What is coal seam gas (CSG)?

Natural gas from coal seams (CSG) is found hundreds of metres beneath the earth's surface. Classified as petroleum, it has been commercially produced in Australia since 1996 and in NSW since 2001. CSG is piped into Australian homes for use in cooking and heating. It is also used by industry and fuels gas-fired power stations. In fact, over 30% of the eastern Australian gas network is fed by coal seam gas.

What exploration and production is underway in NSW?

CSG production is currently occurring in Camden in south-west Sydney. AGL's Camden operation has been operating since 2001 and produces approximately five per cent of NSW's gas needs. Exploration is taking place in the Narrabri region in northern NSW.

Is CSG in NSW different from other states and countries?

Coal seam gas activities in NSW differ significantly from what is often portrayed in the media and in activist films of the gas industry in USA, Queensland and other jurisdictions. This is due to the geology and hydrology of NSW.

In most cases, CSG extraction in NSW is undertaken at significant depths, typically 200m to 1km below the ground's surface. The targeted coal seams generally have limited hydraulic connection with shallow groundwater resources because up to hundreds of metres of shale and clay lie between them.

In NSW, all water used during CSG extraction must be fully accounted for and licensed. NSW coal seams are typically drier than those in Queensland, requiring significantly less water to be extracted and recycled.

Much of the international controversy over the extraction of unconventional gas has focused on shale gas, i.e. gas held within shale layers, rather than coal seams. Shale gas extraction is common in the USA.

The key differences between CSG and shale gas extraction is that shale is much harder and more impermeable than coal, and usually much deeper, requiring fracturing in order to allow the gas to flow. There are no proven shale gas reserves in NSW.

Who is responsible for regulating CSG in NSW?

The Environment Protection Authority is the lead regulator responsible for compliance and enforcement of all coal seam gas exploration and production activities - with the exception of work health and safety issues.

The Division of Resources and Geoscience is responsible for administering petroleum titles under the Petroleum (Onshore) Act 1991, which includes approval, renewal, suspension and cancellation of titles and associated processes. The Division is also responsible for administering work health and safety regulations under the Work Health and Safety (Mines and Petroleum Sites) Act 2013.

The Department of Planning and Environment is responsible for delivering the Strategic Regional Land Use Policy, establishing CSG exclusion zones, resourcing the Gateway panel and assessing development applications for major CSG projects;

DPI Water is responsible for the management of the State's surface water and groundwater resources and assesses the potential impacts of a CSG proposal on water resources, their dependent ecosystems, culturally significant sites and existing water users.

What is the role of the Chief Scientist?

The NSW Government asked the NSW Chief Scientist & Engineer to conduct an independent review of existing CSG activities in NSW with a focus on the potential impact of these activities on  human health, the environment and water catchments.

The Final Report of the Independent Review of Coal Seam Gas Activities in NSW was released in September 2014. The report acknowledges that CSG extraction, like all forms of energy production, poses human health and environmental challenges. The Chief Scientist and Engineer is clear that the risks of gas development can be effectively managed with the right regulation, engineering solutions and constant learning through monitoring and research. The Government accepted all of the recommendations of the Chief Scientist and Engineer’s independent review and is committed to building a world class regime for the extraction of gas. This is the foundation of the NSW Gas Plan.

Is CSG toxic?

Natural gas from coal seams is mostly methane, a non-toxic gas in the air we breathe. Methane is a by-product of the decomposition of organic matter and is constantly released from the earth, particularly in sedimentary basins. Methane is also captured in many municipal waste dumps. Bore water in Australia can naturally contain some level of methane as a result of the decomposition of buried organic matter.

Why does NSW need a CSG industry?

More than 1.1 million NSW consumers use gas in their homes and the demand for gas is rising. Local CSG reserves at Camden provide just five per cent of the State's gas needs, with the majority of our supply coming from interstate producers.

Traditional gas supplies to NSW are changing rapidly and reserves previously contracted to NSW are depleting or being directed to Gladstone in Queensland.

