Coal Seam Gas under pressure

By Paddy Manning*

Coal Seam Gas was once hailed as a clean and green form of energy. But there are now very serious economic and environmental questions for
both communities and governments hanging over the abundant natural resource.

It’s called the energy ‘trilemma’ and governments around the world are grappling with it: how to maximise energy security while minimising the cost of, and greenhouse gas emissions from, energy use. Any technology or policythat can tick those three boxes will be adopted, a no-brainer.

Rio Tinto gave two examples in an interesting presentation at the Australian Institute of Energy conference in Sydney in late November 2012. Nuclear power ticks all three boxes in China, which is building so many reactors that by the end of this decade it will have the second-largest installed nuclear capacity in the world.

Shale gas – extracted from shale rocks deep underground– ticks all three boxes in the US and so over the past 5-10 years its growth has been nothing short of spectacular. The International Energy Agency now expects the US to be the world’s largest gas producer by 2015 and the largest oil producer by 2017, taking it closer to energy self-sufficiency, faster than anyone thought possible.

The so-called US ‘shale gale’ – a storm of cheap oil and gas provided courtesy of hydraulic fracturing (fracking) and directional drilling technologies – has redrawn the world’s energy map and Australia is buffeted too. Developed over decades, mainly from the extraction of coal bed methane, those two technologies combined with high gas prices and Bushera deregulation led to an explosion in gas production from the middle of last decade.

US gas prices have plummeted, emissions have turned down as power plants switch from coal to gas, and North America will soon be exporting significant volumes of liquefied natural gas to Asian markets.

Those same fracking and drilling technologies opened up the possibility of extracting large quantities of coal bed methane in Australia – or coal seam gas, as it is known here – particularly in Queensland and NSW. The implications for Australian energy policy are profound, but does coal seam gas solve our energy trilemma?

The coal seam gas of course has always been there – odourless, colourless methane is a hazard in coal mining – but it wasn’t until the mid-nineties that it became economic to recover and commercial exploitation began in Australia. One of the first producing CSG wells in this country was at Moura in 1996, right near where 11 miners died two years earlier in the infamous explosion at BHP’s No.2 underground mine.

Queensland had some conventional onshore gas fields in the Surat and Bowen Basins, but they were in decline. In 2000 then Premier Peter Beattie decided to diversify the state’s energy supply away from coal.

From 2005 electricity retailers would have to supply 15 per cent of their power from gas (13 per cent) or renewables (2 per cent, consistent with the federal government’s then renewable energy target). Beattie wanted a step change and in 2002 decided a new $500 million gas-fired power station at Townsville would be supplied, not by a pipeline from PNG, but by Queensland’s own CSG. A new industry was born: coal seam gas production in Queensland jumped a hundred-fold in a decade.

But former Howard government energy minister Ian Macfarlane used to say God played a joke on Australia, putting the people on the east coast and the gas on the west coast. With the discovery and development of Queensland’s vast CSG reserves – estimated at some 200 trillion cubic feet, more than is contained in all Australia’s conventional gas fields like the Cooper Basin, North-West Shelf or Bass Strait – the joke is over. It was certainly more gas than Australia’s small domestic market, with abundant coal-fired power, could ever absorb.

Queensland’s CSG would go for export as liquefied natural gas (LNG), shipped out of Gladstone to Asian markets. LNG plants producing millions of tonnes per annum are hungry beasts – nowhere else in the world had they been hooked up to thousands of CSG wells. But in 2010-11 three giant CSG-to-LNG projects worth $60 billion – BG Group’s Queensland Curtis LNG, Santos’ Gladstone LNG and Origin Energy’s Australia-Pacific LNG – were rushed through state and federal government approvals, with 20,000-30,000 wells to be drilled across the Darling Downs over the next two decades.

The LNG plants are under construction and will be up and running from 2014-15. A fourth project, Arrow LNG, proposed by Shell and Petrochina, is hoping for approval.

Queensland’s big CSG-to-LNG projects may enhance Australia’s energy security – we are poised to overtake Qatar as the world’s largest LNG exporter by 2017 – but their impact on domestic energy prices and greenhouse gas emissions is highly debatable.

Domestic gas prices on the east coast are expected to double by around 2015, as they reach ‘export parity’. In simple terms, for the first time Australian gas users – commercial and residential – in the eastern states are competing for gas with energy-hungry Asian nations like Japan, Korea and China.

