An overview of the environmental management of coal seam gas activities in Queensland
Coal seam gas (CSG), once referred to as the ‘girly gas’, due in part to its low calorific value, is in the spotlight more than ever.
Issues covered in the media range from commercial viability of the projects to impacts upon agricultural land; from community impacts to environmental impacts.
This article outlines the environmental impacts of CSG activities, addresses how the Queensland and Federal Governments are seeking to manage these impacts while maintaining support of this burgeoning industry and evaluates the implications of this regulation on the approval processes of four proposed CSG to Liquefied Natural Gas (LNG) projects in Queensland. With the decision of the new Federal Minister for the Environment, Tony Burke due on 22 October 2010 in relation to two of these projects, it is timely to investigate and analyse the particular environmental issues associated with these projects.
Barely a day passes without a newspaper article, media release, community newsletter or blog discussing, criticising, evaluating, supporting or decrying the CSG activities undertaken or planned in Queensland’s Surat and Bowen basins.
Issues range from commercial viability of the projects to impacts upon agricultural land; from community impacts to environmental impacts – not to mention the skills shortage that is feared to result from the approval of the proposed major CSG projects. A gas once referred to as the ‘girly gas’ due in part to its low calorific value is in the spotlight more than ever.1
The purpose of this article is to focus on the environmental impacts of CSG activities and address how the Queensland and Federal Governments are seeking to manage these impacts while balancing that regulation against its support of the industry generally. I will then evaluate the implications of this regulation for the approval processes of four of the proposed CSG to LNG projects in Queensland.
What is CSG?
CSG is a natural gas, approximately 98 per cent methane, which collects in underground coal seams by bonding to the surface of coal particles. The CSG process involves drawing water from the coal seams which releases the CSG.2 In circumstances where the coal seams are very deep and of low permeability it may be necessary to use the method of hydro-fracture (or ‘fraccing’) to increase permeability. This is done by pumping a fluid comprising 99.5 per cent water and sand (plus 0.5 per cent of other additives) at high pressure down a cased well and into the coal seam.3
The primary environmental impacts of CSG activities are the management of CSG water and the impacts on groundwater, in particular, in relation to the rights of other users.
CSG water means underground water brought to the surface of the earth or moved underground in connection with exploring for or producing CSG4. Significant quantities of CSG water are likely to be generated as a result of CSG generation and contain variable concentrations of salt. The salinity of CSG water is typically measured as the concentration of total dissolved solids (TDS) with values ranging from 200 to more than 10,000 milligrams per litre. Good quality drinking water has TDS values of less than 500 milligrams per litre. The TDS of sea water is between 36,000 and 38,000 milligrams per litre. The salty nature of CSG water means it has the potential to cause environmental harm if released to land or waters through inappropriate management.5
In March 2010, the Queensland Government released its Coal Seam Gas Water Management Policy (CSG Water Management Policy). The policy and legislative developments discussed below reflect the commitments set out in the CSG Water Management Policy.
The extraction of CSG necessarily involves the taking of groundwater. In its Blueprint for Queensland’s LNG Industry (September 2009), the Queensland Government recognised that it was critical to manage the impacts (including the cumulative impacts) of CSG extraction on other water users and on springs.
The majority of the proposed CSG activities fall within the Great Artesian Basin and it appears that more information is required on the impacts of those activities. For example, a report released in early September 20106 by the Central Downs Irrigators Limited warns of a risk of one of Queensland’s most important freshwater aquifers, the Condamine Alluvium, draining into the saline Walloon Coal Measures which are subject to CSG activities.
The report notes, however, that insufficient data exists to quantify the extent to which freshwater will flow into the coal measures and in a statement to the media on the day of the release of the report, the Queensland Minister for Natural Resources, Mines and Energy The Honourable Stephen Robertson stated that the Government would treat the report seriously but that a moratorium on CSG exploration was not necessary because “to a large extent, a moratorium is already in place through a heavily-conditioned approval process placed in CSG exploration and development through the independent Coordinator-General”.7 This process is discussed further below.
