Article by Samantha Hepburn | Published September 1, 2012
By Samantha Hepburn. This article is part of our August theme, which focuses on the environment and human rights. Read more articles on this theme.
In the past decade, the expansion of the coal seam gas (CSG) industry in Australia has been nothing short of momentous. In the Eastern states, where the growth has been concentrated, this progression has generated increasing social and environmental concerns. Uncertainty regarding the effect of coal seam gas extraction upon ground water aquifers, the full impact of hydro-fracturing, and how to effectively dispose of gallons of “associated” water without causing cross-contamination have all contributed to this. Additionally, land-holders in these areas have been subjected to what the New South Wales Senate Standing Committee has recently described as an “aggressive” assertion of mining rights. In particular, it has been established that in some cases, coal seam gas proponents have refused to consult or negotiate in any way with landholders, who in turn are deeply concerned about the impact that any such project may have upon their land and their livelihoods.
“Disempowered, uncertain, exhausted, under siege – these are words that I hear landholders use time and again to describe the way they feel…”
The frustration and fatigue of New South Wales farmers has been well summarised by Ms Fiona Simpson, President of the NSW Farmers Association in her submission to the New South Wales Senate Standing Committee:
Disempowered, uncertain, exhausted, under siege – these are words that I hear landholders use time and again to describe the way they feel … This is not a fact of nature like a drought, a flood or a plague, which our farmers are fairly hardened to.
The extension of coal seam gas mining across land devoted to agriculture has produced an unprecedented collision in resource claims in Australia. This conflict has been aggravated by the environmental and social ramifications of coals seam gas expansion. The extraction of coal seam gas is reliant upon the use of gallons of groundwater. In an arid landscape such as Australia, where water is a scarce resource, any depletion is concerning. This concern has been further compounded by the fact that the extent of the connection between coal seam gas aquifers and other aquifers is unknown. It is, therefore, possible that there may be some cross-contamination between coal seam gas aquifers subject to fraccing chemicals or, high saline “associated water” and other aquifers.
In the past, these issues have not been as problematic because of the fact that agriculture and mining have occurred in relatively independent spheres. The coal seam gas phenomenon has, however, mobilised previously uninvolved interests and disrupted traditional patterns of land usage.
There are also concerns about the use of hydro-fracturing, a process that involves fracturing the coal seams by injecting a combination of water, sand and chemicals. Hydro-fracturing is used to increase the extraction of gas from the coal seams. Once the injected water flows back to the wells, the sand remains in the fractures creating gaps which ensure increased flow of gas into the well bore. Whilst hydro-fracturing is not routinely used in all CSG drills in Australia it has been linked with a range of environmental difficulties including aquifer contamination, landslides and increased seismic activity.
As outlined by Dr Khan, a researcher at the Water Research Centre of New South Wales:
Drilling through aquifers, impervious rock and coal seam risks ‘interconnecting’ otherwise confined aquifers. In such circumstances, aquifers holding large volumes of pristine water can be contaminated by mixing with other contaminated waters.
Another major source of discontent for farmers whose land has been subject to coal seam gas mining projects is the absence of a right of veto, which would allow landholders the right to refuse coal seam gas proponents access to their land. There is no right of veto within the Australian land framework because land ownership is premised upon the fragmentation of land interests.
Landowners retain physical control of the land but do not own the petroleum under the ground. In most states, including New South Wales and Queensland, petroleum has been statutorily vested in the government. Coal seam gas is generally defined as a hydro-carbon and therefore comes within the statutory definition of “petroleum”. This means that the government has ownership of coal seam gas in all land and is entitled to license the right to explore and extract that gas to third parties, without the consent of the landholder.
The grant to a third party generates a petroleum title. The holder of the petroleum title is subject to any rights and conditions that are set out in the licence or lease, but is not subject to the demands of the owner of the land in which the gas is located. There are a few statutory safeguards for landowners but not many. For example, the Petroleum (Onshore) Act 1991 (NSW), Part 5, section 71(1) makes it clear that the holder of a production lease cannot carry out any mining operations or erect works over land that is “cultivated” without the consent of the land owner. This limited protection needs to be extended.
Resource based property rights, such as petroleum titles, are not autonomous. The enforcement of these rights necessarily impacts upon the quality and scope of physical land ownership. The absence of a right of veto therefore leaves landholders in a very weak negotiating position.
In the past, these issues have not been as problematic because of the fact that agriculture and mining have occurred in relatively independent spheres. The coal seam gas phenomenon has, however, mobilised previously uninvolved interests and disrupted traditional patterns of land usage. This transition has made it increasingly imperative to reinforce the demarcation between land ownership and petroleum titles and to ensure that landholder rights are not unduly debilitated during this process.
To this end, the New South Wales Standing Committee has recently accepted that the rights of landholders must be strengthened through legislative change. Recommendation 16 of the report is that the Petroleum (Onshore) Act 1991 (NSW), be comprehensively reviewed with the aim of strengthening the rights of landholders and achieving a fair balance between those rights and the entitlements of coal seam gas operators in relation to land access.
A particularly important tool in this respect is the access agreement, whereby coal seam gas proponents who hold a petroleum title enter into an arrangement with the landholder regarding when, where and how access to the land will occur. Under the existing regulatory framework, landholders have little consultative entitlements regarding access. In New South Wales for example, the current provisions of the Petroleum (Onshore) Act 1991 (NSW) only mandate an access arrangement in circumstances where a coal seam gas proponent holds either a low-impact exploration licence or a low impact special prospecting authority. There is no obligation to enter into an access arrangement where the exploration licence is not defined as low impact or alternatively, where the proponent holds a full production lease.
