CSG's battle to boom

Crikey

It is clear that the current mining boom is on an unprecedented scale and is affecting much of Queensland. These industries provide a massive opportunity to the state government for the creation of jobs and royalty revenue, and coal and coal seam gas are the jewels in the mining crown. CSG itself is forecasted to generate well over 18,000 jobs, increase gross state product by more than one per cent, and provide royalty returns approaching $1 billion dollars per annum.

This once in a generation opportunity (as proclaimed by the Bligh government) is also causing once in a generation challenges.

There is significant pressure to get major mining projects approved, to ‘make it happen'. However, should there be a major CSG environmental incident in Australia, mining companies can reasonably anticipate a whole lot more government intervention. It is therefore in everyone's interest to get the regulatory framework right: to balance development with risk, benefit with controls, royalties with realities.

What, exactly, is the problem?

CSG regulation is a very complex and controversial area of science that is encompassing large areas of Queensland, including much of the state's high quality cropping land, but also extending to residential land in rural areas and other agricultural uses. Some would argue that while the financial gains are great, it also has the potential to cause significant harm to ground water resources, including the critical resource of the Great Artisan Basin.

Large scale mining operations traditionally occur in more remote areas. Unfortunately, CSG reserves have not played ball in this regard. CSG development in the Toowoomba/Western Downs region for example, is both rapid, and in clear sight of more populous areas. Indeed, it occurs on residential land – in the sense that it takes place on the ‘Blocks' and because farmers reside on their properties. Many are wondering how farming, agriculture, mining and rural communities can happily cohabitate.

Is it fair that Australian CSG proponents are perceived so negatively?

On the basis of local environmental outcomes to date, probably not. But many vehemently argue that the environmental precautionary principle applies more strongly than anywhere else, because of the nature of CSG, fracking and the potential to cause agricultural and environmental harm. But is this an emotive and irrational perception? At this stage, it doesn't matter because in the world of politics and social beliefs, perception is reality.

The cluttered regulatory landscape

In Queensland, coal mining activities are regulated through the Mineral Resources Act 1989, Environmental Protection Act 1994, Petroleum Act 1923, and Petroleum and Gas (Production and Safety) Act 2004. CSG activities are treated as a mineral and authorised under a petroleum lease pursuant to the Petroleum Act 1923 or Petroleum and Gas (Production and Safety) Act 2004. It is a complex web of mining tenements, CSG water management plans, beneficial use approvals and environmental and planning authorisations.

Companies involved in extractive industries, such as CSG, struggle with the regulatory burden placed upon them. Not because these obligations are perceived as greatly unfair, but because the companies argue they are multi-faceted, duplicated and seemingly glacial in approval process. The industry desperately wants a whole of government approach to regulation. In its submission to the NSW Legislative Council Inquiry into Coal Seam Gas late last year, Santos, one of the country's biggest LNG players stated:

“The range of approvals needed to allow CSG projects to proceed involves a number of Departments and a number of Ministers who have to issue licences, permits, authorities, with separate timeframes and conditions. These approvals are often interrelated and interdependent and can be contradictory if there is not a whole of government approach to the proposed project.”

It is generally accepted that good regulatory practice will focus on the regulatory outcome, rather than strictly about compliance with prescriptive rules. Effective regulation requires clarity and certainty. Responsibilities should be clear both to the regulator and those being regulated. Ideally, then, each party will be crystal clear about their respective roles and obligations.

Industry also seeks certainty and stability from government oversight to ensure long term investments in planning, infrastructure and production can be realised. Mining and energy projects often peer through a commerce telescope searching for horizons 20 years and more away. Governments set sail firmly focused on a three year voyage. Such inherently different critical paths result in competing priorities and conflicting milestones. Destabilisation, through major policy shifts and the moving of regulatory goal posts, can be a genuine deterrent for institutional investors.

Suspicious Minds

The February Newspoll survey found 40 per cent of Queenslanders were opposed to CSG development, while another 30 per cent were undecided. This raises two key issues. Firstly, despite the obvious economic benefits from CSG, a large percentage of the voting public doesn't believe the benefits outweigh the risk – that the industry is in fact well regulated. Secondly, that the industry itself is not articulating a persuasive and cogent case for CSG extraction.

Generally speaking, people have suspicious minds on the subject. They know the economic benefits, they are aware of how it helps build the economy, but they feel that that is just not enough. The CSG debate continues to have prominence on our air waves and is a major election issue. How that translates to votes across Queensland on 24 March, and more interestingly in the key seat of Ashgrove, is yet to be determined.

FAQ Research's Troy Collings is the CEO of Best Practice Regulatory Services (BPRS).

This story first appeared on www.crikey.com.au on March 21, 2012.Republished with permission.