Legislative Context and Developments
The environmental impacts of CSG activities are regulated primarily by the Environmental Protection Act 1994 (EP Act). However, where CSG activities form part of a larger project (such as the four proposed Queensland CSG to LNG projects discussed below), significant project status under the State Development and Public Works Organisation Act 1971 (Qld) (State Development Act) can be given to the project. Significant projects receive a “whole of government” environmental impact assessment overseen by the Coordinator-General. The Coordinator-General then assesses the environmental impact statement (EIS) and releases an evaluation report in which the Coordinator-General imposes conditions on the construction and operation of the project. Where secondary approvals (such as environmental authorities under the EP Act) are required, the conditions imposed upon those secondary approvals must be consistent with the Coordinator-General’s conditions.8
Where CSG activities (whether they form part of a larger project or not) will have or are likely to have an impact on a matter of national environmental significance9, it will require referral to the Federal Minister for Environment (Federal Minister) for a decision as to whether the project is a controlled action under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act). Where a project is declared to be a controlled action under the EPBC Act, it requires environmental assessment and approval by the Federal Minister. Where appropriate, this environmental assessment can be carried out in conjunction with the assessment process under the State Development Act.
Environmental authorities for petroleum activities such as coal seam gas exploration production must be obtained under the EP Act10. Petroleum activities and greenhouse gas activities are together referred to in the EP Act as ‘Chapter 5A activities’. Chapter 5A activities are either a level 1 or a level 2 activity depending upon the risk of environmental harm. The environmental assessment process for level 1 chapter 5A activities is more stringent than as for level 2 chapter 5A activities. Schedule 5 of the Environmental Protection Regulation 2008 (Qld) (EP Regulation) sets out the relevant level 1 chapter 5A activities.
An application for a level 1 chapter 5A activity must be supported by a range of information, including:
- relevant information about the likely risks to the environment11
- details of wastes to be generated and any waste minimisation strategy12
- an environmental management plan that complies with section 310D of the EP Act,13 and
- the prescribed fee.14
Recent amendments to the EP Act and the release of new environmental policies by the Department of Environment and Resource Management (DERM) relating to CSG activities have placed more stringent obligations on CSG proponents. These changes to the regulation of environmental management have impacted upon and delayed the assessment and approval of two CSG to LNG projects (discussed further below).
Underpinning the environmental management of the CSG industry is the concept of ‘adaptive environmental management’ – a system to monitor and instigate change where required.15 Adaptive management is also said to allow for best practice environmental management to be implemented as technologies develop over time. The concept of adaptive environment management is reflected in requirements in the EP Act and related policies to regularly monitor, evaluate, report on (and where necessary improve) the effectiveness of technologies and environmental protection measures.
Environmental Management Plan (EM Plan)
At the heart of the environment regulation of CSG activities is the EM Plan. The purpose of an EM Plan is to propose environmental commitments to help DERM decide the conditions of the environmental authority (chapter 5A activities).16
Under the EP Act, an EM Plan must describe:
- each relevant resource authority for the environmental authority
- all relevant activities the subject of the application
- the land on which the activities are to be carried out
- the environmental values likely to be affected by the activities, and
- the potential adverse and beneficial impacts of the activities on those environmental values.
An EM Plan must also:
- state the environmental protection commitments the applicant proposes for the activities to protect or enhance the environmental values under best practice environmental management
- contain enough information to allow DERM to decide the application and conditions to be imposed on the environmental authority (chapter 5A activity)
- address any other matter prescribed under an environmental protection policy or regulation, and
- include a rehabilitation program for land proposed to be disturbed under each relevant resource authority for the application, which also states a proposed amount of financial assurance for the environmental authority.
