Legislative Council

GREENS BILL: Ban Underground Coal Gasification in SA

November 30th, 2016

On the 30th of November 2016, Mark introduced his Greens Private Members Bill - Petroleum and Geothermal Energy (Underground Coal Gasification) Bill 2016 - which bans the practice of underground coal gasification in South Australia.

The Hon. M.C. PARNELL: Underground coal gasification is one of those technologies that, having been embraced by various jurisdictions around the world, more often than not ends in tears. That is certainly the case in Queensland and it risks being the case here if we do not knock it on the head quick smart. What is
at risk is not just our environment and public health but also our state finances. Underground coal
gasification projects put out their hand for millions of dollars in state government subsidies, so there
is a lot at risk.

The process of underground coal gasification and the problems it caused I referred to in
some detail in an earlier contribution back on 27 July, and I do not propose to repeat all the things I
said back then. That motion on that day called on the South Australian government to follow the lead
of their counterparts in Queensland and ban the practice of underground coal gasification in South
Australia. Having given the government a chance to take action itself, it seems clear that they will
not, which is why I have introduced this bill.

I want to briefly put on the record some things that have happened in this area since I last
spoke about this topic in July. On 1 September, the ABC reported that the Queensland government
may end up being liable for a $150 million class action over the Linc Energy UCG trial project, which
damaged farmland near Hopeland on the Darling Downs. The ABC report states:

Solicitor Tom Marland said it was 'more than likely' Linc Energy's insurance policy would not cover the claim.

'If we're unable to find any fruit in relation to the insurance policies, we'll just endeavour to continue our action
against the State Government,' he said.

That shows that the risk might be well beyond just the immediate vicinity. It can also be a major hit
to state revenue.

In a statement to the Stock Exchange on 14 October this year, Leigh Creek Energy said that
it was pleased to announce that 'environmental drilling [had] resumed at the Company's in-situ coal
gasification project at Leigh Creek, South Australia', and it was anticipated that drilling would finish
in five weeks' time. I think the phrase 'environmental drilling' is the mining industry's equivalent of
'friendly fire' because there is nothing of benefit to the environment in underground coal gasification.

On 8 November, the Queensland government introduced legislation into parliament to ban
underground coal gasification. This was something that had been foreshadowed earlier, in fact the
policy had been announced on 18 April. The Queensland government's Department of Natural
Resources and Mines website states:

…the Queensland Government introduced legislation into the Parliament which seeks to place a moratorium on all future activities relating to UCG through the Mineral Resources Act 1989. The moratorium will also apply to the in situ gasification of oil shale.

It goes on:

After careful consideration of the results of these trials, the Queensland Government concluded that the
potential impacts of UCG activities and the issues associated with the trial projects to date, the risks associated with allowing future commercial-scale UCG operations are not acceptable and currently outweigh the foreseeable benefits.

There are many parallels to the debate that we had before the dinner adjournment in relation to
unconventional gas. Whilst this is a very different process we are talking about, underground coal
gasification, you will see that many of the same themes emerge.

On 14 November this year, the ABC reported that an increasing number of mining executives
were being charged with criminal offences. The report states:

The Queensland Government has charged five former executives of Linc Energy with environmental offences over the failed company's alleged contamination of huge swathes of prime farmland in the state's south-east.

They are: Peter Bond, who is facing two further charges since September; Donald Schofield, former
Linc Energy general manager, on two charges; Stephen Dumble, former chief operating officer, on
two charges; Jacobus Terblanche, former chief operating officer, on one charge; and Daryl Rattai,
former general manager, on one charge.

At this point, I note that none of those listed executives who are facing charges are, in fact,
executives or directors of Leigh Creek Energy, or its predecessor, Marathon Resources. The point
that I make is that it is a company that was undertaking exactly the same activity that Leigh Creek
Energy now seeks to undertake. The ABC report continues:

The ABC revealed last year that a Queensland Government investigation found hundreds of square
kilometres of prime agricultural land was at risk from a cocktail of toxic chemicals and explosive gases that had allegedly seeped from Linc's UCG site.

The multi-million-dollar investigation was the largest in the Queensland Environment Department's history.

It found that soil near the facility had been permanently acidified, with methane, hydrogen, carbon monoxide and hydrogen sulphide alleged to have leaked from the site.

These are not claims or allegations being made by me. This is the Queensland government, having
undertaken the largest ever environmental investigation in its history, and it is all to do with
underground coal gasification.

On 18 November this year, Leigh Creek Energy made another statement to the Stock
Exchange and in it they refer to all the public subsidies they are going to be receiving—the public
handouts. According to the statement:

Innovation Australia grants R&D 'Advance Finding' for Leigh Creek Energy Project

Australian Government determines the Leigh Creek Energy Project eligible for Research and Development
tax offset

The total estimated eligible expenditure is $21 million. The statement also says that the company
was applying for South Australian government PACE grants to accelerate investment in gas projects,
and they point out that the maximum application amount is $6 million.

