Unlock the gate? A special look at a divided state

Victoria is a state divided. Divided over what can only be described as speculation over the risk of onshore gas development.

The previous Victorian Liberal government, under the leadership of Ted Baillieu, installed a moratorium on all unconventional onshore gas exploration and production in 2012 amid rising community outrage over the industry.

The ban was extended in 2013 to cover all onshore gas activities as community upheaval snowballed.

At the time and still to this day no coal seam gas projects have been approved for development despite numerous exploration attempts. In fact, Victoria has the least amount of prospective coal seam gas reserves out of any Australian state.

Meanwhile, the politicisation of the onshore gas industry and the alleged risks associated with its development have reached fever pitch as a joint Parliamentary Inquiry, chaired by Liberal member David Davis, investigates the industry’s viability in the state.

Over recent months the inquiry has heard repeated calls from community groups, the Victorian Farmers Federation and even the opposition Liberal Party for the moratorium to be extended to 2020.

On the other hand, Australia’s largest energy users – manufacturers and industry – have warned of an imminent gas crisis as limited stockpiles of the commodity continue to force wholesale prices up and have all but made long-term gas usage contracts extinct.

The latest data from the Australian Energy Regulator shows the wholesale gas price in Victoria has increased 28 per cent in the past 12 months, and more than
100 per cent since September 2010.

The inquiry has attracted a record amount of submissions – more than 1,000 since it was launched last year. The interim report, published in September, revealed an overriding truth: that the government still knows too little about the mining technology and science behind onshore production.

Victorian Minister for Energy and Resources, Lily D’Ambrosio insists the government is considering all angles and maintaining an open mind on the subject of unconventional onshore gas development.

“The inquiry is relying on science presented by independent experts and is engaging with farmers, local councils and communities, industry and environmental groups,” she told Gas Today.

“The government will consider the recommendations when the report is handed down in December and will not be making knee-jerk decisions because there are by-elections in western Victoria.”

The Parliamentary Inquiry will hand down its findings on 1 December. Whatever the decision – support for or denial of onshore development – you can be sure that Victoria will remain a battleground for the gas industry for years to come.

GIPPSLAND

If there was a hole in the wall for Melbourne’s proverbial power cord to plug into, Gippsland would be it. This 41,000 sq km expanse has been the energy capital of the state for more than a century.

Its landscape is one that characterises Victoria’s industrial and agricultural history and draws controversy within the modern energy dialogue over its coal mines and coal-fired power stations.

While conventional gas exploration has been in the area for more than a century, the industry didn’t arrive significantly until the 1960s when Esso and BHP Billiton established the Longford gas plant, which continues to process the resource from the offshore Barracouta platform.

Two hours down the road, Origin’s BassGas facility in Lang Lang processes gas from the offshore Yolla fields. A network of pipelines then carries the Victorian gas to Melbourne and as far as Queensland and overseas.

Gippsland operators on the front line

The unconventional gas moratorium has already taken scalps in the Gippsland region.

In June 2012, ExxonMobil and Ignite Energy Resources announced a joint venture to explore Gippsland’s unconventional coal seam gas with an eye towards drilling up to seven wells over the space of 12 months.

Just weeks after the Exxon and Ignite Energy announcement, however, the state government introduced its ban on all unconventional exploration and production activities.

Ignite Energy and ExxonMobil have since terminated the joint agreement.

Similarly, it has been a long road for Lakes Oil, one of the firms forced to cease its onshore Gippsland Basin operations since the government’s moratorium was introduced.

The company, which also has permits in the Otway and the Cooper/Eromanga basins, discovered gas reserves in impermeable reservoirs in the Seaspray Depression – about 30 km south of Sale – in the late 1990s, and remains the only firm to have performed onshore fracture stimulate operations in Victoria.

The wells were fracture stimulated 11 times between 2004 and 2009.

The operator’s perspective
RIGHT: Rob Annells

Lakes Oil has spent in excess of AU$80 million exploring the potential for onshore gas resources in the Gippsland and Otway basins.

Since the moratorium was introduced the company’s operations in Gippsland have stalled. The well heads, located in the company’s Wombat field permits, stand unmanned, inactive and in silence behind wire fences.

“Now, you have to keep in mind that in the Gippsland region alone, over the last 50 years thousands of holes have been drilled by other exploration companies,” Rob Annells, the chairman of Lakes Oil told Gas Today.

“And you can be sure they weren’t completed under the same safety regulations as our wells, because they were not subject to the same regulations back then.”

Mr Annells is understandably fatigued by the past three years of government intervention and says his company has borne the brunt of the community upheaval against onshore unconventional gas since 2012.

Signs of protest from the opposition lobby, Lock the Gate, are on almost every fence that surrounds the company’s permits. However, the area’s residents, Gas Today discovered while travelling through the area, are not so willing to speak candidly about the issue.

“It is because most people do not understand or know what we want to do. They don’t know the science behind onshore production. And to be perfectly honest, if I was a farmer in one of these areas and someone was telling me that the water table is going to be ruined or my children would be born with two heads, I would be upset too,” Mr Annells said.

“But as to what constitutes conventional gas, what constitutes tight gas, what constitutes fracking and then separately what constitutes coalbed methane – that is the biggest problem. The community, the politicians and the public all need to understand the differences between all of those sorts of energy.”