Many farmers have expressed the opinion that they do not want compensation but rather, want coal seam gas mining banned from their land so that they can continue to farm the land that they have always farmed.
Both the New South Wales Draft Code of Conduct for Coal Seam Gas Mining as well as the Standing Committee report recommend that this position be altered. The Draft Code of Conduct recommends mandating access arrangements for all petroleum titles, whatever the impact or type. This would mean that all exploration licences and production leases would need to negotiate an agreement with the landholder regarding suitable and appropriate access. The access arrangement proposed by the draft code incorporates extensive mandatory inclusions such as: when and how the coal seam gas proponents may access the land, how the environment will be protected, acceptable noise levels, requirements for rehabilitation and any compensation arrangements.
The issue of compensation, particularly for farmers, is a vexed one. A fundamental question is whether farmers and other landholders actually want financial reimbursement. Many farmers have expressed the opinion that they do not want compensation but rather, want coal seam gas mining banned from their land so that they can continue to farm the land that they have always farmed. The Senate Standing Committee received many submissions for a complete moratorium on coal seam gas mining until all of the social and environmental concerns have been properly and thoroughly investigated; however, such a moratorium was not recommended.
…many farmers receive $5000 per year for each well that is drilled, however the profit that the well makes can be between $800,000 to $1million a year. This sense of financial inequity, particularly as the mining process may actually decrease the value of the land, generates further frustration and discontent.
Where compensation is negotiated, many farmers have opted to simply take the money and leave their properties. This creates the phenomenon of “absentee farmers”, because the infrastructure and interference that generally follows the establishment of a coal seam gas project involves a complete loss of lifestyle. Absentee farming causes significant social costs as it fractures communities and impairs regional development.
The amount of compensation being paid to farmers is also the subject of significant debate. Generally the compensation paid to farmers is connected to an assessment of loss of enjoyment and lifestyle. The amount paid does not, therefore, represent a component of the actual profit that coal seam gas proponents are making from the extraction of the gas. For example, many farmers receive $5000 per year for each well that is drilled, however the profit that the well makes can be between $800,000 to $1million a year. This sense of financial inequity, particularly as the mining process may actually decrease the value of the land, generates further frustration and discontent.
If no moratorium is to be imposed, a better option may be for coal seam gas proponents to offer farmers and landholders an initial compensation payment that is representative of the value of the land needed for the well, combined with the loss in asset value and productivity. Further compensation payments could then be based upon a profit percentage. This type of payment would provide farmers with increased financial benefits and a greater sense of participation and involvement. Other options could be non-monetary in nature. For example, the New South Wales Draft Code of Conduct proposes temporary employment or contract work as options that should also be seriously considered.
Strengthening the rights of landholders is, however, ultimately inadequate if such reforms are not complemented by reinforced environmental protection. One of the most alarming issues underlying coal seam gas extraction is lack of knowledge. Scientists have not yet done enough research to be fully and accurately apprised of the environmental impact of coal seam gas extraction. Research and modelling on vital issues including water connectivity and the impact of hydro-fraccing upon vital water sources, such as the Great Artesian Basin, are being conducted as a priority. Clear results have not, however, been established because the water in groundwater aquifers can be centuries old and is extremely slow-moving. The impact of coal seam gas extraction on these aquifers can, therefore, take a long time to become evident. It may, for example, take hundreds of years for the aquifers which have been depleted to recharge, or they may never recharge.
The uncertainties connected to coal seam gas mining mean that the future expansion of the industry must be grounded in fundamentally revised principles. In the absence of adequate scientific knowledge, the most appropriate strategy for dealing with a “plausible but uncertain harm” is to implement a governance framework that adopts the “precautionary principle”. The “precautionary principle” is essentially a risk management strategy that has a particular cogency for environmental governance.
The precautionary approach is ostensibly endorsed in New South Wales by the Protection of the Environment Administration Act 1991 (NSW), Part 3, section 6(2)(a) which requires public and private decisions to be guided by “careful evaluation to avoid serious or irreversible damages to the environment and the risk-weighted consequences of various options.” Arguably, these principles would support a complete moratorium on coal seam gas mining until the information needed to make a “significant evaluation” is acquired.
Alternatively, these principles may mandate the endorsement of an adaptive management framework, similar to that underpinning the regulatory framework in Queensland. An adaptive management framework would support the continuation of coal seam gas mining; however, mining entitlements would be subject to rigorous ongoing assessment processes. The Standing Report in New South Wales, whilst accepting the importance of attaining further robust scientific knowledge, preferred to interpret the precautionary approach as necessitating an adaptive management framework. This means that drilling and exploration for coal seam gas mining will continue but that data for hydro-geology and geology will be collected during this process and, where necessary, utilised to moderate the industry practices in the future.
The commercial exploitation of coal seam gas is likely to continue as global energy demands increase. The industry predicts that by 2040, the worldwide production of natural gas (including coal seam gas) will either match or exceed that of oil. Whilst the extraction process is fraught with social and environmental costs, this has not diminished the myopic exploitation of the economic value of coal seam gas. The emergent regulatory frameworks have been slow to respond and, whilst significant reforms have been proposed, they may end up being too little, too late.
In the long term, respect for ecological integrity is a global imperative that will have devastating social and environmental consequences if ignored. This respect is, however, difficult to achieve retrospectively. In determining how to best regulate the expansion of coal seam gas mining in Australia, political communities must make careful choices; they must be cognisant of the depth of responsibility that is owed towards citizens, nations and future generations.
Samantha Hepburn is an Associate Professor at the Deakin University School of Law, Barrister and Solicitor at the Supreme Court of Victoria. She has written widely on native title rights, water rights and property law generally.