As existing contracts with interstate suppliers begin to expire, NSW will have to compete with offshore demand and pay export prices, leading to a rise in the cost of gas.

Access to a secure and sustainable supply of gas by further developing the CSG industry in NSW is essential to improving the State's gas security, meeting growing energy needs and containing household energy bills.

Growth of the industry will also assist regional development by bringing infrastructure and investment to parts of rural and regional NSW, providing new jobs and sustainable energy which will strengthen regional economies and provide development opportunities.

How will the environment and water be protected?

The CSG industry in NSW is subject to the most stringent controls in Australia. Rigorous regulations introduced by the NSW Government include:

  • the Environment Protection Authority being appointed as the State’s sole authority responsible for compliance and enforcement of all consent conditions for gas exploration and production activities, with the exception of work health and safety conditions;
  • the requirement for an Environment Protection Licence to be held over all exploration, assessment and production titles and activities;
  • an Aquifer Interference Policy to assess the impacts of CSG proposals on water resources;
  • an Agricultural Impact Statement must be provided by the applicant at both the exploration stage (where there is a requirement for a Review of Environmental Factors) and at the development application stage
  • new Codes of Practice for the industry covering well drilling standards and hydraulic fracturing.

In addition, the NSW Government has:

  • released a Code of Practice for coal seam gas explorers to ensure binding standards are set for industry during the exploration phase
  • completed a statewide audit of coal and CSG exploration licences
  • introduced an Exploration Code of Practice: Community Consultation which provides upfront information to the industry and the community, and sets out enforceable mandatory requirements related to community consultation.
  • introduced the Strategic Regional Land Use Policy to protect strategic agricultural land through an independent scientific assessment prior to development application.

How safe are CSG wells?

The NSW Government has introduced stringent new codes of practice to regulate the coal seam gas industry, including new well integrity standards. The Code of Practice for Coal Seam Gas Well Integrity specifies technical requirements for industry to meet world best practice standards during the life cycle of the well through design, construction, production, maintenance and rehabilitation.

Strict standards for casing and cementing well heads guarantee wells are built to maintain control at high pressures, prevent cross aquifer contamination and retain well integrity. Blow out prevention equipment must also be fitted to ensure safety for workers and the public. Regular monitoring and maintenance is also required to secure the ongoing integrity of wells.

The Code of Practice for Coal Seam Gas Fracture Stimulation establishes a best practice framework which covers:

  • the hydraulic fracturing process;
  • the use of chemicals in fracturing fluid;
  • the sourcing of the water using in fracturing; and
  • the protection of aquifers from the fracturing fluid.

An Aquifer Interference Policy has been introduced to prevent leakage, loss of flow or pressure, cross-contamination and change in water quality. Other protections include prohibiting the use of BTEX (Benzene, Toluene, Ethylbenzene and Xylene) chemicals as additives during drilling and banning evaporation ponds to encourage the reuse of water produced from operations.

See fact sheet Anatomy of a coal seam gas well.

Are residential areas and key industry clusters protected?

The NSW Government has introduced exclusion zones for CSG activities in residential areas. All new coal seam gas exploration and production activity is banned within 2kms of existing and future residential areas. Coal seam gas activity has also been banned within the areas identified as the Upper Hunter equine and viticulture critical industry clusters.

What is Hydraulic Fracturing?

Hydraulic Fracturing (also called fracture stimulation, fraccing or fracking) is one method of extraction used in the CSG industry.

Hydraulic fracturing is used infrequently in NSW because, in the majority of cases, the geology of the State's coal seams allow the gas to be extracted without fracturing. Where practical, CSG companies are moving to other forms of extraction including horizontal drilling.

Hydraulic fracturing involves pumping a fluid, mostly comprised of approximately 99 per cent water and sand, under pressure through a steel and cement-cased gas well into coal seams. The sand props open the cracks in the coal seam to release the water within, depressurising the gas from the pores of the coal seam so it can be extracted from the well.

