For industry, the NSW Chief Scientist’s report on the independent review of CSG activities in the state released last night was vindication for the much-vexed hydrocarbon industry, aside from numerous commissioned reports of their own validating the science around CSG.
Chief Scientist and Engineer Mary O’Kane noted that the report had been commissioned in February 2013 by then-NSW premier Barry O'Farrell in “a climate of unease” about CSG extraction.
Last week, Premier Mike Baird said the report would be "the line in the sand" on how the industry operated in NSW.
O’Kane concluded in her report that the technical challenges and risks posed by the CSG industry could in general be managed through several factors.
- Careful designation of areas appropriate in geological and land-use terms for CSG extraction
- High standards of engineering and professionalism in CSG companies
- Creation of a state whole-of-environment data repository so data from CSG industry operations can be interrogated as needed and in the context of the wider environment
- Comprehensive monitoring of CSG operations with ongoing automatic scrutiny of the resulting data
- A well-trained and certified workforce; and
- Application of new technological developments as they become available.
“All of this needs to take place within a clear, revised, legislative framework, which is supported by an effective and transparent reporting and compliance regime and by drawing on appropriate expert advice,” O’Kane said.
Herein lies the kicker. Industry was stunned last week when Resources and Energy Minister Anthony Roberts lobbed an additional 12-month freeze on NSW petroleum exploration licence applications and petroleum special prospecting authority applications.
Roberts’ comment at the time that the NSW government was “committed to increasing our domestic supply of gas and … working to ensure only safe and sustainable gas supply projects proceed” rang hollow for industry and investors when there was clearly no domestic supply happening any time soon.
This came after a six-month freeze the NSW government imposed in March.
The Chief Scientist report gives industry hope.
Santos, whose CSG project near Narrabri in NSW’s northwest has the potential to supply between 20% and 50% of the state’s gas needs, saw the report’s overwhelming message that “when properly regulated natural gas extraction from coal seams can be done in a safe and sustainable manner”.
It said the Narrabri gas project would supply an essential commodity to NSW over its 25-30 year life and deliver significant regional and local benefits, including up to 1200 jobs during construction and approximately $1.6 billion in royalties.
“Santos is committed to high engineering standards and best practice approaches, particularly in relation to water, environment and community engagement,” a company spokesman told Energy News.
“It is important to reiterate that supply of natural gas from NSW is vital to the economic viability of local industry and affordable energy for families.
“Continued delays in developing natural gas resources will only increase cost pressures for business and families.
“Santos has a long and successful track record of safely delivering natural gas to NSW since 1976.
“Santos will take a keen interest in the findings and recommendations contained within the NSW Chief Scientist’s final coal seam gas review.
“We are confident that with robust science, strong regulation and a continued commitment to work closely with communities, Santos can continue to develop the much-needed natural gas for the homes and businesses of NSW.
“We expect this report to build on a number of comprehensive reports and studies already undertaken into the natural gas industry.”
However, there are no guarantees.
O’Kane cautioned that it was “inevitable” that the CSG industry would have some “unintended consequences”, including as the result of accidents, human error and natural disasters.
“Industry, government and the community need to work together to plan adequately to mitigate such risks and be prepared to respond to problems if they occur,” she said.
O’Kane said there was also a need to better understand the nature of risk of pollution or other potential short or long-term environmental damage from CSG and related operations, as well as the capacity and cost of mitigation and/or remediation and whether there were adequate financial mechanisms in place to deal with these issues.
“This requires an investigation of insurance and environmental risk coverage, security deposits and the possibility of establishing an environmental rehabilitation fund,” she said.
“Doing this is essential to ensure that the costs and impacts from this industry are not a burden for the community.
“Legacy issues, including better understanding of inappropriately abandoned wells, need attention.”
That said, risks could be managed and new technologies were becoming available but needed to be harnessed to make CSG extraction safer and more productive, she added.
The Australian Petroleum Production and Exploration Association said the report’s conclusion that the technical challenges and risks posed by the industry could be safely managed, while noting the high standards of engineering and professionalism in natural gas companies, was “a far cry from the alarmist and misinformed claims that have too often characterised debate about natural gas projects in NSW”
“APPEA welcomes the Chief Scientist’s observations that the natural gas industry is mature and well equipped to manage extraction and related technologies through its high engineering standards and level of professionalism,” the lobby group said.
It noted that NSW consumed about a quarter of the gas used in the eastern Australian gas market, yet supplied only about 1% of the gas production for that market.
“The state’s 1.3 million gas customers rely on interstate producers for 95% of their supply, despite the state possessing very significant reserves and experienced gas companies being willing and able to produce local gas for local consumers,” APPEA said.
“New production depends upon successful exploration activity and without new exploration and production in NSW, it will be very difficult to put downward pressure on NSW gas prices, which are increasing by more than 10% this year.”