CSG, Markets, Technology

CSG – next generation legal issues

With the ever increasing pressures on government and business alike to find cleaner and more environmentally friendly sources of energy, CSG is well placed to provide long term and sustainable electricity generation whilst only emitting half of the greenhouse gas emissions of traditional coal-fired electricity generators.

During the initial stages of the expansion of the CSG industry, the legal issues were generally regulatory in nature. The commencement of a new industry forced governments to move forward with a legislative regime within which the industry could operate.

This has been completed in most jurisdictions around Australia and has supported the rapid expansion of the industry. The next hurdle for CSG explorers and producers is a new generation of legal issues that a high growth industry attracts.

Competition for resources

The boom in CSG is not isolated to that industry alone. During the same period, coal and mineral industries have also had the benefit of prosperous times. With both industries expanding rapidly, there is increasing competition for access to resources.

In Queensland, the petroleum and minerals legislation include provisions which allow for the co-ordinated production of both coal and CSG from the same area. This legislative regime has generally been successful in allowing CSG and coal producers to reach a commercial arrangement allowing exploration and production in overlapping areas.

However, the regime and the ability to reach commercial arrangements are not as successful when both parties are targeting the same resource (for example the same coal seam) and have similar time constraints. This is becoming particularly evident in overlaps between CSG and proposed underground coal gasification projects.

The competition for these resources is only likely to increase over time. While this is an issue which needs to be closely addressed and regulated by government, the CSG industry as a whole needs to be mindful of its need to co-operate, to the extent practicable, with other extractive industries that are competing for the same resources.

Water

Strong concerns have been raised by government and landowner groups alike regarding the possible negative impacts of ground water extraction during the CSG production process.

Landowners are generally concerned that the extraction and storage of this saline water may result in contamination of potable aquifers from which landowners extract water for their stock and domestic uses. In particular, landowners are concerned about the storage of saline water extracted by CSG producers in specially constructed storages, which landowners believe are likely to leak.

In response to these concerns, governments have imposed more stringent regulations on the use of water extracted from CSG activities. Many CSG producers have implemented proactive initiatives to beneficially use this water. These initiatives include supplying the water to coal companies for wash plants, to landowners for stock use (where the water quality is suitable) or treating the water by reverse osmosis so it can be used for town purposes.

Given the large quantities of water which is extracted by CSG producers, the concerns of landowners and government must be proactively addressed in order to prevent over regulation by government. Additional regulation will be more costly and time consuming for CSG producers.

Landowner concerns

As with the increased instances of competition for resources which has resulted from the expansion of the CSG gas industry, there has been a significant increase in CSG activities on land in general.

This has resulted in a larger CSG footprint on freehold and leasehold land in the last five years and a steady increase in concerns being raised by landowners regarding the conduct of CSG activities.

These concerns can sometimes be an attempt by landowners to increase compensation payments but, in some instances, are based on genuine concerns regarding the performance of CSG companies.

CSG producers should ensure that there is a consistent and targeted approach to dealing with landowners across the industry. Poor past performance by one producer will significantly impact on the ability of other producers to maintain their working relationships with landowners.

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