Manufacturers like Dow Chemical and Incitec Pivot, who use huge amounts of gas and are already struggling with our high dollar, are livid. Households battling rising electricity prices will be shocked to find their gas prices doubling too.

The impact of CSG development on Australia’s greenhouse gas emissions is also contentious. Coal-fired power stations are not switching to gas here – and even at $23 a tonne, well above the international price, the carbon tax is not high enough to incentivise the switch. LNG is incredibly energy-intensive to produce and the industry is already one of the top emitters in the country, even before our production capacity triples.

Gas is cleaner-burning than coal at the point of combustion – the industry claims up to 70 per cent cleaner – but it only lowers emissions if gas substitutes for coal, and there is little evidence that is happening in Asia. Plus, there is a huge debate about the full life-cycle emissions of unconventional gas extraction, particularly once fugitive emissions (or ‘leaks’) from thousands of wells and from seepage – until now considered negligible – are included.

In research which is still subject to peer review, Southern Cross University researchers this month took the first field measurements of fugitive emissions in a coal seam gas field in Queensland. The preliminary findings show there is reason to believe fugitive emissions from CSG extraction here may be much higher than expected and in line with the latest US scientific findings, that 2-4 per cent of the gas may be escaping to the atmosphere.

If fugitive emissions are indeed that high, and are uncontrolled, given methane has much higher warming potential than coal, CSG could turn out to be a worse fossil fuel than coal. As the world faces up to the challenge of getting emissions to peak this decade, and limiting global warming to two degrees, that would undermine the entire premise that gas can be a transitional fuel.

Having watched Queensland’s ‘dash for coal seam gas’, NSW is at a crossroads. CSG is still in its infancy there but the NSW government is convinced that rising gas prices mean the State, which has always piped gas from the Cooper Basin or Bass Strait – both still producing in ample quantities – suddenly needs its own indigenous gas supply. The NSW Government has backflipped on preelection commitments to establish ‘no-go’ areas, protecting prime agricultural land.

In the Gunnedah Basin, Santos wants to develop hundreds of wells across the Pilliga State Forest and Liverpool Plains. AGL, which operates the state’s largest-producing CSG field on Sydney’s south-western fringe, wants to expand into the suburbs near Camden, and also pushing into the Hunter Valley. Hopefuls like Metgasco, Dart Energy, Apex Energy and Planet Gas have contentious projects.

In fact CSG exploration is criss-crossing Australia – from the Kimberley to Victoria’s Gippsland Basin, from the Northern Territory to Tasmania. And coming up behind is shale gas with a resource of as much as 400 trillion cubic feet estimated to lie in places like the Cooper Basin. Ticking
the boxes of our energy trilemma? Not yet.

*Paddy Manning is a senior business writer for the Sydney Morning Herald and The Age and the author of ebook What the Frack? Everything you need to know about coal seam gas, published by NewSouthBooks and available on iTunes, Kindle, bookstores and via , $4.99.

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11 thoughts on “Coal Seam Gas under pressure

  1. It is a travesty that in a continent that is water starved we are using so much water for gas exploration and production- The eastern green belt and WATER CATCHMENTS have been given away to a group of gas companies that in the process use millions of 100 percent consumptive water free of charge and on top pollute the air ,land and water ways and get away with with false advertisement by claiming its greener and cleaner energy.Across the world there is a cry by communities affected by this industry to stop the fracking and take a look at the consequnces… capitalism at its worst phase-what use is it for a grazier/farmer that depends on its bore wells when the water is depleted and has no more water for his cattle or cannot use due to contmination of waterits a matter of common sense when Ross Dunn spokesman from the APPEA Sstates:”Good management could not eliminate the risk of contaminating water aquifers…drilling to variyng degrees impact on adjoining aquifer.”Protect our water protect our land -respect land owners rights.

  2. I am shocked and appalled by the governments collusion with the mining industries. I can only conclude that they have an irresponsible and dangerous disregard for our citizen’s well being. In a time when preserving the environment should be a top priority, we are still destroying our abundant natural resources and the people are being bullied and misled into accepting these mining practices right on their doorsteps. If there is ANY DOUBT WHATSOEVER about the long-term safety of our underground water reserves or of the accumulative effects of using the dangerous chemical cocktails in fracking,then there should be no further mining using these practices. Use your common sense!