However, amendments to the EP Act which took effect on 5 July 2010 impose specific requirements for EM Plans relating to a CSG environmental authority (that is for an environmental authority (chapter 5A activity) for a level 1 chapter 5A activity involving exploring for or producing coal seam gas). Further, the holder of an existing CSG environmental authority must give DERM a revised EM Plan that complies with the following requirements by 5 July 2011.17
In such a case, the EM Plan must also state the following:
- the quantity of CSG water the applicant reasonably expects will be generated in connection with carrying out each relevant coal seam gas activity
- the flow rate at which the applicant reasonably expects the CSG water will be generated
- the quality of CSG water, including changes in the water quality that the applicant reasonably expects will happen while each relevant coal seam gas activity is carried out
- the proposed management of the CSG water including use, treatment, storage or disposal of the water
- the measurable criteria (the management criteria) against which the applicant will monitor and assess the effectiveness of the management of the CSG water including criteria for each of the following:
- the quantity and quality of the water used, treated, stored, disposed of
- protection of the environmental values affected by each relevant CSG activity; the disposal of waste, including for example, salt, generated from the management of the water, and
- the action that is proposed to be taken, if any of the management criteria are not satisfied, to ensure the criteria will be able to be satisfied in the future.18
Each year, CSG operators must submit as part of the annual return an evaluation of the effectiveness and appropriateness of the management of CSG water.19 If it is determined that the CSG water has not been managed appropriately, then the CSG operator must outline what future actions will be taken to ensure appropriate management of their CSG water. This requirement does not apply to the first annual return the holder of an existing CSG environmental authority is required to lodge after 5 July 2010, unless the holder has already given DERM a revised EM Plan.20
The EM Plan must not provide for using a CSG evaporation dam in connection with carrying out a relevant CSG activity unless the EM Plan includes an evaluation of best practice environmental management for managing the CSG water and alternative ways for managing the water and that evaluation shows there is no feasible alternative to a CSG evaporation dam for managing the water.21
A CSG evaporation dam means an impoundment, enclosure or structure that is designed to hold CSG water for evaporation.22 CSG evaporation dams should be distinguished from CSG water aggregation dams. DERM prefers that CSG water be contained in dams designed to aggregate water (deep dams with a small footprint) rather than dams designed to evaporate water (shallow dams with a large surface area).
The prohibition applies also to existing CSG environmental authorities, unless the construction of the CSG evaporation dam had substantially commenced before 5 July 2010. Despite this, it is still possible for DERM to approve the construction of an CSG evaporation dam as part of the EM Plan approval process, provided the requirements of section 310D(6) (above) are met.
In March 2010, DERM released Guideline: Preparing an environmental management plan for coal seam gas activities (EM Plan Guideline) to further assist understanding the requirements of EM Plans for CSG authorities.
The EM Plan Guideline describes the preferred structure of an EM Plan, including a list of potential project activities and environmental values that could be relevant to the project area. As with all EM Plans, the level of detail required depends upon the specific characteristics of the project activities and the environmental values of the project area. The amount of information provided should be commensurate to the risk of environmental harm and based on an assessment of the potential impacts of the proposed activities on the environmental values of the project site.
CSG Water Management Hierarchy
In particular, the EM Plan Guidelines provides significant detail on how CSG water should be managed by reference to a ‘CSG water management hierarchy’. The EM Plan Guidelines distinguish between preferred management options (Category 1) and non-preferred management options (Category 2).
In Category 1, four management options are preferred:
- injection where the detrimental impact on environmental values and water quality is unlikely and where it can be demonstrated that the injection fluid has inconsequential reactivity with the target formation and native groundwater it will come into contact with
- untreated use, where the CSG water can be used without first substantially changing its composition (e.g. livestock dewatering, mining and extractive industries such as coal mine wash plants and industrial uses such as cooling tower water)
- treatment (for example, by desalination, chemical treatment or ancillary sterilisation or filtration) and use, although the CSG water must be of an appropriate quality for the proposed used and comply with the conditions of the environmental authority, the general approval of a resource for beneficial use or a specific approval of a resource for beneficial use,23 and
- direct supply via pipeline to a water supply dam managed by a water service provider, in which case proof of a contract for the supply of the water between the environmental authority holder and the responsible entity must be provided along with an indication of the amount and quality of the water to be supplied.
