CHAPTER 6. Coal Seam Gas Recovery in Australia: Economic, Environmental and Policy Issues

Abstract

Australia is experiencing a massive expansion of coal seam gas (CSG) extraction in response to buoyant international demand for liquefied natural gas and encouraged by accommodative mineral rights and taxation policies. The industry is capital-intensive and, while wages are high, employment of Australian workers is modest. The economic benefits accrue in the first few decades while the environmental costs may continue for a very long time. The CSG and shale gas extraction processes are commonly quite different: for CSG, dewatering is the main method of releasing the gas, and fracking is at present used in only a minority of wells. In an arid land, dewatering raises major concerns of cumulative impact on groundwater systems, which can only be allayed by disconcertingly expensive wastewater treatment and recycling. Environmental impacts also include methane leakage into the atmosphere (which undercuts CSG's cleaner-burning advantage relative to coal), disturbance of sub-surface aquifers and geological structure, fragmentation of landscape, and disruption of ecosystems and agricultural production. Regulation of CSG extraction remains a work in progress, but is becoming more substantive in response to public concerns. This chapter elaborates on the promises and challenges of massive CSG development, and discusses the relevant regulatory and taxation issues. Given that major Australian CSG developments lie beneath prime agricultural lands, I summarise the reasoning and empirical findings of a recent case study of the economics of competition and coexistence of CSG and agriculture on prime lands. Uncertainties and unknown unknowns are of such magnitude that they tend to dominate the policy discourse.