Mine-Field
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Mine-Field

The Dark Side of Australia's Resources Rush

Paul Cleary

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Mine-Field

The Dark Side of Australia's Resources Rush

Paul Cleary

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About This Book

It is not a case of governments and companies putting royalties and profits before people; instead it is as though people don't matter at all … In Mine-Field, Paul Cleary counts the true cost of Australia's mineral addiction.Whether it be coal-seam gas, LNG or coal mega-mines, a resources rush is happening in just about every productive corner of our country. Yet at the same time oversight and regulation have been hollowed out. High-risk projects are being approved without proper assessment of the long-term consequences. Water resources, farmland and national parks are under threat, and people, communities and industries are being steamrolled.A ground-breaking piece of reporting by the author of Too Much Luck, Mine-Field plots the dubious networks created and greased by mining companies to get their projects through, and exposes regulatory gaps that must be addressed to prevent enormous and irreversible harm to our society and environment. Shortlisted for the 2012 Walkley Book Award, the 2013 Ashurst Business Literature Prize and the 2013 John Button Prize 'This important book is compelling in its storytelling and chilling in its facts. It storms into the mining debate with a clarion call for more effective regulation. If you read it, you can't help joining the chorus.' —Geoff Cousins' Mine-Field provides a warts-and-all, no-holds-barred view of Australia's mining industry. It is a must-read for anyone making an informed judgement on where our nation is going.' —Tony Windsor'Cleary's sharp and timely reportage should provoke – if not lead – an urgent, informed discussion about the mining industry's role in our society.' — Australian Book Review 'Provocative, polemic and highly readable … a compelling book and I recommend people to read it.' — Australian Journal of Politics and History 'Paul Cleary's take-no-prisoners survey of the resources boom is essential reading.' — Sydney Morning Herald 'Compelling, in-the-field reportage … an effective call-to-arms expose.' — Courier Mail 'Cleary writes well and argues cogently.' — Australian Paul Cleary is a prominent Australian journalist who has documented the politics and economics of resource extraction for more than a decade. He served as an adviser to the government of East Timor on resource-sector governance and negotiations, and has a doctorate from the Australian National University. He is the author of Too Much Luck, Mine-Field and Trillion Dollar Baby.

