NSW Coal and Gas Strategy

The Government intends to develop the Strategy following a public consultation process which will also involve input from a reference group including the NSW Farmers Federation, the Total Environment Centre, the NSW Minerals Council, the Australian Petroleum Production and Exploration Association and others.

While the Scoping Paper gives some hints at the likely changes in law or regulation that the Strategy might introduce to address the key issue of land use conflicts, in particular, between agriculture and mining and CSG activities and related issues concerning water resource management, the Scoping Paper does not give a firm and clear indication of what these might be. Below we consider how the Scoping Paper addresses these issues and, on how to deal with land use conflicts, we also comment on the Queensland position in relation to “strategic cropping land” and the New South Wales Liberals and Nationals‘ strategic regional land use policy.

The aims of the Strategy

The aims of the Strategy are to:

• guide the sustainable development of the coal mining and coal seam gas industry and associated infrastructure;
• minimise the adverse health, environmental, agricultural and land use impacts of the industry;
• ensure the industry is regulated efficiently and effectively; and
• strengthen the communication between Government, industry and the community on mining related matters.

The role of gas and CSG

The Scoping Paper acknowledges that gas has a critical role to play in New South Wales moving to a low carbon economy. While the CSG industry in New South Wales is small at present, it is noted in the Scoping Paper that there has been a significant increase in CSG exploration which could result in a substantial increase in CSG production over the next 25 years. Much of the production is expected to be in the Hunter Valley and the Gunnedah basin, but CSG development is likely in most of the main coal mining areas and the Clarence-Moreton basin.

Generally, all of the proposed key initiatives discussed in the Scoping Paper apply to coal mining and CSG activities. But the Scoping Paper itself does not give any indication as to whether any particular changes in laws or regulations are being considered to cater for increasing competition between coal mining and CSG.

Environmental and social impacts and community concerns

The Scoping Paper highlights the numerous community concerns in relation to amenity, health, environmental and land use impacts associated with the growth of coal mining and CSG exploration and production. These include, among others, concerns about climate change and the use of coal due to its contribution to global carbon emissions, concerns about the subsidence impacts of mining, concerns about the cumulative health and environmental impacts of mining, the compatibility of mining and CSG activities with other land uses (in particular, farming and food production) and the use of chemical additives in and the potential impacts from CSG operations, in particular in relation to interference with aquifers and the extraction of “produced water” from operations.

Many of these issues are attracting increasing public attention. This is particularly so in the case of CSG activities, as the development of the LNG to CSG sector in Queensland intensifies and ever greater attention is given to the use and management of water resources.

These concerns have been increasingly highlighted at the Federal level, for example, in the statements in December 2010 given by Federal MP Tony Windsor that “bio-regional assessments” should be carried out to assess the cumulative impacts of multiple projects on surface and groundwater before exploration licences are issued and, also in December 2010, by the National Water Commission’s release of its Position Statement on CSG and Water.

Key initiatives of the Strategy

The Scoping Paper looks in turn at specific key issues affecting future growth in the Hunter Valley, the Western coal resource area (the area stretching from Lithgow past Ulan and up to Dunedoo), the Gunnedah Basin and the Illawarra region. Many of the specific key issues such as water resource impacts, biodiversity, Aboriginal heritage and development of infrastructure (in particular, roads and rail), are faced by each of these regions.

Twelve matters, ranging from defining the potential growth of the industry to regulation and standards, are presented and discussed in brief in the Scoping Paper as “key priority initiatives” for the proposed Strategy. For some of these matters, specific potential tasks, plans or guidelines are identified. For example, it is noted that mine rehabilitation guidelines are currently being developed and that a policy on surface and groundwater management could be prepared. The Scoping Paper does not explore these or any other matters going to any of the proposed initiatives in any real detail and the Government’s policy position in relation to several of these matters is not identified.

While some of the key priority initiatives will be of greater concern to stakeholders in certain regions as opposed to others, issues which are likely to be of concern to all stakeholders across each of the regions include:

• the definition and mapping of the potential growth of the coal mining and CSG industries;
• measures for the improved management of potential land use conflicts (in particular, between agriculture and coal mining and CSG activities);
• water resource management; and
• change in law and regulation.

Defining the potential growth of the industry

To define the potential growth of the coal mining and CSG industries, it is proposed that the Strategy will identify:

1. the location of potential mining and gas extraction areas;
2. potential resource deposit sizes and annual yields or outputs; and
3. expected timing of commencement and extraction period.

Improved management of potential land use conflicts

Scoping Paper

It is noted in the Scoping Paper that, while coal mining and other industries and land use activities can and do co-exist, the need for choices to be made may arise. To guide decision-making, the Scoping Paper suggests that “triple bottom line, cost benefit analysis” incorporating social, environmental and economic costs and benefits could be carried out in regions where coal mining or gas extraction may have the potential to displace or adversely impact other high value existing land uses. The Gunnedah Basin, the Singleton-Scone area and the Musswellbrook area are named as potential areas where such cost benefit analysis could be carried out.

