An economic argument for a slow on CSG

The long-term impact of CSG production is still hazy, so why the rush to develop?

The Conversation

The rush is on to ramp-up Australia’s coal seam gas (CSG) production and exports at a frantic pace. This is no trivial undertaking. In addition to the huge projected expansion of CSG wells, there are roads, pipelines, and liquefaction plants to be built, harbours to be dredged, and ports to be constructed.

We have had little more than 10 years’ experience with CSG. But individual wells may operate for up to 40 years, and future development will dwarf what we have seen to this point. The scale of planned CSG development, and its cumulative impacts on the environment, are far beyond anything yet experienced.

Current plans call for a giant leap in the dark, but it doesn’t have to be that way.

There are three reasons why Australia would greatly benefit from a more deliberate approach to CSG development

We don’t understand the risks

Coal seam gas is trapped in pores inside the coal and held in place by large volumes of water. It is released by withdrawing this water, producing huge volumes of waste water that is often contaminated with salt and various other chemicals. Fracking (or hydro-fracturing), used in some CSG wells, introduces liquids under high pressure to crack the coal seam and surrounding rock, and may be an additional source of soil and water contamination.

CSG development has a much greater footprint on the land and environment than the fairly modest area devoted to its well-heads would suggest. It needs accompanying infrastructure such as roads, pipes, processing and waste storage and treatment facilities. It will impact rural and community ways of life and reduce agricultural productivity everywhere it operates.

There are many unknowns about site-specific impacts of CSG development on soil and aquifers, and the extent of contamination in the waste water. But these unknowns are dwarfed by the unknown cumulative effects of CSG mining at the scale envisioned.

The National Water Commission estimates 300 gigalitres withdrawn annually from the Great Artesian Basin for CSG (that is 60 per cent of total allowable withdrawals for a single new use), when development is in full swing.

We frankly do not know how to model these cumulative effects accurately. The cumulative shock to the system from CSG will be so large that standard modelling methods, better suited to modelling marginal changes, will be increasingly inaccurate and perhaps literally misdirected.

Australia would greatly benefit from a ‘slow down and learn approach’ to managing possible risks from coal seam gas extraction given the truly daunting challenge of assessing its cumulative risks today.

We can still proactively regulate CSG

Long study of environmental risk management has impressed me with the power of one simple idea. There are so many more options for managing risky innovations if the risk manager gets ahead of the game by intervening while there is still time to apply the brakes if necessary.

The grand Australian coal seam gas project is just getting started, so there is still the opportunity to slow things down and learn more about its impacts. We can apply what is learned to control the direction, scale and speed of future development. Regulatory approaches are evolving, but I am suggesting a more comprehensive approach than anything currently under serious consideration.

The key elements of a ‘slow down and learn’ approach to CSG would include curtailing CSG expansion until we can complete in-depth scientific studies and analysis including:

-- Site-specific studies of impact: in-depth scientific studies and analysis of the impacts of existing CSG extraction technology on soil, the land surface, and the aquifers

-- Studies of cumulative impact: design, testing, and implementation of cumulative impact models for large-scale CSG development; for example, basin-wide impacts on groundwater in the Great Artesian Basin

-- Research to design state-of-the-art and cost-effective technologies for CSG extraction and, especially, waste water treatment

-- An integrated risk management approach. It would combine a comprehensive plan to direct, manage and control future expansion of CSG extraction with adequate regulatory protections at site and project levels for future and (to the extent feasible) existing projects.

If the ‘slow down and learn’ approach seems a bit plodding, compare it with adaptive management. This is currently Australia’s favourite regulatory answer to the issue of unpredictable impact.

Adaptive management is essentially reactive – basically, feeling our way in the dark. This is a perfectly acceptable trial-and-error approach to unanticipated problems. But defaulting to adaptive management in the case of CSG, when we still have time to be pro-active, is more like standing aside while the lights go out and then feeling our way in the dark.

Slowing things down won’t cost that much

Of course, slowing down future CSG development will deny us some potential economic benefits, but foregone gains could be less than we might think.

We won’t be just sitting on our hands while waiting for better information; we will be actively researching and learning about all aspects of mining and mitigating the environmental impacts. So, CSG development that occurs later will use more benign technologies, and we will be better able to handle the adverse effects that remain.

It will take some time until we know better how to identify projects that entail manageable risks, how to manage those risks, and where to draw the line on unacceptable risks. But when we do, the gas will still be there and depending on developments in energy markets, it may be even more valuable later than it is now.

Even the rather sluggish global economic situation works in favour of slowing CSG development down. Right now, the risk-free interest rate worldwide – that is, the time-cost of delaying economic benefits – is close to zero.

Alan Randall is a Professor of Agricultural and Resource Economics at the University of Sydney.

This article was originally published on The Conversation – Reproduced with permission.

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