  3. In addition to the legitimate concerns outlined in the two previous comments, the energy requirement to produce LNG is huge. There is almost as much gas used in producing the electricity required for compression as the volume of usable gas that is processed. Add that energy equation to the water usage, leakage, toxicity, aquifer damage and other concerns about CSG and it seems time for a thorough analysis of the whole industry before it progresses any further in NSW.

  4. It is hard to believe that our State and Federal Governments are still compromising our natural assets and the health of our environment and economy, not to mention the health and wellbeing of our citizens, in order to supply non sustainable energy resources to “energy-hungry Asian nations like Japan, Korea and China”.

    Why not take a look at the environmental, social, and economic state of these countries, as a result of an insatiable appetite for energy resources. Why would we want to compromise our ability to provide a safe, sustainable and profitable country for ourselves and our future generations?

    Particularly when we have sustainable choices, why would we sell our non-renewable resources in exchange for higher power prices to the Australian public, at great costs to the health of the people, the environment, and a loss of sustainable industries. Who are suffering the environmental impacts from the harmful processes involved in extracting coal seam gas and exporting LNG.

    Our country has survived and thrived from sustainable agriculture and fishing industries for many years, yet these are the very industries being compromised, due to the many negative impacts seen from Coal seam gas Mining.

    In order to meet the energy demands of Asian Nations, we are having 20,000-30,000 wells to be drilled across the Darling Downs over the next two decades! Allowing 2-4 per cent of the gas to be escaping to the atmosphere, and given that methane has much higher warming potential than coal, CSG could turn out to be a worse fossil fuel than coal. Why would we put so much at risk in exchange for financial gain?

    And for who’s financial gain? Given that Australia’s small domestic market gas users (commercial and residential) are competing for gas with Asian markets, and that domestic gas prices on the east coast are expected to double by around 2015, as they reach ‘export parity’? How can this be when in 2010-11 three giant CSG-to-LNG projects are said to be worth $60 billion? Where is the profit going? Who is mopping up the environmental mess?

    Liquid Gas is shipped out of Gladstone to Asian markets, the environmental impacts on Gladstone Harbour from commercial activities, and dredging to allow for the shipments of LNG have already become evident with a local fishing ban due to poor water quality and parasitic infection of marine life, not to mention the loss of habitat and food source for all marine species, from dredging and polluted waters. The long lineage of commercial fishing in the harbour has been greatly affected due to the loss of skilled labourers to the high wages offered by the transport, dredging and building companies operating in the harbour, as well as the limited supply of local fish due to the fishing ban.

    “Given the massive economic and tax benefits to both state and Commonwealth governments of LNG developments, there is a conflict of interest when these same governments make environmental assessments, moreover, the chances of these judgements being biased are exacerbated when the Environmental Impact Assessments (EISs) are put together by the project developers themselves.” (Hunt C. 2011). How is it possible for such statements to be valid in a fair and just democratic government which is fully aware of the importance of ecologically sustainable development principles in this day and age?

  5. I am not sure where the facts you have stated in the first two comments come from?

    You state that “It is a travesty that in a continent that is water starved we are using so much water for gas exploration and production”. However during the gas extraction process water is also brought up in the process, undrinkable and salty, it is then put through an RO (reverse Osmosis) plant and the water made drinkable.
    Currently due to abundance of water from the last 2-3 years in Queensland especially, and the fact that the farmers have tapped into the aquifers and for decades plundered this natural resource. The clean water produced from CSG is having to be either reinjected back into the Coal Bed (after further treatment) or with environmental approvals released into creeks etc.
    It is an interesting side note that the greens and the farmers until this industry came along have been fighting against each other over the miss use of the aquifers. Yet due to the famers wanting to seek more financial compensations and the greens wanting to “fight the man” have united. Both seeking two totally different outcomes, one a financial benefit, the other an environmental.
    Secondly you mention “and on top pollute the air” the gas, if realised is methane. The farming/cattle industry which you state “by this industry to stop the fracking and take a look at the consequnces… capitalism at its worst phase-what use is it for a grazier/farmer that depends on its bore wells when the water is depleted and has no more water for his cattle or cannot use due to contmination of waterits a matter” realeases far more gas into the atmosphere, by your illogical reasoning the farming industry which you seek to protect for the same reasons should also be banned.
    Not to get technically in a very emotional argument, but Shale gas used in north America is much closer to the aquifer then CSG, and has a considerable amount less regulation then in Australia.
    Instead of reading extremist views, getting emotional and making brash statements. Which then in turn lead other informed people making incorrect statements and ruining and industry which has a lot of promise. Maybe you should attended an information seminar or ask someone in the industry.
    Its really good that there are people out there that care for the environment and don’t want it to be destroyed, but try and get your facts correct and see the bigger picture. Until CSG came along these “poor” farmers were abusing the aquifers, but now they are the good guys?