In Category 2, the following management options are considered to be ‘non-preferred’:
- disposal via evaporation dams, unless an applicant can demonstrate that there is no feasible alternative for using, treatment, storing or disposing of CSG water
- disposal via injection where a detrimental impact is likely
- disposal to surface waters, and
- disposal to land, unless it is approved for beneficial use (e.g. for dust suppression or irrigation).
EM Plans that are developed through the environmental impact assessment process must describe the preferred option where several options are proposed within the EIS. Management options must be converted into specific commitments within the EM Plan.
Coal Seam Gas Water Management Plan (CWMP)
To address the specific issues arising out of the management of CSG water, the EM Plan Guidelines also require a CWMP to be incorporated into the EM Plan.
The CWMP must:
- provide an estimate of the volume of CSG water produced annually over the life of the project and describe the characteristics of CSG water produced
- describe how and where the CSG water will be produced, aggregated, stored and kept separate from other waters until it is used, treated, distributed or disposed of
- describe how CSG water will be dealt with in accordance with the CSG water management hierarchy including a description of the estimated amount of CSG water that will be dealt with under the preferred water management options in category 1 and the water management options that are not preferred in category 2
- where CSG water is proposed to be treated, describe:
- the treatment process
- how and where the treated water will be stored and used, and
- how and where the waste generated by the treatment process will be stored, used and/or disposed of;
- If any CSG water is proposed for direct disposal as waste, provide information sufficient to demonstrate that legislative, environmental, technological, economic and social requirements have all been evaluated and taken into consideration in deciding the disposal as waste is the only feasible option;
- describe the detail of any pilot programs or trials for CSG water solutions, including:
- objectives of project
- quantity and quality of CSG water applied
- location and area
- duration of the activity
- describe the characteristics of the receiving environment
- describe the control measures that will be implemented for each water management option (aggregation, storage, treatment, use or disposal) to prevent or control the release of a contaminant or waste to the environment
- describe the indicators or other criteria against which the performance of the CSG water management practices will be assessed
- describe a monitoring program sufficient for the prediction and early detection of any detrimental impacts on the receiving environment from CSG water management practices
- describe the procedures that will be adopted to regularly review the monitoring program and to report to management and DERM should unforeseen or non-compliant monitoring results be recorded
- describe the procedures that will be implemented to prevent unauthorised environmental harm from unforeseen or non-compliant monitoring results.
- describe procedures for dealing with accidents, spills, failure of containment structures and other incidents that may arise in the course of the CSG water management practices and result in the unexpected release of contaminants or waste to the environment, and
- describe the procedures to be used to identify and implement strategies that minimise the quantity of CSG water generated at the surface of the land, promote efficiency in the use of CSG water as a resource through direct use and treatment, improve the water management practices employed where non-preferred management options are being used and minimise the total area of land disturbed by CSG water dams.
Model Environmental Authority Conditions
In further support of the legislative amendments and new policies, DERM (in consultation with the Australian Petroleum Production and Exploration Association) has also introduced model conditions for level 1 environmental authorities for CSG activities, which may be used as a basis for proposing specific environmental protection commitments in an EM Plan.
Despite the existence of these model conditions, it is possible for applicants to propose alternative conditions which are more specific to the particular project through the EM Plan. DERM may also impose alternative conditions if necessary. However, the introduction to the model conditions states that it is unlikely that DERM will accept less rigorous conditions without clear evidence that the risk of environmental harm is significantly reduced by the specific environmental practices to be implemented, the technologies to be used or the nature of the environmental values impacted by the project.
