News & Media Opinion Pieces Crikey clarifier: how is CSG extraction regulated?

Crikey clarifier: how is CSG extraction regulated?

This article was originally published online at Crikey and appears here with permission.


Crikey intern Clare O’Meara writes:

The debate between farmers and miners over coal seam gas (CSG) rages on. The Greens are siding with the farmers. So too is Tony Abbott. But this unlikely alliance is not the only confusing aspect of this issue.

One of the main points of contention is exploration rights and the power of the coal industry over the liquid natural gas (LNG) industry. Paramount in understanding the farmers versus miners debate is determining just which legal act actually covers CSG extraction.

Each state regulates CSG activity differently, and given the natural distribution of CSG, most of the action is centres around areas in Queensland and NSW. One of the complicating factors around CSG regulation is that the process of extraction is consistently lumped into the same category as mining. As such, it is difficult to determine whether the relevant Mining Act or Petroleum Act in each state applies. The distinction is really quite important, given that the two acts have some rather contradictory points.

So, which category does coal seam gas extraction and the all important fracking process fall into — petroleum or mining — under NSW law?

According to the NSW Onshore Petroleum Act 1991, Petroleum is defined as:

(a) any naturally occurring hydrocarbon, whether in a gaseous, liquid or solid state, or
(b) any naturally occurring mixture of hydrocarbons, whether in a gaseous, liquid or solid state, or
(c) any naturally occurring mixture of one or more hydrocarbons, whether in a gaseous, liquid or solid state, and one or more of the following, that is to say, hydrogen sulphide, nitrogen, helium, carbon dioxide and water.

That leaves the Mineral Act 1992 covering “coal or oil shale or any substance prescribed to be a mineral”.

But CSG is chemically very similar to gas that comes from shale reservoirs, and thus should fall under the Mining Act, right?

Wrong. CSG, as defined by the Queensland Mineral Resources Act 1989, is “a substance (in any state) occurring naturally in association with coal or oil shale, or with strata associated with coal or oil shale mining”. Translation: CSG is the methane gas associated with the formation of coal deposits and as such, is dealt with under the Petroleum Act.

But the plot thickens. Under s78.(1) of the NSW Mining Act, “the holder of a mining lease for coal may apply for the inclusion in the lease of petroleum”. That is to say that if a mining lease is obtained, the holder of said lease can bypass the Petroleum Act and pursue their desire to mine petroleum (or specifically CSG) by applying through the Mining Act. If the application is granted, the lease holder has the right to mine two minerals: coal and petroleum. This is in some cases a legitimate requirement, as methane gas has to be removed from underground coal seams before mining can begin (called incidental CSG). But there is no legal requirement to ensure against companies abusing this right.

Industry lawyer Martin Klapper told Crikey, “because petroleum is then included in the mining lease, no petroleum lease can be granted over the same area under the Petroleum (Onshore) Act. That is one reason why this regime favours coal … There is also a second reason: there are no similar rights in the Petroleum (Onshore) Act, so a petroleum lease holder cannot get rights to mine coal.” For this reason, industry lawyers, including Klapper, have called for reform on this legislation.

What about in Queensland? What law does CSG exploration fall under?

In Queensland there is also a legislative overlap between coal and coal seam gas mining rights, and the legislation is much more complex than in NSW. A Queensland consultation report into CSG and coal exploration published this year says the overlaps in tenure “will not be fully realised until the CSG-LNG (liquid natural gas) industry matures”.

In the Sunshine state, CSG also falls under the state’s Petroleum Act, the Petroleum and Gas (production and safety) Act 2004, and to a lesser extent, the Petroleum Act 1923. CSG mining is “carried out under a relevant petroleum lease”, says the 2004 Act. Incidental CSG exploration falls under the state’s Minerals Act, but contrary to the case in NSW, there is no loophole that allows for the mining of petroleum through a lease granted via the Mining Act.

In Queensland, a mining and petroleum lease can be granted simultaneously for the same piece of land, which means that both industries are on a level footing, as opposed to the situation in NSW, which favours coal mining. Nevertheless, when overlapping tenure exists, “tenure holders [are obliged] to make reasonable attempts to negotiate a co-ordination agreement and consult one another in order to seek agreement”, says the recent industry consultation paper. If an agreement cannot be reached, a “ministerial preference decision” is made. Essentially, however, the leases are granted on a “first come, first served” basis.

What does all this mean for farmers?

Ultimately, under the NSW Petroleum Act 1991 and the Queensland Petroleum and Gas (production and safety) Act 2004, landholders are unable to deny gas and mining companies access to their private properties if proper negotiations have taken place. Drew Hutton of the aptly named Lock The Gate Alliance of farmers against fracking, told Crikey “it is an offence to refuse negotiation and we are essentially breaking the law by locking the gate.”

It also means that landholders whose properties are rich in CSG and petroleum rather than resources stipulated in the Mining Act are not protected by the rights under the Mining Act that allow property owners to “veto the granting of a mining lease over the surface of their land” and “to negotiate the terms of access to minimise inconvenience to them.

Therefore the press release issued by the NSW Minerals Council on August 15 to counter the “misconception that land-holders have no rights if a mining company obtains approval to develop a mine on their land,” only applies to those whose properties are being mined under the Mining Act, not the Petroleum Act.

Enough with confusing legislation, can you just tell me the nuts and bolts of it?

In Queensland and NSW, CSG is regulated under the respective Petroleum Act of each state. In NSW, the legislation favours the coal industry over the budding LNG industry, and in Queensland, the two industries supposedly work hand in hand, with ultimate power resting in the hands of the minister. Under the Petroleum Act of each state, farmers do not have the right to veto sub-surface mining and “all petroleum, helium and carbon dioxide existing in a natural state on or below the surface of any land in the state is the property of the Crown.”