploration Association (Appea).

With Australia witnessing growing political momentum to slow the development of coal-bed methane (CBM) development, the NSW state has, for a second time, extended the temporary ban to allow further independent analysis into the method used to tap CBM, known in Australia as coal seam gas (CSG), raising the ire of Appea, the oil and gas industry body.

The moratorium, due to end on 21 December, and now deferred until April, is bad news for NSW said Appea. Chief operating officer for eastern Australia Rick Wilkinson highlighted that fracking is a well-established and tightly regulated technology, which has been used safely in Australia since the 1970s and globally since 1948.

It’s unfortunate to see the debate surrounding this technology getting so heavy on ideology and light on facts, he added. “Not only is this a moratorium on economic growth at a time of significant economic uncertainty, it is a moratorium on investor confidence in a state stuck in the slow lane of Australia’s two-speed economy,” said Wilkinson.

In contrast, the government in neighboring Queensland stands firmly behind the development of the CBM sector. The state expects more than $70 billion to be committed to the development of CBM to liquefied natural gas (LNG) export projects over the next few years.

In NSW, individual companies have been playing down the effect of the ban, with CBM explorer Dart Energy saying it had no plans to use the process and that other technologies could achieve similar or better results.

Santos, which last month completed the acquisition of Eastern Star Gas, the biggest CBM reserves holder in NSW, said it supported the government carrying out a scientific assessment of fracking, although stressed it believed the process was safe.

Metgasco, Origin Energy and Red Sky Energy are also involved in CBM exploration in NSW. AGL Energy is the only producer.

CBM development can progress without fracking, but the technique optimises project economics, by opening up a wider area of the coal face and allowing more gas to flow into the well, improving recovery rates.

The technique is more commonly used in shale-gas development. Australia is estimated by Appea to hold 4 trillion cubic metres (cm) of CBM reserves; while the US Energy Information Administration puts shale-gas resources at over 11 trillion cm.

In Queensland, which saw its CBM production hit 6 billion cm last year, an estimated 5-6% of CBM wells used fracking to stimulate gas flows, which may reach as high as 40% for wells producing gas for export, says Appea. Several LNG-export projects are planned, or are being built in Queensland’s Gladstone area, based on its huge CBM reserves.

Fracking has been at the forefront of concerns among environmental groups and farmers over the potential effects of the rapid development of the CBM industry on underground water supplies and agriculture. They fear the process – which involves injecting a solution of water, sand and chemicals into a well to force cracks in the underground coal bed – could contaminate water supplies.

The controversial technique has been banned in France, Quebec in Canada, as well as some US states and NSW’s decision is the latest regulatory handicap for the fast-expanding CBM sector in eastern Australia. Recently, a federal committee recommended proposals that would severely hamper the industry should they be implemented.

In a move that could freeze billions of dollars of planned investment, the federal committee recommended the suspension of all new CBM projects in southern Queensland and northern NSW, where the Murray-Darling and Great Artesian basins overlap, pending new research into water pollution and the effects of fracking.

But defending the industry, Origin Energy managing director Grant King, accused the industry’s protagonists of being ill-informed and unscrupulous in their attacks. King slammed CBM critics of misleading the public and driving an “ideologically driven” campaign. “Continual references to the release of toxic chemicals by opponents of CBM production is simply not informed by the facts and is, at best, misleading, if not a deliberate misrepresentation,” said King.

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