Natural Resources Committee: Unconventional Gas (Fracking) Interim Report

Adjourned debate on motion of Hon. S.W. Key:

That the 106^th report of the committee, entitled Unconventional Gas (Fracking) Interim Report, be noted.

(Continued from 18 November 2015.)

Mr TRELOAR (Flinders) (11:38): I am pleased to be a member of the Natural Resources Committee, a standing committee of this parliament. It is a wonderful committee to be involved with. We do lots of exciting work, take lots of exciting trips all around the state, and we seem to make quite a considerable number of reports to this place which are often spoken to and are well received.

We are part way through what has been a really time-consuming and not inconsiderable inquiry into fracking. It has all come about as a result of the intention of a couple of companies, Beach Petroleum most particularly, looking to investigate at least the possibility of extracting gas from the South-East of South Australia through a method known as fracking.

The inquiry is entitled 'An inquiry into unconventional gas in fracking', and it was referred by the Legislative Council to the committee on 19 November 2014. It has been in motion for quite some time, 18 months now, and I have to say that the committee has been very diligent in its work. The committee has taken on an extraordinary workload, and it is not over yet. In fact, we quite possibly will have another trip to the South-East. I know that this coming Friday at our Natural Resources Committee yet more witnesses will be presenting on this particular issue.

It has been very topical. As with a lot of these inquiries, there have been extreme views put forward by both sides of the argument, and I do not say that lightly. I guess the challenge for the committee is to find its way through all this and come up with a report that adequately reflects the submissions we have received and the positions that the various stakeholders take.

I would have to say that the economic environment has changed quite significantly in the last 18 months. We have all seen the price of oil and gas drop considerably. We have seen east coast gas come online for the export market. We heard from one of our most recent witnesses that the world gas market, not just the gas market here in Australia, is well and truly adequately supplied, I guess that is the best way of putting it. Without being oversupplied, it is adequately supplied. That is keeping a lid on gas prices and no doubt will be a consideration for those looking to investigate fracking in the South-East, Beach Energy in particular.

In the last couple of minutes, I will quickly highlight the terms of reference because it will give some idea of the scope this committee has had to work within:

The terms of reference for the inquiry include inquiring into potential risks and impacts in the use of hydraulic fracture stimulation—

otherwise known as fracking—

to produce gas in the South East of South Australia and in particular:

1. The risks of groundwater contamination;

2. The impacts upon landscape;

3. The effectiveness of existing legislation and regulation; and

4. The potential net economic outcomes to the region and the rest of the state.

We are speaking to an interim report today, and I would suggest—and I am sure that the Chair of the committee, the member for Ashford, who is here today, would agree—that the committee still has to do some work on term of reference No. 4, the potential net economic outcomes to the region and the rest of the state. My opinion is that the first three references we have covered and canvassed pretty well thus far, but certainly the fourth is one that we will be considering more in the coming weeks.

Time expired.

Mr PEDERICK (Hammond) (11:42): I rise to speak to the Natural Resources Committee 106^th report, titled Unconventional Gas (Fracking) Interim Report. As I have indicated in this place before, I was involved in the fracking industry from 1982 into early 1983 in the Cooper Basin, operating in the north of this state and in Queensland. Fracking is certainly a business that does open up the resource. In the Cooper Basin, it has been low volume fracking, or fracturing. I was involved in fracturing many drill holes and many oil wells. I was working for a company called Gearhart Australia, which was subsequently taken over by Halliburton, which is a major company operating in this field.

Essentially, we did vertical fracking, straight down. Most of the time it was using items like four-inch steel guns, and there would be an explosive every 120° that could blast through 22 inches (using old technology measurements) of solid steel, so they had a fair go. There is quite a science in making sure that you actually shoot, so to speak, the correct area. As a junior operator at the time, it was my job to run the equipment the 10,000 feet to the bottom of the well. You knew when you were getting close to the well by your distance meter. You slowed the pace right down to a crawl, and then you kissed the bottom of the oil well with the equipment, with the guns.

Mr Pengilly interjecting:

Mr PEDERICK: It was 10,000 feet down. Then you had to work out where exactly you were in the oil well because at 10,000 feet (or a bit over 3,000 metres) you could get close to 10 metres of stretch in a cable. There is a machine called a casing collar locator that would tell you exactly where the collars in the 30-foot (nine and a bit metres) lengths of casing were. The idea was that you did not want to shoot through the collars.

This was all cased-hole work and it was all operated in holes with multiple runs of casing, usually triple runs at the top, going down to double runs and then a single run to the bottom. All these runs of casing are cemented in, and that is tested. The work that was done, in relation to the ability of the cement to be properly cured and in place for the whole distance of the well, was logged with a cement bond log. That would tell you if the cementing had been done appropriately. If it was not done appropriately, you would have to go back in. Usually, it was Halliburton's job as a company to cement in those wells.

Essentially, we would run our equipment down. We would work out the exact depth of where we had to be, which had been found out through the open hole testing that had been completed by a company that operated doing the open hole work prior to the wells being cased. The company is called Schlumberger, and they are well known around the world as experts in their field of wireline operations, which are what the operations are called when you are operating down a hole like that. They would have the zones where the gas or the crude oil was and where the fracture was going to happen.

What would happen after we fractured the wells was that we would come out and pack up our equipment. We would use a truck hooked up to an oil rig on site. Then Halliburton would have a range of tanks, and they could have up to 30 of these probably 30,000 or 40,000 litre tanks on site. They would have an article called 'frac sand' mixed up in fluid that would be pumped under immense pressure using V12 and V16 two-stroke diesel motors, Detroit engines, all operated by one engineer and all linked on one throttle. Obviously, all these tanks were hooked up so that this slurry could be blown down the hole and open up the fracture.

