CSG Needs a Long, Hard Look

Matthew Wright, November 24:

The contentious issue of coal seam gas has become a federal government concern in the dying days of the 2011 parliamentary sitting year. To gain the backing of independents Rob Oakeshott and Tony Windsor for the minerals resource rent tax, the Labor government has agreed to set up an independent committee to study the environmental impacts of CSG, but the new body won’t end the uncertainty surrounding the controversial industry. 

According to reports, the $150 million Independent Expert Scientific Committee will advise governments on the impacts of CSG extraction on the environment and water. This is definitely a step in the right direction, but it is essential that the scope of the inquiry includes a comprehensive evaluation of the life-cycle greenhouse gas emissions of CSG, particularly fugitive emissions.

 The prudent course of action would be for Australian governments to impose a moratorium on CSG mining until its impacts, particularly on water and greenhouse gas emissions, are properly understood. To proceed without this understanding risks irreparable damage to Australia’s productive farmland and aquifers, and a pulse in emissions that could easily eclipse any emissions saving made under the Clean Energy Future package. In the meantime, these uncertainties represent a very real risk to those investing in this embattled industry.

Last week Merrill Lynch issued a warning to investors about the shaky research showing CSG to be less carbon intensive than coal. There is a potential discrepancy between the Australian Petroleum Production and Exploration Association’s appraisal of CSG and a withheld report that think tank Beyond Zero Emissions commissioned into the life-cycle emissions of CSG.

The US Environment Protection Agency’s re-evaluation of the fugitive emissions of unconventional gas (including CSG) found factors used in calculating emissions were severely underestimated. If similar emissions impacts are found to occur in Australia, the carbon price liability of the sector would be dramatically increased.

The implications of this, according to the Merrill Lynch analysis, “…may directly impact future earnings in terms of carbon liability under a possibly more thorough future inventory of emissions.”  

Credible research on the life-cycle assessment of CSG would provide crucial information for investors. Now the government has laid the foundations for independent scientific assessment of CSG, it must expand the body’s scope to assess the life-cycle greenhouse gas emissions of the fuel. Failure to do so could erode investor confidence in CSG and distort national carbon and energy markets.