Hydraulic fracturing has been used around the world for more than 65 years in gas and oil production and for more than 40 years in Australia.

In NSW, a Fracture Stimulation Management Plan (FSMP) must be in place before any hydraulic fracturing activity can commence. An FSMP must demonstrate that any potential risks to the environment, land, water and community are managed through an effective risk management process.

The Code of Practice for Coal Seam Gas Fracture Stimulation establishes a best practice framework which covers: the hydraulic fracturing process; the use of chemicals in fracturing fluid; the sourcing of the water using in fracturing; and protecting aquifers from the fracturing fluid.

What chemicals are used in the fracturing process?

Fracturing fluid is comprised of approximately 99 per cent water and sand. The remainder is comprised of commonly used compounds to help turn the fluid to gel so it can be pumped more easily, and to prevent bacterial growth.

Fracturing fluid

  • Guar gum (a food thickening agent)
    Purpose: used to create a gel that transports sand through the fracture
  • Sodium hypochlorite (used in pool chlorine) and sodium hydroxide (used to make soap)
    Purpose: to prevent bacterial growth that contaminates gas and restricts gas flow
  • Ammonium persulfate (used in hair bleach)
    Purpose: to dissolve hydraulic fracturing gels so they can transport water and gas
  • Surfactants such as ethanol and the cleaning agent orange oil
    Purpose: to increase fluid recovery from the fracture
  • Acetic acid (vinegar) and sodium carbonate (washing soda)
    Purpose: to control the acid balance of the hydraulic fracturing fluid.

(Source: CSIRO)

The permitted components, already highly-diluted, are further diluted by the water in the coal seam.

Samples of drilling additives and fracture stimulation additives may be taken at any time by Government inspectors to verify compliance.

The use of BTEX chemicals as additives during drilling has been banned by the NSW Government to help protect groundwater, surface water and the environment.

How big is a CSG well and drill site?

A CSG well-head and associated infrastructure is smaller than an average water tank. The well itself extends up to 1000 metres below the surface. Transported on a trailer, the well head takes up less room than a car.

A typical drill site requires a cleared area of about 75m by 75m. Once the operation proceeds to the pilot stage the area required is considerably smaller and typically fenced off.

How much water does CSG extraction use?

For vertical drilling operations, between 20,000 and 40,000 litres (or one fifth of an Olympic swimming pool) may be used and can be recycled for use at other wells. In line with NSW Government legislative requirements, the water must be disposed of via a licensed water facility if it is not recycled for beneficial re-use. A water access licence must also be held by any operator proposing to extract more than three mega litres of water per year (equivalent to 1.2 Olympic sized swimming pools) from groundwater sources.

Why are evaporation ponds banned?

Evaporation ponds take up a large area of land and discourage the treatment and re-use of water from the CSG exploration and production processes.

In NSW, CSG companies must treat or otherwise dispose of produced water. While they must not store water with the intention of having it evaporate, in some cases temporary holding ponds or dams may be required for various treatment processes.

How will the Great Artesian Basin be protected?

The Great Artesian Basin (GAB) is one of the largest natural underground water reservoirs in the world. It is Australia's largest groundwater basin, containing around 65 million gigalitres (GL) of water, and extending beneath parts of Queensland, New South Wales, South Australia and the Northern Territory.

65 million GL is the equivalent to the volume of almost 116 million Sydney Harbours.

NSW authorities have monitored the GAB for more than 100 years to ensure its pressure, water levels and quality is maintained. A program of capping and piping free flowing water bores on properties minimises water loss and waste.

Under state laws, a Water Access Licence is mandatory for any CSG activity extracting more than three mega-litres per year from groundwater sources. New licences will not be issued where proposed activity means extraction limits in water sharing plans will be exceeded.

What are landholders' rights regarding CSG?

Before undertaking any CSG activities, companies must hold a valid petroleum title and enter into a written access arrangement with each individual landholder. It is a landholder's right to be compensated for any loss or interference to their normal activities. Access arrangements may also include provisions to minimise any potential loss or interference.