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PART 1: TWO RUSHES

SPIDERWEBS AND ANT NESTS

When seen for the first time from the air, it looks as though a giant spiderweb has spread over what was until recently a vast patchwork of paddocks and fields. Like nothing ever before visited upon the continent of Australia, a network of wells, access roads, pipelines and pressurisation stations is fanning out across the Darling Downs. This is what coal-seam gas looks like from above; beneath the surface it is even more intrusive, akin to a vast network of ants’ nests fanning out deep below the earth’s surface, all connected to their ant Queen, the pressurisation station.
What can now be seen in Queensland is the result of the 5,000 CSG wells installed so far, but this is just one-fifth to one-tenth of the likely number to be drilled into agricultural land in the state by mid-century. Only 2,400 of these 5,000 wells are actually producing gas; the balance are either appraisal or exploration wells. In what is arguably the biggest engineering feat since the Snowy Mountains Scheme, three mammoth projects worth $70 billion are being built over 20,000 square kilometres of good cultivation and grazing land.
These projects alone involve drilling almost 20,000 production wells, but another five in development could push that number to 40,000 over coming decades.17 There remain many unknowns about how these developments will interact with the groundwater systems that make up the Great Artesian Basin. Given the uncertainties, other states have been more cautious. New South Wales has put a moratorium on the technique of fracking and on the building of evaporation ponds for waste water, and so far has granted approval for only 275 wells to be installed, but this has not halted ambitious exploration drilling, including some by Dart Energy just five kilometres from the centre of Sydney.18
Unlike in the 1960s and 1970s, when gas companies developed fields like the Cooper Basin in remote parts of the country, far away from populations centres, groundwater and prime farmland, the Queensland and NSW governments have now granted licences for CSG extraction on some of the best farmland in Australia, and close to or even within towns and cities. In the rush to rake in the royalties, these governments have carpeted their states with exploration licences, while Queensland has expedited full-scale production.
CSG developments pose a range of serious threats to groundwater, farmland, farming families and rural communities, and to the national economy. Based on overseas experience and the risks identified by developers and regulators in Australia, the industry has the potential to do the following: contaminate underground aquifers; produce billions of litres of unmanageable saline waste water that will yield millions of tonnes of salt and threaten farmland, river systems and wetlands; overlay an extensive network of access roads and pipelines; accelerate climate change by leaking methane gas into the atmosphere; trigger earthquakes; depress land values; and impose a crippling cost across the economy by doubling or even tripling the price of domestic gas.
Like all resource projects, CSG developments have inherent risks, but the likelihood of at least some of these dangers being realised, and indeed multiplied, is heightened by their enormous size and what seems to be the diminishing capacity, or perhaps willingness, of state governments to regulate them effectively.
When the Queensland projects were on the horizon in 2006, Geoff Edwards, a principal policy officer with the state Department of Mines and Energy, raised the alarm about the capacity of industry and government to manage the potential downsides. Edwards’ paper was confined to the topic of managing waste water produced by CSG – just one of the challenges posed by this form of energy extraction. He warned there was an attitude of ‘technological optimism’ about how to deal with the problem, and that the industry had been ‘developed faster than the capabilities of the authorities to moderate the potential downsides’.19 Edwards also warned that the simultaneous approval of multiple, large-scale projects could make matters even worse – which is exactly what occurred. Edwards spelt out the cumulative impact in blunt terms:
Each company may well be able to manage its own patch, but each company’s efforts will not be adequate to manage the interplay of effects once many new fields are added and flood vulnerability, roadworks, possible new dams, changes in the grain industry and climate change considerations are superimposed.20
Five years later, some of the key players involved in sanctioning these developments, including the environment minister, Tony Burke, and the resources minister, Martin Ferguson, echoed Edwards’ warning. In early 2011, Ferguson had declared that the CSG developments in Queensland represented a ‘new industry for Australia’ that positioned the country to become the second-biggest LNG exporter in the world. By the end of that same year, however, he conceded that ‘the industry has grown too quickly’, although he believed it should ‘concentrate a little more on community engagement’ to overcome this problem.
While the potential risks from CSG developments cannot be quantified, companies are serious about ensuring that one of them – a sharp increase of domestic gas prices – is indeed realised. Gas companies have been signalling to each other about their imminent plans to ramp these up as soon as they start exporting. This is because domestic gas prices are about half to one-third the price of the Asian LNG market, so linking the two markets will allow the companies to apply world parity pricing.
map4.webp
Map 4. Conventional gas
Proven reserves and prospective basins for gas found in sandstone reservoirs. This gas can be readily extracted with a small number of wells. © Commonwealth of Australia (Geoscience Australia) 2012.
map5.webp
Map 5. Tight gas
Prospective basins for gas trapped in shale and coal seams. Extraction requires many wells and hydraulic fracturing. © Commonwealth of Australia (Geoscience Australia) 2012.
In a November 2011 television interview, which Professor Frank Zumbo of UNSW said should have been investigated by Australia’s competition watchdog, AGL’s chief executive, Michael Fraser, said: ‘Historically gas has traded around $4 a gigajoule … I’m absolutely convinced that we’re heading to a price regime of $6 to $8 a gigajoule … with all of the debate that’s around coal-seam gas … that is simply going to put further upward pressure on prices.’ About the same time, BHP Petroleum’s chief executive, Michael Yeager, sent the same signal when he linked Bass Strait gas prices with LNG markets.21 A few months later, as some contract prices for gas headed well into double figures per gigajoule, Fraser said that the Gladstone LNG plants were like giant vacuum cleaners ‘hoovering up’ all the gas they could get, putting pressure on prices.