Management of Groundwater impacts
CSG producers are permitted to take groundwater under the Petroleum & Gas (Production and Safety) Act 2004 (Qld) (Petroleum and Gas Act) as it is a necessary activity in the process of extracting CSG.
Legislative amendments are proposed to the Water Act 2000 (Qld) (Water Act) to transfer the management of groundwater associated with CSG production from the Petroleum and Gas Act to the Water Act.
These amendments will also include trigger thresholds for groundwater level drawdown in bores and springs. If the projected decline in groundwater levels (associated with CSG production) in water bores exceeds the trigger threshold and the bore owner has experienced a reduction in water supply, then the CSG operator must investigate the matter.
If it is established that the CSG activities have contributed to the reduction, then the CSG operator must negotiate arrangements with the bore owner to ‘make good’ the impact. Such arrangements may include restoration of water supply (such as by deepening a bore) or compensation for the loss of supply to the bore owner.
CSG producers will be required to periodically prepare and submit underground water impact reports to DERM for approval. The reports will be required to contain: the results of monitoring; projects of the extent of water level impacts; an inventory of springs where impacts on water levels in underlying aquifers are projected to exceed trigger threshold values and an assessment of the risk to those springs having regard to matters such as the connectivity of the springs to the underlying aquifers; and a proposal for managing impacts.
DERM has also indicated that the Surat Basin is likely to be a ‘cumulative impact management area’ within its proposed cumulative underground water management regime. This regime is designed to manage areas where water level impacts of CSG producers overlap.
At the time of writing, no such legislative amendments have been introduced to give effect to these proposed changes. The author’s inquiries with DERM indicate that these amendments are likely to be tabled by the end of 2010.
The Queensland Government has also introduced further initiatives to compliment these legislative and policy developments. In July 2010, the State Government announced additional compliance staff within DERM and Queensland Parks and Wildlife and a Mines Registrar who will be the first point of contact for land holder issues arising from the CSG industry and attend to applications for tenements (together with two support staff who will focus on compliance, monitoring and enforcement).24
On 4 August 2010, the Minister for Climate Change and Sustainability The Honourable Kate Jones announced the appointment of a ‘squad’ of 11 additional officers to undertake approvals and compliance functions in the CSG sector, “working to ensure companies meet all their regulatory requirements for environmental protection.”25
At the same time, the State Government announced it would ban petroleum compounds containing benzene, toluene, ethylbenzene and xylenes (commonly referred to as B-TEX) from use in CSG operations or ‘fraccing. Fraccing involves pumping fluid at high pressure into a coal seam to facture the seam and allow gas to flow readily into gas wells (although the vast majority of gas wells do not need to be fracced).26 The use of B-TEX in fraccing has caused community concern as evidenced by the recent detection of small quantities of the chemicals during routine testing by Australia Pacific LNG27. While there was no evidence of environmental harm or evidence of the source of the chemicals, there has been a call by environment group, Friends of the Earth for a moratorium of CSG activities as a result - further indication of the attitudes in relation to these activities.
At the time legislation had not been introduced to effect this requirement, the Minister for Natural Resources, Mines and Energy announced that he would be writing to all existing CSG environmental authority holders to express the expectation that ‘the current non-use of B-TEX chemicals will continue until such time as the new legislation is in place’. The Minister also foreshadowed that he will use the existing head of power in the EP Act to require DERM to refuse any application for new CSG activities that involve the use of B-TEX chemicals to facture the coal seam.
On 5 October 2010, the Minister introduced the Natural Resources and Other Legislation Amendment Bill (No. 2) 2010, which (amongst other things) deems an environmental authority (chapter 5A activities) to include a condition prohibiting the use of ‘restricted stimulation fluids’ such as B-TEX in fraccing.