The NSW Government has further strengthened landholders' rights by appointing the State's first Land and Water Commissioner to oversee new standardised land access arrangements in consultation with farmers, irrigators and industry.

Does CSG exploration always lead to production?

No. An exploration licence gives the licence holder exclusive rights to explore for specific resources within a designated area but it does not permit production nor does it guarantee a production lease will be granted. Only a very small percentage of land that is subject to exploration licences ever proceeds to production.

Where the proposed production activity is located on Strategic Agricultural Land, the applicant will be required to go through the Gateway Process. The Gateway Process is an independent, scientific and upfront assessment of the potential impacts of a mining or coal seam gas production proposal on strategic agricultural land. The assessment is undertaken by an independent panel of experts in fields such as agricultural science, hydrogeology, mining and petroleum production.

All projects then require assessment and approval under the Environmental Planning and Assessment Act 1979 before they can commence. An application needs to be lodged with the NSW Department of Planning & Environment and requires an Environmental Impact Statement (EIS). The EIS is a comprehensive document that covers issues such as air quality, noise, transport, flora and fauna on the site, surface and groundwater management, methods of production, landscape management and rehabilitation. Extensive public consultation requirements are also associated with this process and community members are encouraged to make submissions on the application.

What is involved in exploring for CSG?

The first step is usually carrying out a desktop assessment of the geology and hydrogeology of the area to determine the exploration strategy. Many areas may not be considered suitable for on ground exploration activities, such as seismic studies or drilling, due to environmental or topographical constraints or tenement boundaries.

This is followed by a site visit by a geologist or technical officer who will normally undertake geological mapping of rock outcrops. Small samples may be gathered from streams, rocks or soil for chemical analysis.

Further sampling may be collected if an area of interest is identified. Most of these techniques do not involve significant disturbance of the ground.

Seismic studies involve the use of a truck fitted with a 'thumper' to create sound waves in the earth that, when recorded and analysed, create a model of the sub-surface. Often this work is carried out along existing public roads and may not require access to private land.

If resources are indicated, the next phase of exploration may involve core hole drilling which is conducted by using truck-mounted drill rigs, or production testing of pilot wells. Prior to the commencement of any drilling, the explorer is required to prepare an environmental report called a Review of Environmental Factors (REF).

Any exploration activity classified as medium or high intensity, including those that have the potential to adversely affect threatened species or ecological communities, require specific notices and approvals. All areas affected must be fully rehabilitated to strict environmental standards.

How are well sites rehabilitated?

Explorers are required to rehabilitate discontinued well sites to their previous state or as agreed with the landowner and to a standard acceptable to the NSW Government.

When CSG activities cease, in accordance with regulatory requirements, core holes are cemented, plugged and abandoned and the site is fully rehabilitated.

How do I report a CSG incident?

The EPA is the watchdog for CSG activity in NSW and can be contacted via the environment hotline on 131 555.

Does hydraulic fracturing cause earthquakes or seismic activity?

Scientists in the United States have speculated that the underground disposal of hydraulic fracturing waste water in deep wells may have contributed to an increased occurrence of earthquakes. This method of disposal does not occur in NSW, which mandates all waste water is brought to the surface and rehabilitated for re-use.

Can CSG drilling result in land subsidence?

CSG activities do not result in significant subsidence of the land surface. Mining engineers from the University of NSW's School of Mining Engineering have found that ground movements attributable to CSG production are within the range of ground movements attributable to natural factors.

Is the NSW Government consulting communities on CSG projects?

The NSW Government has introduced a public comment process to improve the transparency and effectiveness of the exploration licence decision-making process and to ensure regional communities are kept fully informed of new licence applications.

The new process gives communities the opportunity to voice their concerns and make submissions on exploration licence proposals. All submissions are carefully considered in the assessment process and there are specific requirements in place to ensure applicants respond to issues raised.

It is also a condition of title that exploration licence holders meet strict consultation requirements to involve communities in making decisions that affect them.