contentsQGC's LNG Project Dependant On Water
QGC's $15 B LNG hub at Gladstone depends on restoring public confidence in water management, land access and operational performance, Senior Vice President Jim Knudsen told delegates at the PESA QLD/NT Symposium on 22 September in Brisbane.
In a mea culpa, Knudson said that much controversy, including those aired on the ABC's Four Corners program on 21 February 2011 focusing around dealings with landholders, "is surprising to us because it does not reflect our experience on the ground. I am the first to agree that we have made mistakes and that we should have done some things better. But the rap we get does not reflect reality".
QGC came under fire on Four Corners, in an episode which gave the impression that the company has been other than forthright and honest in its dealings with landholders and that its operations are unsafe and are compromising groundwater quality.
It was also revealed in March 2011 that QGC suspended work in its major pipeline in Queensland after admitting one of its contractors may have breached Federal and State environmental conditions in clearing a 6 km long, 40 m-wide route for the pipeline near Dalby. Knudson said at the time that the lack of approved plans for soil and species management may have resulted in the breach, but said QGC does not believe the clearing had an adverse impact on protected plants
and animals.
"To maintain the confidence of our landholders and the broader community one thing is certain: we have to operate, in every way, beyond reproach. We will put the issues of leaking wells [which Four Corners mentioned] and so forth behind us and we will see a very different industry over the next few years", he told the PESA Symposium.
"That means that we and our contractors have to do our jobs very well. We have to close gates. We have to clean up our rubbish. We have to conduct ourselves as if our mother is watching us."
QGC has openly acknowledged that the Argyle-2 well, shown on Four Corners on the Lloyd property seeping gas around the well head, "is a problem". QGC said that the well, drilled in 2001, would have been constructed with "much greater rigour" had it applied today's standards.
While QGC admitted that the appearance of gas seeping out of well is "not a good look", neither is it unsafe, he said. QGC had twice attempted to cement the well to stop the gas seepage. A third attempt plugged the well and it was abandoned.
QGC and the gas industry regulator are satisfied that the seep does not cause an unacceptable safety risk.
Methane will ignite if its concentration in the air is within a range of 5% and 15% (assuming that an ignition source exists. The methane concentration for the Argyle-2 well is more than an order of magnitude below the minimum amount required for ignition.
Knudson also admitted that the success of QGC's operations affects other CSG operators. "We know that the performance of the worst is the performance of all of us in the public's mind", he said.
QGC will drill about 2000 wells in the Surat Basin of southern Queensland by 2014, when the LNG terminal will become
operational, and 6000 over the next 20 years. It will build 21 new compression stations, four new central processing plants and three water treatment plants. QGC needs to grow a 150 TJpd business into a 1500 TJpd business within the next four years – a ninefold increase.
The stakes are high. These figures of TJ are small compared to what is to come, he said, noting that it is estimated that beneath Queensland and NSW there is 250 Tcf of gas – enough energy to power a city of a million people for 5000 years.
Yet Knudson said that to realise this potential, the industry must demonstrate "complete competence" in water
management, land access and "our own operational performance".
QGC has devoted a whole web page to addressing the issues raised on Four Corners. The company says it is confident its activities pose no unacceptable risk to health and safety or to the environment, that most of the issues raised in the program are not new and were advanced by "a few, longstanding and committed opponents to the industry".
He said the motives of these opponents are known to QGC but were not disclosed in the program, and that some complaints by landholders are legitimate and are known to QGC, "and we are working to rectify them".
QGC's website also addresses the issue of compensation, which it said is based on an independent land valuation that considers land use and the impact of gas activities. The value varies from property to property, depending on the productivity of the land and the scale of gas activity.
In general, the annual compensation for a landholder could range from a few thousand dollars to more than $100,000 and QGC also pays a one-off, up-front payment, often of similar amounts, it said.
"In our experience, many landholders find our compensation to be a much-needed, additional income stream", QGC said.
Despite stressing that "our business is gas – not water", Knudson noted that QGC will invest over $1 B by 2014 in turning the salty water it produces into a product that can be used for agriculture, industry and local town supply.
"We have a strong economic incentive to minimise its production and we spend a great deal of time working out how to produce as little as possible", Knudson said of water.
Although talking to oil and gas experts at the PESA Symposium, he was compelled to explain the basics of CSG extraction involving water, such is the pressure that CSG companies, and QGC particularly, are under.
He apologised for taking Symposium delegates "back to school" in explaining the geology of coal, and highlighting how
QGC extracts gas and water from the Walloon Coal Measure, a thick geological feature of solid rock which has thin coal seams embedded within it, most not more than 30 cm thick and each a few hundred metres long and wide. The rock that surrounds coal seams within the Walloons is so dense, he said, as to be virtually impermeable.
"As a result, we do not expect to drain water from anything other than the Walloons coal seams, which, in QGC's area, are hydraulically isolated from the major aquifers of agricultural interest above or below them. If we find exceptions driven by local geology, we know we can isolate connection through the design of our wells", he said.
However, he acknowledged the need to "make good any impact we have on farmers' underground water supplies". QGC can do this by:
- Re-setting pumps at deeper levels within bores to access alternative available water columns;
- Deepening bores to provide access to aquifers of suitable quality and yield that are less affected by CSG operations;
- Installing replacement bores, particularly if original bores cannot be reconditioned or deepened;
- Providing bulk water of suitable quality to bore owners to compensate for loss of yield in water supply bores; and
- Compensating bore owners for their losses in agricultural productivity due to diminished bore yield or water quality.
QGC has noted that governments have long imposed limits on water extraction from the Great Artesian Basin to curb large withdrawals by farmers, particularly from shallow aquifers.
"We know that most of the coal seams from which we draw gas are deep below the aquifers used by farmers and that more than 1000 water bores on our tenements are taking water from shallow aquifers above the coal seams. Of this
total, fewer than 40 bores take water from coal seams", QGC said in its response to the Four Corners program.
Though that is well understood in industry, having been used globally for over 50 years, including in over a million wells in the US alone, he said the challenge is to reassure communities where they operate that best practice is being done.
He stressed that "we certainly will not drain the Great Artesian Basin. Nor will we poison aquifers through hydraulic fracturing". He added that US Environmental Protection Agency studies have found no risk to water supplies due to fraccing – "though to be sure, the EPA is in the process of doing the study again".
The chemicals QGC use are in concentrations so low or become so highly diluted that they are virtually unmeasurable, he said.
Though companies have the legal right to access subsurface materials without landholder permission as it is the property
of the State, Knudson said that, in reality, "we are obliged, before entering a property, to give notice of entry and to negotiate in good faith to agree compensation with the landholder".
He went further, saying: "We do not just 'give notice', we 'ask for entry'. We prefer voluntary agreements", adding that QGC now has over 800 agreements following negotiations on land access with about 1000 landholders.
"Every piece of infrastructure in the gas fields is there with landholder permission. We know we can co-exist and we expect to co-exist for decades. Indeed, very few of our critics even have land affected by our operations."