Presumably, “triple bottom line, cost benefit analysis” will involve significant changes to the current regulatory framework for coal mining and CSG activities. Such changes might be effected by amending existing planning, water and resources legislation. But the Scoping Paper does not canvass the likely changes in laws or regulations which might be introduced to implement decision making on the basis of such cost benefit analyses. In particular, the Scoping Paper does not give any details as to the precise decision making process which will be used to decide conflicts between the competing land uses of agriculture and mining or CSG activities.

The Queensland position on “strategic cropping land”

The idea of “triple bottom line cost benefit analysis” to decide land use conflicts can be contrasted with the approach proposed by the Queensland government under its new policy Protecting Queensland’s strategic cropping land: a policy framework published in August 2010. There has been much debate in Queensland about the kind of test which should be applied to determine any contest between agriculture and coal mining and CSG activities. Under Queensland’s proposed policy for “strategic cropping land”, essentially defined under the policy as the “best cropping land,” development of land which is identified and mapped as strategic cropping land will not be permitted where development leads to the “permanent alienation” or diminished productivity of the relevant land, except where certain exceptions apply.

Where development, including coal mining and CSG activities, is proposed on strategic cropping land, an assessment will be required under the strategic cropping land policy, which will be implemented by the introduction of a new Act specifically designed for the identification of strategic cropping land, a new state planning policy and changes to existing resources legislation. Development may be approved where “permanent alienation” of strategically cropping land can be avoided or where temporary impacts can be mitigated through restoration. If these tests cannot be met, then a development will only proceed if there are “exceptional circumstances” for its approval.

The process for determining “exceptional circumstances” will involve a two step test. First, if there is an alternative site on which the proposed development could take place, then the development should occur on the alternative site. Secondly, if there is a “significant community benefit” for the development proceeding, then the Minister may approve it. The definition of “significant community benefit” under the policy provides that while economic benefit may be relevant, the significance of the project cannot be based on economic benefits alone. Queensland’s strategic cropping land regulatory framework is still to be finalised and the relevant changes in law and regulation introduced.

New South Wales Liberals and Nationals‘ position

Meanwhile, the New South Wales Liberals and Nationals‘ Stategic Regional Land Use Policy suggests a similar approach to that under Queensland’s proposed strategic cropping land policy.

The New South Wales Liberals and Nationals’ policy states that “strategic agricultural land and associated water” will be identified by a “triple bottom line” assessment of the environmental, social and economic characteristics of the area and that all new mining and petroleum project applications will be subject to an “agricultural productivity assessment.” The policy does not provide any details as to how these measures would be implemented. It is stated in the policy that:

The NSW Liberals and Nationals believe that agricultural land and other sensitive areas exist in NSW where mining and coal seam gas extraction should not occur. There are other areas where mining and coal seam gas extraction are suitable and should be pursued following a tough assessment of potential impacts. Strategic land use plans will set the framework within which future development will be assessed.

While certain lessons might be learnt at least from an assessment of the debate and development of the strategic cropping land policy framework in Queensland, the next New South Wales Government will need to address how land use conflicts between agriculture and coal mining and CSG activities will be dealt with. In relation to the Scoping Paper and the consultation process for the Strategy, the New South Wales Liberals and Nationals’ policy states that “…in government, we will take any useful outcomes from this process which are consistent with our policy.”

Water resource management

It is suggested in the Scoping Paper that a policy on surface and groundwater management, including aquifer interference, could be prepared. While the Scoping Paper does not suggest what precise changes in law or regulation might be introduced to implement such a policy, it is likely that changes will be introduced under water and resources legislation which will tighten existing obligations or impose new obligations on title holders to monitor and report impacts on underground and surface water.

We anticipate that the disposal of water extracted from CSG operations (“produced water”) is also likely to be specifically addressed.

The Scoping Paper suggests that a number of possible tasks are likely, including:

• the identification of potential impacts of mining and gas extraction on surface water and groundwater;
• measures to ensure access to adequate water for surrounding land uses; and
• measures to avoid impacts to water that may be detrimental to surrounding land-uses.

Change in law and regulation

The critical changes in law and regulation to come out of the Strategy are likely to concern:

• decision-making processes where there is a land-use conflict between agriculture and coal mining and CSG activities; and
• water resource management (i.e. surface and groundwater impacts and the disposal of produced water).

On 19 December 2010, the NSW Government announced that it would introduce new rules for CSG exploration licences which will include rigorous community consultation and tighter environmental controls during the approval process. In addition, the Government indicated it would examine the banning of BTEX (benzene, toluene, ethylene and xylene).

As at the commencement of March 2011, the scope and content of these new rules is yet to be made public.

From the NSW Government’s December 2010 announcement, the changes are likely to include:

• referral of applications for exploration licences to the Department of Planning and the Department of Environment, Climate Change and Water (DECCW) for comments;
• a requirement for chemicals to be used in drilling and fraccing to be listed as part of the review of environmental factors provided for licence applications; and
• review by DECCW and the Department of Planning of review of environmental factors documents and applications for drilling or fraccing before approvals to drill.

The Scoping Paper states that, in addition to the new rules for CSG exploration licences announced in December 2010, the regulatory regime for CSG exploration and production poses some particular issues which need to be addressed, but precisely what these changes in law or regulation might be is not canvassed.

Closing date for submissions

The closing date for feedback on the Scoping Paper and submissions on the proposed Strategy to the Department of Planning is 15 April 2011.