Since the Victorian Parliamentary Inquiry into onshore gas commenced, Mr Annells said the campaign against onshore gas had left the industry for dust, reaching more members of the community with their message than the companies could ever hope to.

He admitted that he had seen a notable improvement in the basic knowledge shown by the committee’s members. That knowledge, however, is not being rallied throughout the concerned communities of Gippsland.

“Unfortunately the wider public have not had the same advantage of having the industry, manufacturers, suppliers, and all the people that have presented to the committee, presenting to the community. And what is desperately needed is community consultation.”

Gippslanders’ gripes: a councillor’s perspective
RIGHT: Neil Rankine

Gas opposition in Gippsland is far reaching, cautious of big business and highly protective of their natural landscape.

So much so, in fact, that the “clean and green image” of Gippsland has been enshrined into local government policy. This has subsequently helped the Bass Coast Shire’s campaign to stop unconventional gas in its tracks.

“But to be frank there is not a lot that council can do to stop the industry coming in,” Neil Rankine, Hovell Ward councillor, admitted. “What we can do is stop the companies from having access to the council-owned assets, like roads.”

While the council’s position is strictly opposed, Mr Rankine admits that awareness of the similarities between onshore and offshore unconventional gas is less known.

Further, when asked if many gas companies had been forthcoming with information and consultation, the councillor said just one had discussed the issue with the shire – Lakes Oil.

“But I don’t think we want or need more research or consultation.”

The sticking point for many in the community, he says, is the fear of something going wrong and the long-term viability of an onshore gas industry.

“If it is unconventional, where they are drilling a whole lot of holes, there is a suspicion that they will not do as good of a job to ensure that the well heads are not going to leak 10, 20 or 100 years down the track.

“This industry might only last 20, 30 or 40 years. There are already some 40 years of gas reserves identified in the current wells. So why would you take the risk, when I can’t see the industry lasting that long anyway.”

Tourism in the Gippsland region contributes AU$653 million to the local economy (37.9 per cent of gross regional product) and generates employment for approximately 5,700 people (38.2 per cent of regional employment).

A rapidly rising population – migrating out from the city – has spurred massive residential construction in the region, accounting for almost half the municipality’s total gross regional output (GRP).

Mining, one of the oldest industries in the region, generates less than 1 per cent of GRP.

“You’ll see as you drive down the roads, tourists out of their car taking a photos of a cow in a paddock. This is vital for us and we simply must protect those vistas, keep the clean and green image and not industrialise our landscapes,” Mr Rankine told Gas Today.

The region has long been known and celebrated for its dairy produce. But the rising property market, the cost of dairy production and declining price of consumer dairy goods are all placing pressure on the industry. Consequently, hobby and full-time farmers are increasingly turning towards to cattle grazing and vegetable growing.

But not every region in Gippsland shares the same outright rejection of the onshore gas industry.

Wellington Shire Council, neighbour to the Bass Coast and home to the Longford Power Station and the Seaspray Depression, has opted to take a more tentative approach – and for obvious reason.

The shire supports the moratorium on onshore hydraulic fracturing in the hope that solid evidence to support or deny its development surfaces. However, with mining giants Esso and BHP and smaller players like Lakes Oil in the picture, the economic benefits to mining are too apparent in the shire to be ignored.

Wellington’s economy is linked to oil and gas with a quarter, or AU$1 billion, of the municipality’s GRP and exports coming from mining operations, more than AU$500 million in value-added contributions and over 500 direct jobs supplied by the industry.

“Wellington Shire Council sees considerable value in listening,” a statement from the Wellington Shire said.

“Council remains in ongoing discussions with the state government and a number of the onshore gas project proponents, seeking information on proposed activities, community engagement and communication as well as the regulatory framework governing such activities.”

Manufacturers hit
RIGHT: Brian Green

Energy Users Association of Australia (EUAA) chair Brian Green slammed Victoria’s opposition Liberal party after it announced it would support an extension to the existing moratorium on onshore gas in September.

As the purchasing manager of Australian Paper, one of the country’s largest paper makers, Mr Green has repeatedly recited the company’s difficulty in recent years landing energy contracts longer than 12 months.

“Victoria’s energy users have faced rising demand on services, conflicting policy objectives and an emerging gas crisis,” he said.

“What is needed is for our politicians to take the politics out of energy policy, and show a genuine commitment to energy users from the domestic, commercial and industrial sectors.”


An unfiltered perspective
RIGHT: Pat and Beverly Mason

Pat and his wife Beverly Mason have been affiliated with the oil and gas industry all of their lives. They are just one of a handful of farmers in the region that have had first-hand experience working with gas companies on their land.

When the gas exploration firms began drilling on their land in Seaspray more than a decade ago, Mr Mason remembers his eldest son, Matthew being infatuated with workers and the rig. Matthew has gone on to study metallurgy at university.

“You might say, we embraced it,” he told Gas Today.

“The concerns stem from the issues that Queensland endured in their early days of CSG, and that’s partly valid. But they clearly learned from them and so can we, here in Victoria.

“I would say now, compared to a decade or more ago, the regulatory system has matured enough to take on an onshore gas industry. But the government needs time, it seems, to spend money on that regulation and get the information to make sure those regulations are all tightly kept.

“I’m not suggesting we all go to hell in a handbag, but there has to be a happy medium. Saying ‘no’ to everything is just as bad as saying ‘yes’ to everything. There has to be balance.”

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