Despite the somewhat emotive nature of the media releases, the State Government has also gone to great pains to assure the CSG industry of its importance and value. The balance between economic development and environmental protection (and the corresponding balance between stakeholder interests) will be a fine one that must be well managed by a Government already experiencing a lack of popularity amongst voters and business.
Impact on Current Proposals
Four CSG to LNG projects are currently subject to environmental impact assessment by the Coordinator-General under the State Development Act and by the Federal Environment Minister under the EPBC Act. Following such assessment, the proponents must obtain secondary approvals, including environment authorities under the EP Act.
In this section, I provide an overview of the status of the projects as at the date of writing and discuss how the new policy and legislative developments have impacted upon the assessment process. The current status of the projects is set out in Table 1 below.
In the Evaluation Report for the Gladstone LNG Project, the Coordinator-General stated he was not convinced that there was sufficient detail in the draft EIS and SEIS on the construction layout and location of the gas field infrastructure, in order to determine with some degree of accuracy the impacts on the environmental values in the gas fields. He further went on to comment that the content of the EIS and the Supplementary EIS was ‘not sufficient to provide the necessary detail required by the legislation in applications for petroleum and gas tenures’. It is not intended to analyse the particular concerns raised by the Coordinator-General. However, it is worth noting that many of the legislative requirements referred to by the Coordinator-General came into force after the preparation of the EIS was complete and submitted to the Coordinator-General for evaluation. Therefore, the Coordinator-General has imposed further assessment requirements on the proponents to be provided at particular future stages of the approvals process. The proponent has indicated that it will be providing all information as required by the Co-ordinator General.
Further Required Information
Within three months following final investment decision and prior to petroleum activities taking place, the proponent must provide to the Coordinator-General for review a gas field cumulative impacts assessment report addressing: regional impacts on terrestrial flora and fauna, biodiversity values, listed species and ecosystems; riparian habitats; surface and groundwater environmental values; and soils, including the ability to support ongoing agricultural production.
The Coordinator-General also required the following reports to be provided to him for review:
- ecological constraints planning report (prior to the issue of the environmental authorities)
- CWMP (prior to the issue of the environmental authorities)
- Brine Management Strategy (within 90 days of the issue of the Coordinator-General’s Report), and
- Environmental Offsets Program.
Prior to the commencement of the gas field activities, the Coordinator-General also requires the following:
- water quality monitoring program
- regional groundwater model
- groundwater and springs impact assessment
- operational plans, and
- water quality and soil monitoring plan.
The Coordinator-General referred to the Model Conditions in his evaluation report and stated that they must be used as a guide as to environmental authority conditions that may be imposed. He qualifies this by saying that the actual conditions imposed by DERM as a result of the assessment of the EM Plan may be different.
Similar conditions were imposed by the Coordinator-General on the Queensland Curtis LNG Project.
On 11 July 2010, the (then) Federal Minister for the Environment, Peter Garrett delayed assessment of both projects until 11 October 2010 to provide ‘a chance for further information to be provide, including the areas indentified as deficient in the Queensland Coordinator-General’s report’.32 At the time of writing, the new Minister for the Environment, Tony Burke, had announced he would be in a position to meet this deadline33. Further, it will be interesting to assess the impact of the minority Federal Government’s agreement with the Greens on CSG activities in Queensland given that party’s policy position on such activities.
The past 12 months have seen many changes in the way the environmental impacts of CSG activities are regulated. The important task of balancing stakeholder interests in this area has required careful management by State and Federal Governments alike. Environmental impacts are but one aspect of the issues confronting those involved in the industry. It is beyond the scope of this paper to discuss issues arising from the protection of strategic cropping land, overlapping tenures and land access. However, these are all critical and are also subject to significant legislative and policy developments. The “girly gas” is the centre of attention and will be for some time to come. It is now for the proponents and their consultants to navigate their way through the regulatory mine and come through the other side with their approvals and relationships with the government and community in tact.