  6. Hi, I am greatly concerned and opposed about drilling around The Woronora Dam Catchment area, etc. I think it is very dangerous and of great concern due to the fact it supplies parts of Sydney with water…Therefore there is a high risk of contamination… To the relevant people who make these decisions, Please consider all aspects of potentional problems to the enviorment and people that may occur. Is it not time, for once to think of human beings and safety before profits! Thanking you for your time, Sincerely…Debbie Chrisafis.

  7. To correct a few of “Facts” incorrect “facts:

    1. The waste water produced by CSG miners is not “clean water”. The water contains a range of salts, mobilised heavy metals, and radionuclides. It is only dubiously “useful” when put through expensive RO treatment and diluted with clean water by adding to creeks and rivers, or reinjection. Both strategies depreciate the water quality of the receiving water source.

    2.The farmers, by and large, do not want “financial compensation”, they just want to be left alone and for the CSG industry to go away. The intrusion into their lives by this industry has been horrific on many levels. The fact they are working with the environmental “Greens” is probably what should be seen as a natural process. Both want good environmental outcomes. Family farm practices have changes considerably over the past three decades with land care and conservation farming methods. A “fact” you seem to ignore (or may not be aware of?)

    3.Cattle may release methane, but they don’t release other non-methane gases such as propane, ethane and toulene. They also don’t emit other pollutants associated with drilling and gas field development. These include methylene chloride, methanol, ethanol,
    acetone, formaldehyde, acetaldehyde and Naphthalene.

    4. You display a serious lack of knowledge of the subject when you state that the shale gas deposits in the USA are “much closer to the aquifer” than CSG. It is actually the other way around. Shale is deeper and much less likely to impact aquifers via ground seepage than CSG. Coal Seams are shallower and closely underlie usable aquifers. The likelihood of impacting aquifers is 100%. It is impossible to avoid this happening.

    Your rant is ill-informed. You should take your own advice and attend some information seminars to sort your “facts” out.

  8. Dear Michele Harman, you attempt to sound authoritative when supposedly correcting facts, but did you even read the document on endocrine disruptors for which you provided the URL? It is about conventional gas wells. Whilst interesting it has no relevance to coal seam gas at all.
    I suggest you may be interested in a recently released report “State of the science of endocrine disrupting chemicals 2012″ prepared by a group of experts for the United Nations Environment Programme (UNEP) and WHO – published March 2013. Curiously in this most authoritative and up to date 300 page Report on the subject, CSG is not mentioned at all, and coal is mentioned only several times in a minor way, just as a source of tar etc when combusted, along with mention of other hydrocarbons eg “exposure to airborne PAHs is highest in densely populated urban areas and in rural areas where wood and coal are frequently used”. I would have expected that if CSG was so important to endocrine disruptors, then it would have rated a mention in the Report. It does mention the most prevalent source of PAH’s in community sense as being in every car petrol tank…think about it!

  9. Dear Chris Lawrence

    CSG is chemically similar to conventional natural gas — methane is the main component of both.

    While you attempt to cloud the issue by trying to make a distinction between the source of the gas – the study actually focuses on potential sources of air pollution from natural gas operations in their entirety and not merely the gas itself.

    So the study is entirely relevant.

    These sources include:

    “…volatile chemicals introduced during drilling and hydraulic fracturing (in which fluids are injected under high pressure to fracture the underlying formation that holds the gas), combustion byproducts from mobile and stationary equipment, chemicals used during maintenance of the well pad and equipment, and numerous NMHCs that surface with the raw natural gas.”

    Unless Apex Energy (et al) have found a method of extraction which does not involve using drilling equipment? Require pad maintenance? Or prevents the associated non-methane hydrocarbons being released as a contingent part of the activity?

    As Coal Seam Gas is only recently being exploited on a large scale – one would not expect it to rate a mention in said endocrine study.

    Adding yet another source of pollution to the list of pollution sources you so describe – is counterintuitive perhaps?

    Think about it.

  10. Thanks for your great information, the contents are quiet interesting.I will be waiting for your next post.
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