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The Future Examined: Regulation needs to catch up with CSG

Australia needs to boost its gas production, and in particular, accelerate onshore unconventional gas production.

Very few people would have envisaged, 20 years ago, that an unwelcome — and dangerous — by-product of coalmining, coal-seam gas, would be captured and turned, after $70 billion worth of investment, into an export commodity that has been converted to liquefied natural gas and sold globally.

Unfortunately, Australia’s regulatory frameworks have been slow to respond to the massive build-up of this industry, Professor Samantha Hepburn, of Deakin Law School, says.

“This is demonstrated by that fact that Australia’s national environmental protection legislation, the Environment Protection and Biodiversity Conservation Act 1999, predates the CSG industry,” says Hepburn.

The major problem is that all gas regulation is domain-based, meaning the regulation that applies to a particular project depends on the state in which that project is located. The only way the federal government can have an impact on state regulatory frameworks is if the project affects a matter of national environmental significance and triggers the EPBC Act.

In March 2013, the federal government introduced the Environment Protection and Biodiversity Conservation Amendment Bill, which introduced an additional matter of “national environmental significance” to the EPBC Act, so that where either a large coalmining or CSG project has a significant impact on a water resource, environmental assessment under the EPBC Act would apply.

“If a CSG project impacts a water resource — and it generally will, because of the way in which CSG is extracted — it must be reviewed by the EPBC Act. The federal minister may then decide to enter into a bilateral agreement with the state which will effectively allow state environmental regulation to apply to the project,” says Hepburn. “Hence, whilst the implementation of a new CSG trigger was an important development, it does not necessarily guarantee stronger environmental assessment.”

The two major CSG states, Queensland and NSW, have the most developed regulatory frameworks, she says. “NSW, for example, has an aquifer interference code, and a fracking code (where hydraulic fracturing is required: shale gas always requires fracking, but CSG doesn’t necessarily).

Hence, in NSW, projects have to set out a management plan for how the fracking will proceed, and be monitored.

“NSW requires reinforced environmental assessment where a project impacts ‘strategic biophysical land’,” Hepburn says. “This is usually land which is important for food production, and this will depend upon the nature of the soil and other geophysical attributes: strategic biophysical land usually exists where industries such as agriculture are concentrated.

“There are also exclusion zones around certain areas, for example, the Hunter Valley, so that projects do not interfere with tourism and viticulture.”

The other states have different arrangements. Victoria has a moratorium in place on development of CSG and shale onshore gas that will continue until 2020.

South Australia has a moratorium on hydraulic fracking for unconventional gas. The Northern Territory had a ban on fracking, but it was reversed in April, after two years.

Regulation in the gas market has also been “somewhat ad hoc”, Hepburn says. In June 2017, the federal government implemented the Domestic Gas Security Mechanism, which gives the federal resources minister the power, for five years, to restrict exports of LNG in the event of a forecast shortfall for the domestic market in any given year.

And all of this is happening in the context of the federal government’s national energy guarantee.

“Fundamentally, the apprehension that underlies domestic gas production and supply is characterised by a trilemma of issues: how to ensure sustainable production, how to maintain stability in domestic pricing and how to ensure we retain expected levels of reliability,” says Hepburn.

“Gas is incredibly important as a transition fuel in a decarbonising economy, because it has less of a carbon footprint than coal.

“In that sense, accelerating gas production is important: we know that it’s hugely attractive as a global commodity, so it makes sense to access unconventional gas; and given the incredible energy independence that shale oil and shale gas has provided for the US, it makes sense for Australia to investigate all of its unconventional gas reserves, provided issues relevant to environmental and ecological sustainability are properly regulated.”

To do this effectively, “we need to get the national framework right,” says Hepburn. “We need to see how a national environment act might operate in a more consistent and focused manner with states to ensure that projects that do impact areas of national concern receive cogent environmental impact evaluation. If the project is too risky and does not cohere with our national objectives and values moving forward, it must be declined.”

Hepburn agrees that Australia needs to boost its gas production, and in particular, accelerate onshore unconventional gas production. “But this must be accompanied by improving — and where necessary, revamping — our existing regulatory mechanisms for environmental assessment,” she says.

It is time to update the national environment act: “Any legislation of its kind, that predates the coal seam gas industry that it has to deal with — and predates the decarbonisation imperative — is not really fit for purpose.”

Originally published on The Australian.

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