Coal Seam Gas Could Face Heavy Carbon Tax

Reports suggest the coal seam gas (CSG) industry faces a tax bill that could run into billions of dollars through carbon tax liabilities if “fugitive” emissions of methane are higher than expected.

Beyond these environmental and pollution considerations, concerns surrounding CSG have also long included its impact on water security, food production and health.

Ensuring environmental and technical considerations are properly considered going forward, Environment Minister Tony Burke has announced a new Independent Expert Scientific Committee on Coal Seam Gas and Large Coal Mining Development. The committee will play an important role in reviewing coal seam gas proposals and large coal mining developments, focusing in particular on their potential impact on water resources.

“The work of this committee will give communities reason to be confident that future decisions about coal seam gas and large coal mining development are informed by the best possible science,” Burke said.

The committee will advise the Minister on research priorities that address critical gaps in scientific understanding of the actual and potential water-related impacts associated with coal seam gas and large coal mining activities, and scope out what research is needed to reduce these knowledge gaps.

The Australian Government has provided $150 million to establish the committee and fund scientific research on the potential water-related impacts of coal seam gas and large coal mining activities.

Addressing these concerns is just one of the issues facing the industry. Both BG Group and Santos, who are building huge coal seam gas-to-LNG projects have had multi-billion dollar blowouts this year with investors nervous about costs, execution and rates of return.

News of recent studies of unconventional gasfields in the US and Australia could cause more nervousness. These studies suggest that emissions could be four per cent or more rather than the 0.12 per cent the federal government uses to calculate carbon tax liability currently.

The US Environmental Protection Agency has already doubled its own estimate of fugitive emissions to 2.4 per cent.

Beyond Zero Emissions (BZE), an independent think tank, has called for an independent study of fugitive emissions from coal seam gas with executive director Matthew Wright claiming they had conducted calculations which showed ”massive unaccounted-for liabilities.”

BZE’s figures suggest that a typical coal seam gas well producing a terajoule a day of methane, and giving off one per cent fugitive emissions, would incur a carbon tax liability of $31,700 a year at the current rate of $23 a tonne of carbon dioxide equivalent. A well that leaked four per cent would be liable to pay $126,800 a year due to the carbon tax.

This data was backed by Southern Cross University researchers in a report which said that flow rates identified in a Queensland study showed a single gas well could emit enough fugitive methane to incur a $10 million annual carbon tax liability.

Although the Australian Petroleum Production and Exploration Association says this data is still speculative, the organisation does support consideration of independent research and data gathering methods.

Certainly potential investors are going to be demanding further reassurances before they commit financially in the future.