I participated in many of these fracture stimulations. We also did some work through tubing perforation, where we would have what was called a workover rig or a two-stage rig on a hole, and they would have the fully completed well with tubing in place. You would have long strips with lighter explosives on them. You would run them down and just go through the tubing, so it was not such a structured operation as with the four-inch or 100-millimetre guns. We did quite a bit of that work as well.

Things have moved on. There are tubing-conveyed perforations operated now, and there has certainly been the advent of horizontal drilling, which is when you are drilling vertically and then you have the art of being able to go horizontally and use about 300-odd metres (or 1,000 feet) to make the bend so that you can limit the impact on the surface and make it much more efficient in shifting your oil rig. I have seen it at Moomba and I have seen it in the United States. You can actually confine your pad area where you can put up to at least a dozen wells on one drill pad.

I acknowledge the work the committee has done on this, and I know they have a lot more work to do, but I think people really need to look at the science. There are a lot of different views about fracturing. Last year, I went on a trip to America with the Hon. John Darley, Mr Troy Bell (member for Mount Gambier) and the Hon. Mark Parnell to have a look at the situation in the United States. What they have learned in the United States is that good regulation is the key. Reports by the United States Environmental Protection Agency acknowledge there has not been any systemic failure. I did encounter people who were abjectly against the use of fossil fuels. I personally believe that they use fracturing as the tool to combat fossil fuels.

We also met a farmer who has since spoken to the committee via Skype, Jeff Heller, who represents 1,700 farmers from New York state who have been blocked out with the moratorium and the ban on hydraulic fracturing. The royalty regime in the United States means that a property owner actually gets a share of their royalties, which they obviously do in Pennsylvania and the other 34 out of 35 states in the US which have oil drilling. They were very keen to access that work so it would make their farms viable, for one thing. It was interesting to note, as Mr Heller said in his evidence, that they are heavily reliant on groundwater. You would not think you would want to mess up your farm if there were a risk of the hydraulic fracturing messing it up.

There are certainly a lot of different views, and I note there is a lot more work to do. I acknowledge that work needs to be done. It just shows that you need to sell your message if you are going to conduct this anywhere. I note that Kidman properties have recently figured well in the debate on land sales and that they have had many holes fractured on their properties. I would urge people to have a look at a couple of short videos, TruthLand and FrackNation, just to get a view of how hydraulic fracturing operates. I commend and support the work of the committee, because there are a lot of questions to be asked. We do not want to upset our prime farmland, but we also have to be realistic about how it really operates.

Mr BELL (Mount Gambier) (11:52): I rise to make a contribution to the unconventional gas inquiry interim report. I commend the committee and the work that they do. I have been in the audience at a local meeting and will be presenting evidence this Friday. Having received 175 separate submissions and taken evidence, at this point, from 48 witnesses, this should highlight the anxiety and also the importance of this piece of work. The area I want to focus on is the social licence. What is the social licence and how is it achieved? According to the Pacific Energy Summit 2013 working papers:

The term 'social license'…generally refers to a local community's acceptance or approval of a project or a company's ongoing presence. It is usually informal and intangible, and is granted by a community based on the opinions and views of stakeholders, including local populations…and other interested parties. Due to this intangibility, it can be difficult to determine when social license has been achieved for a project. Social license may manifest in a variety of ways, ranging from absence of opposition to vocal support or even advocacy, and these various levels of social license…may occur at the same time among different interested parties.

I would contend at this point in time that a social licence has not been achieved in the South-East. You only need to read our local paper this week to see some commentary with differing views on fracking in the South-East or shale gas extraction. What is quite interesting in those debates that are taking place—and I have collected just six months worth ready for Friday and already it needs to be bound and presented—is that the defendants of fracking in the South-East do not live in the South-East. They represent various groups and industry bodies, such as the Norwood Resource group, that are not based in our local community.

Those who have a concern and those who are raising the issue live in our local community. What they are concerned about is what is quite rightly in the terms of reference for this inquiry, and that is:

1. The risks of groundwater contamination;

2. The impacts upon landscape;

3. The effectiveness of existing legislation and regulation; and

4. The potential net economic outcomes to the region and the rest of the state.

It has been acknowledged in this interim report that there are differences in the Cooper Basin where fracking has been occurring for several decades. There is a significant difference between the Cooper Basin, which is sparsely populated and in an arid zone, and the South-East, which has a much wetter environment and is a more densely populated area. That is quite an important distinction.

One of the issues I would like to see raised is the difference between hydraulic fracturing and slick water fracturing because part of this is about transparency, being open and so forth. The proponents claim that they have been fracking in the Cooper Basin since the 1970s, and to all intents and purposes that is true, but slick water fracking—the injection of water with silica or some other proponent to keep the cracks open at high pressure—has not been around for 70-odd years, as we may be led to believe with fracking in the Cooper Basin. In fact, it was only in the early 2000s that it was introduced commercially into America.

On that, in April 2015 I undertook an American study tour and my conclusions are on record. That was looking at the positive effects that the oil and gas industry, particularly fracking, has in sections of the United States, focusing pretty heavily around Texas and an area called Eagle Ford. I met with local representatives, mayors and community people and really got their insight into the benefits of fracking in their areas.

I then also went to America in June—so not long after, but this trip was not organised by me and I felt it was important that I attend—on another fracking tour and this predominantly looked at the negatives. I seek leave to continue my remarks.

Leave granted; debate adjourned.