It is a risk to the environment, a risk to health, a risk to taxpayers from the liability of having
to fund damages claims, and also a direct hit to our state budget as we hand money to these
companies in the form of direct grants or tax offsets. That brings us up to the present. I refer to a
comment made by the Hon. Tom Koutsantonis in that important journal of record, The
Transcontinental newspaper. The article states:

State Energy Minister Tom Koutsantonis said the approval or otherwise of coal gasification projects should
be based on science and determined by 'expert regulators, not politicians'.

The direct quote from the minister is:

Politicians are not qualified to make these assessments. We trust the scientists and independent regulators, and proponents need to prove to these regulators that they will do no harm to the environment.

Let's find an independent regulator and hear what they have to say to help us make the assessment.
That brings us to Scotland. A month ago, Scotland banned underground coal gasification. It did so
following an independent report which evaluated the technology and the global experience of
underground coal gasification. The author of that report was one Professor Campbell Gemmell, who
members would realise is the former chief executive of South Australia's own EPA.

When I found out about the Scottish government decision and I found out about the report, I
contacted Professor Gemmell in Scotland, and, as it turned out, he was coming back to Australia in
November for a holiday and to do some consultancy work for the Victorian EPA. So, I ran past him
the idea that if he happened to be in Adelaide on a sitting day, he might see his way clear to providing
a lunchtime briefing to members of parliament. I was delighted that it turned out that he was able to
do it, and he gave that briefing to members on Tuesday. A number of members attended. For those
who did not, I am happy to circulate his PowerPoint presentation, because it is quite telling.

It is entitled 'A review of underground coal gasification for Scottish government', and he
highlighted the main messages and offered some lessons for South Australia. After describing how
the underground coal gasification project works, he described the parameters of his study.
Effectively, he looked at this industry everywhere in the world that it had been carried out. As well as
the global literature review, they interviewed 35 people from 23 stakeholder bodies and they made
sure they talked to industry, community regulators and also NGOs. They also had the ability to rely
on some other independent European scientific work that had been done.

The professor described how he had looked at projects in Australia, Belgium, Bulgaria,
Canada, Chile, China, England, France, Germany, India, Japan, Mongolia, New Zealand, Pakistan,
Poland, Russia, South Africa, Spain, Tanzania, Ukraine, the USA and Uzbekistan. As it turns out, it
is only Uzbekistan where the project has lasted any period of time. Just about all the other projects
failed within a very short period of time. Some went for a few weeks, but only Uzbekistan has been
going for any significant time. I understand it is about 50 years that that project has been going.

Maybe it is to do with the regulatory regime in Uzbekistan, but the professor found it very
difficult to find information about any environmental monitoring that had been undertaken. Having
done all that work, the results of the professor's independent study showed that there were very few
cases where the results of the underground coal gasification had been written up, there were no
published environmental licences that were available, and there was very little verified, peerreviewed, or openly-reported performance data. In other words, it was an incredibly secretive

What he did find was evidence of significant performance failures, and these included:
surface, groundwater and land contamination; containment losses; fugitive methane emissions;
seismicity; inadequate liability management; and worker health issues.

The results also showed that one of the inevitable consequences of setting fire to a coal
seam under the ground is that, once that coal seam has burnt out, a cavity remains and those cavities
have a habit of collapsing, so subsidence was a serious issue in many of the examples.

The approach that Professor Gemmell took was that he thought there were five
considerations that needed to be taken into account before you could go ahead with something like
UCG. He looked at the impact on climate and found that it was overwhelmingly negative because
there is no capture of fugitive emissions and no offsets. He pointed out that public or community
consent was essential, and that brings us back to the debate we have been having on fracking. He
said that did not exist in Scotland.

You have to look at the operators. Are they credible? Are they competent? Are they fit? Are
they using the best available technology? You need to look at the regulation. Is it a clear system? Is
it coherent? Is it effective? Is it robust? You also have to look at long-term issues, not the least of
which is post-mining closure. What do you do once you have finished extracting the gas? How do
you put out the fire? Does putting out the fire stop the gasses from coming to the surface?

His conclusion was that these tests could not be met in Scotland. He points out that, where
it has been tried in Australia, it has led to prosecutions. The operators exit. They exit leaving
contamination behind and the state is left to pick up the tab.

The activity of underground coal gasification has been banned, as I said, in Scotland. It has
also been banned in Wales, France, Germany and, most recently, Queensland, and the question
before us in this bill is: should it be banned in South Australia as well? The professor basically left
that decision to us, as is appropriate, but, having put all that information on the table, I think it is pretty
clear that he has not found too much to recommend this industry.

Let's take Minister Tom Koutsantonis at his word. He wants to hear from independent
regulators. I have found one for him who was the top regulator of the environment in South Australia
until fairly recently. He has handed down his verdict and I think that mining Minister Koutsantonis
needs to pay close attention to it.

With those remarks, I commend the bill to the chamber.

For more information see a copy of the Bill

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