Should companies succeed with their plans, a doubling of domestic gas prices driven by CSG exports would impose a crippling burden on industry and household costs – far greater than the carbon tax and the GST combined. But now that some governments are curbing CSG developments, the industry is twisting the truth by claiming that these restrictions are the cause of looming price rises.
WHEN WATER AND GAS MIX
Coal-seam gas is so named because it is methane gas trapped in porous coal seams, usually found at depths of 300 to 1,000 metres, well below the shallower groundwater aquifers used by farmers and rural communities for irrigation and household consumption. CSG is also known as ‘unconventional’ or ‘tight’ gas because it is derived from more complex geological systems that prevent or significantly limit access to it, and therefore extraction requires complex technology and many more wells. CSG is distinct from ‘conventional’ gas, like that found offshore, which is held in porous sandstone formations and trapped by rock, and therefore more readily accessible by drilling a small number of wells.22 In the United States, where these techniques were pioneered, the gas is extracted mainly from shale beds and is therefore known as shale gas.
They say that oil and water don’t mix, but in the case of CSG the gas is kept in place by the pressure of groundwater, which is why extracting it involves bringing vast amounts of water to the surface. If the coal seams are connected to aquifers used for drinking water and irrigation, then the release of water from coal seams could in turn reduce the amount of water in these vital aquifers. This potential damage is what makes CSG production particularly problematic for Australia. It involves messing with the Great Artesian Basin (GAB), the sequence of aquifers that stretches underneath most of Queensland west of the Great Dividing Range, into New South Wales as far south as Dubbo, across one corner of the Northern Territory and past the South Australian town of Coober Pedy.
After its discovery in the mid-1800s, the GAB spurred the development of inland Australia by providing fresh water for communities and livestock. Given the highly variable nature of rainfall in these parts, the GAB became the foundation for industries across an area of more than 1.7 million square kilometres of land, ranging from intensive cultivation towards the Divide to sprawling cattle stations further inland. Water moves through the porous gravel and rock layers of the GAB at a glacial pace, which means that any sudden changes to its usage may take decades, if not centuries, to rectify. This is why water extraction from the GAB is subject to very strict controls.
The water in coal seams typically has a high salt content and contains traces of a range of chemicals and metals. It is an ancient resource that scientists refer to as ‘dinosaur water’, which is why bringing it to the surface raises serious issues about management and disposal. The amount of water extracted by CSG production varies from a few thousand to 100,000 litres a day. The production wells operating in Queensland have been producing 20,000 litres a day, although this usually tapers off over time.
When these figures are applied to 20,000 or even 40,000 wells over a period of decades, they add up to an awful lot of water.23 Estimates by the National Water Commission, a federal–state advisory agency, predict that all the proposed CSG projects combined will increase extraction from the GAB by 300 gigalitres, or 55 per cent above the 540 gigalitres currently drawn from it by all users. Other estimates produced by the WaterGroup, a division within the federal environment department, indicate that the industry’s consumption could be three to five times that amount.24
Even if the lower estimate applies, the implications are significant in two ways. First, companies don’t yet have a viable plan for managing such a vast amount of brackish dinosaur water and all of the salt and contaminants that it contains. Second, as we’ll see in the following sections, any connection between freshwater aquifers and coal seams risks serious damage to these precious resources in regional and remote Australia. These water resources could be damaged by methane gas, fracking chemicals and saline water leaking into aquifers.
FOR WHOM THE WELL TOLLS
The extent to which coal seams and aquifers are connected is an absolutely pivotal element in understanding the impact of CSG projects. The companies argue that they can prove categorically that there are no connections, which would mean it is safe to draw huge amounts of water from coal seams and then re-deposit waste water, but the reality is that there’s great uncertainty about what lies deep beneath the surface. The available evidence indicates that no CSG well or coal seam can be seen as an island, completely isolated from the surrounding geology.
The federal environment minister, Tony Burke, says his approvals require companies to carry out thorough tests, thereby eliminating the risk of adverse consequences:
The approvals that I’ve put in place say you have to test every individual aquifer. You test it seam by seam. And for each one, if it’s water-tight and the companies are right, then you don’t have an impact on groundwater. If it’s not water-tight, if it’s in fact porous and it is connected to the groundwater system or the Great Artesian Basin, then in those instances you either have to re-pressurise or re-inject the water after you’ve taken the gas out.25
This sounds very reassuring, yet a briefing paper that Burke would (or should) have read says there can be no such certainty. The 2010 paper by Professor Chris Moran and Dr Sue Vink, commissioned by Burke’s own department, assessed the likely impact of CSG projects and said that there was a real risk of subsidence leading to the fracturing of the relationship between coal seams and aquifers. While all project proponents saw this as a minor risk, Moran and Vink believed that subsidence could ‘change or cause fracturing in aquifers which may alter hydraulic connectivity’. The authors revealed: ‘No proponents have considered the effect of faulting or fractures in their models.’26 The danger of subsidence caused by CSG operations was also raised by the federal environment department in advice to Burke i...

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