Nearly two years ago I wrote a blog entry for The Barrel discussing the fact that the Australian coalseam gas industry had averted a public relations disaster, after coming “within a blink” of being shut down by angry farmers and graziers.
Now it seems the tables have turned yet again, with the industry coming under heavy fire from environmental lobby groups and facing government-imposed restrictions on its activities.
The coalseam gas industry in the state of Queensland barely existed a decade ago, but it now accounts for one third of the eastern Australian gas market, estimated by local consultancy EnergyQuest to have totaled 722 petajoules (about 685 Bcf) in 2012.
The three coalseam gas-to-LNG projects currently under construction in the Queensland city of Gladstone represent total investment of more than A$60 billion (US$61.93 billion). The projects are already transforming the local economy and are set to mark the start of a new era for the global energy sector.
When those plants start loading vessels around the middle of this decade, they will be supplying the world’s first ever LNG to be produced from CSG. They have a total LNG capacity of 25.3 million mt/year and will be supplied with CSG from tens of thousands of wells to be drilled across Queensland’s Bowen and Surat basins.
According to the Australian Petroleum Production and Exploration Association, Queensland’s coalseam gas industry now employs more than 27,000 people, has signed 3,500 landholder agreements, and has so far contributed more than A$100 million to community projects and causes.
Clearly, this growing industry offers the potential for a revitalization of regional areas of eastern Australia, bringing new employment opportunities and economic growth to rural communities. And yet it appears to be becoming more and more unpopular, particularly in Queensland’s southern neighbor, New South Wales.
As APPEA notes: “In NSW, where arbitrary and ad hoc government regulation continues to send the signal that the state is closed for business, our industry employs only 332 people, has signed just 281 agreements with landholders, and has contributed A$662,000 to community projects.”
Blog entry continues below…
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The development of CSG in NSW has been on hold for around two years while the state government finalized its policies and regulations for the industry. In February, the NSW government unexpectedly went a step further and announced plans to introduce 2 km (1.2 mile) exclusion zones for CSG development around residential areas, horse studs and vineyards.
“The NSW government has listened to community concerns about CSG — these new measures build on what are already the toughest controls in the country,” state Premier Barry O’Farrell said at the time. “We have declared country towns and suburbs across NSW ‘no-go zones’ for CSG activities in NSW.”
The NSW market is facing a gas supply crunch as existing long-term contracts roll off over the period from 2014 to 2016. The expiry of those supply deals will coincide with significant increases in demand for gas as the LNG export projects come on line in Gladstone.
Waiting in the wings is local exploration and production company Santos, which is the largest holder of CSG acreage in NSW. Santos plans to spend A$500 million drilling 50 wells in its licenses over the next three years and has already invested A$1.5 billion in the state’s CSG sector, most of it in its 2011 takeover of Eastern Star Gas, the major acreage holder in NSW’s Gunnedah Basin.
Polling figures reported last week in the Daily Telegraph newspaper, meanwhile, appear to bear out that support for the CSG industry in NSW has collapsed. According to the report, in February 2011, 44% of people in NSW supported CSG and 42% opposed it. Now, 58% oppose the industry and only 27% support it.
Last week, the Lock the Gate Alliance, one of the most vocal of the anti-CSG protest groups, launched a national campaign dubbed the “Call to Country.” Lock the Gate describes itself as a “national grassroots organization made up of thousands of individuals and over 160 local groups.”
The Call to Country campaign aimed to take the lobby group’s demands for national law reform on coal and gas developments to federal parliamentarians across Australia. It may have already yielded some results, with environment minister Tony Burke announcing on Tuesday that federal government approvals would now be required for CSG projects that have significant impacts on ground and surface water resources.
Lock the Gate immediately claimed a victory, saying the water trigger was a minor component of its eight-point Call to Country plan.
The gas industry hit back, with APPEA Chief Executive David Byers saying the federal government’s plan for an industry-specific trigger in its environmental regulation was a “text-book example of how to increase costs to industry while delivering absolutely no environmental benefit.”
So far, however, the industry’s lament that “eastern Australia needs more gas, not more regulation,” seems to have fallen on deaf ears at both state and federal government levels. Perhaps more worryingly for the industry, if the polls are to be believed, stakeholders in communities across NSW are switching off to the idea of CSG.