Environment & energy, Government and governance, Trade and industry | Australia

6 April 2017

When it comes to conventional and unconventional gas exploration, Australia needs a risk-management approach based on science and evidence, James Horne writes.

Moratoriums and bans on conventional and unconventional gas exploration and extraction have been introduced in some Australian states and territories in recent years, and if sustained will have a significant impact on domestic gas availability. In the main, these policy responses reflect the knee-jerk politics of hydraulic fracturing (‘fracking’). Fracking is necessary to facilitate production of shale gas and is regularly used in coal seam gas production.

State policies reflect the views of vested interests: a subset of mining companies that were not prepared to factor in community concerns into their business model at the outset of exploration, undermining community confidence; ‘green’ groups seeking to shut down all new gas activities, no matter the consequences for the broader community; farming groups who argued the importance of their lifestyle over all else; and politicians looking after their own future rather than that of the community.

Science and a long-term consideration of community interest appear to have played little role in these decisions.

There have been detailed studies on the risks from fracking commissioned by the US Environmental Protection Agency (US EPA) and Australia’s Independent Expert Scientific Committee on Coal Seam Gas and Large Coal Mining Development (IESC). There have also been independent state/territory reviews in NSW, Victoria and the Northern Territory that have examined whether fracking needed for unconventional gas extraction could be safely undertaken.

The overwhelming evidence is that the risk from fracking can be managed: what is required more than anything is a sensible, well-calibrated regulatory framework, with teeth where necessary to ensure potential adverse impacts are addressed or minimised.

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The key task is to manage risks, not eliminate all risks. For example, if as a society we want to eliminate all risks in specific industry sectors, we would be shutting down the sugar industry (for its impacts on the Great Barrier Reef), salmon farming in Tasmania (for its impact on the marine environment), or the irrigation sector in the Murray-Darling Basin (for its impact on the riverine environment). In all these cases, and many more, governments seek to manage risks, because each of these activities adds value to the society as a whole.

In doing so, governments generally establish the nature of the risk and its consequences, its probability of occurrence, and the cost of addressing it. In some cases – such as the collapse of a dam wall – governments seek to all but eliminate risk because the implications are catastrophic. In other cases, the amount of risk we are prepared to accept will change over time.

Sometimes governments get it wrong. Climate change is a good example: here governments have moved very slowly, despite the evidence of the cost of not acting.

There are three main groups of concerns with fracking.

First, some fracking liquids could contain ‘nasty’ chemicals. There have been cases of this overseas, particularly in relation to benzene, toluene, ethyl-benzene and xylene (known as BTEX chemicals), which are banned in Queensland and NSW. This problem can be effectively managed by requiring a public listing of all chemicals (audited by an independent regulator), and having their toxicity – or otherwise – established.

If companies providing fracking services don’t wish to publish the chemicals contained in their products, they should not be able to undertake the fracking activity. Here banning would occur only if public disclosure did not happen, or if toxicity was established. A national assessment of chemicals associated with coal seam gas extraction in Australia has been underway since 2012 and, according to the website, is due to be completed in 2017. Its early completion and publication would help to provide more substantive evidence to the debate around acceptability of chemicals that would be used.

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Second, some fracking can damage groundwater aquifers, affect river flows, and have an impact on either quantity or quality of groundwater used for farming or drinking water. All these concerns are real when the regulatory framework is inadequate. In some cases, these concerns will be sufficient for governments to withhold production licences, but they should be managed on a case-by-case basis. The Australian Government’s Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) provides a legal framework to protect and manage impacts on matters of national environmental significance, which include water resources in relation to coal seam gas and large coal mining development. The IESC provides advice to Commonwealth and state government regulators on the water-related impacts of coal seam gas proposals. It would seem sensible to extend coverage of the EPBC Act to shale gas proposals, and other proposals employing fracking, to ensure a rigorous regime examines likely impacts on water resources before production licences are issued.

Mining companies should be at the vanguard of efforts to ensure our water resources are properly protected and that treatment regimes of chemicals reflect their danger to the public. This would go a long way to establishing a social licence with the community.

Third, if you allow fracking, you allow the industry to be established. Some groups like ‘Lock the Gate’ don’t want to allow the industry to be established in the first place. These groups have a legitimate perspective, but the question that should be asked is why single out this industry over many other industries and activities in our society?

While the use of fracking is likely to pose unacceptable risks in some geographic areas, in most areas risks can be managed. With ongoing concerns over the adequate availability of gas for domestic consumption, it is important that our governments develop and implement calibrated approaches to risk management. Mining companies can assist in this process by showing a greater preparedness to be open about how they undertake their business, and to show the community they take the concept of social licence to operate seriously.

Disclosure statement: James Horne holds shares in BHP and Origin Energy. Both companies are involved in the Australian gas industry.

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