PETROLEUM AND GEOTHERMAL ENERGY (HYDRAULIC FRACTURING) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 19 June 2013.)

The Hon. R.P. WORTLEY (22:15): Safeguarding the environment is not the preserve of the Greens, despite their rhetoric. Labor has a long tradition of commitment to sustained and sound management of our state's natural resources. We have done this in a way that does not undermine the expectation of South Australians that we also safeguard the prosperity of this state, and we will continue to do so. The best safeguard a government can employ is a robust regulatory framework, one that is built on science and not fads. For these reasons, the government strongly opposes this bill.

Our state is currently experiencing an energy revolution. It is an energy revolution that is happening right here and now, one that will flow from the Cooper Basin to the homes of all South Australians. Billions of dollars have been invested across our state as local, national and international players are drawn to South Australia not just because of our vast oil and gas reserves but because of our world-class quality regulatory system.

A strong government working with strong business, backed by a strong community, is on the threshold of a golden age of oil and gas development in South Australia. It is a golden age that brings with it investment, jobs, prosperity and opportunity. This bill is designed with one purpose in mind, and that is to frustrate oil and gas companies. It does so by introducing unnecessary restrictions and duplication. A moratorium simply says to those companies, 'We don't trust you.' There is nothing in this bill that is not already being achieved by the existing regulatory framework—that is, if your intent is to safeguard the interests of landowners and the environment.

How can we be sure that our state's interests are being protected? For a start, we have more than 40 years of experience in using the technologies that this bill seeks to ban. Hydraulic fracturing technology has been used safely and without adverse impact for four decades. With 685 wells, more than 1,415 fracture stimulation stages have been carried out within the robust regulatory framework that has been in place in this state.

All potential impacts with relevance to hydraulic fracturing are already clearly outlined in publicly documented environmental impact reports, which all licensees are required under the act to have completed before they can do anything on the ground. The act requires statements of environmental objectives to be prepared on the basis of these reports, and these clearly state that contamination of surface waters, shallow groundwater resources, aquifers or soil must be avoided. They also state that there is to be no uncontrolled flow to the surface and that cross-flow between separate aquifers or hydrocarbon reservoirs must be prevented.

These are the standards to which these activities adhere, and it can be demonstrated that these objectives have been achieved. As I said, the objectives are designed as the result of detailed environmental impact reports that must be completed for all activities. This is required by the Petroleum and Geothermal Energy Act. The report covers a broad scope of potential impacts, as the term 'environment' in the act includes not only the natural environment but also the social and economic environment and so includes aspects such as health and wellbeing, and existing uses of land. These reports are required as a matter of course by all licensees and exceed the requirements of the report proposed in the bill.

Reports can cover the potential impact and management strategies of a range of activities proposed, or they can be specific. In fact, last year an environmental impact report and statement of environmental objectives were thoroughly consulted on and completed specifically for hydraulic fracturing. I reiterate that the documents were made available for an extended period for public comment before they were finalised.

The other intent of this bill is to prevent hydraulic fracturing activities in certain areas. This government recognises the importance of the establishment of clear and effective multiple land use frameworks aimed at minimising conflicts. Above all else, this government recognises the need to provide a shared commitment by government, industry and community to multiple and sequential land uses. Clear multiple land use frameworks are vital in achieving better outcomes for community and industry through increased transparency, enabling more effective and targeted engagement with communities on land use change and potential benefits. These clear frameworks allow government and industry to better inform public discourse to ensure greater outcomes for communities and landholders.

The petroleum industry in South Australia has a long history of compatibility with other land uses and, under the act, landowners are consulted early and involved in the setting of the environmental objectives. Landowners who, by definition, also include native title holders and claimants, concurrent licence holders, lessees and, in fact, anyone with an interest in the land, must be provided early with good information so they can make informed decisions.

They have the right to object to activities on their land. There are also clear processes for working together and bringing matters to court. For some areas where activities are not compatible—including in some protected areas—such activities are already prevented under the existing provisions of the act.

Hydraulic fracturing is used in conventional and unconventional wells, and preventing its use would limit an industry that has enormous potential to provide immense benefits to South Australia. Security of supply, jobs and other flow-on benefits would all be at risk. In essence, hydraulic fracturing has been undertaken safely here for many years and is already regulated under the existing act.

What is new is the hysteria being generated in the Eastern States in relation to shallow coal seam gas. Trying to import that 'close the gate' hysteria here demonstrates a fundamental misunderstanding of our state's geology. Shallow coal seam gas is very different to the deep gas resources that are being developed in South Australia. Our gas resources have much smaller surface footprints and, as they are much deeper, there are thousands of metres of rock between the resource where the hydraulic fracturing would occur and the shallower potable or beneficial aquifers.

The existing regulatory framework operating in the state is robust and built on decades of practical experience. One of its key objectives is to protect the environment, and the public, from any potential risks and impacts from petroleum and geothermal activities. The bottom line is: science should be our guide in this matter, not uninformed hysteria. This government strongly opposes the bill.

The Hon. D.W. RIDGWAY (Leader of the Opposition) (22:22): I rise to speak on behalf of the opposition to the Petroleum and Geothermal Energy (Hydraulic Fracturing) Amendment Bill. The bill seeks to place a moratorium on the practice of hydraulic fracturing for two years on any land used for primary production, residential zones, environmentally protected zones and any other zone deemed necessary by regulation. The bill also seeks to ensure that the minister provides a report to parliament into the possible impacts of fracturing on water quality, soil health, climate change and local economies.

There are two primary forms of unconventional gas prospects in Australia—coal seam gas and shale gas, and they are the two types of gas that will be accessed by this fracturing. Coal seam gas is formed along coal deposit beds. This is the form of unconventional gas that has received negative media attention and prohibitive regulations in the Eastern States. Currently, fewer than five per cent of all Australian coal seam gas projects have required hydraulic fracturing, although this is expected to eventually involve 30 per cent of all projects.

Coal seam gas is usually pursued on smaller tenements with multiple drill holes at a shallower depth of generally no deeper than 1,800 metres and, often, as a secondary product to coal production. Exploration of coal seam gas in South Australia is very much in its infancy and production is unlikely in the short to medium term, as operators are likely to pursue coal in the first instance at these sites.

Shale gas is found within finely grained sedimentary rock, often found layered deep in stable geological structures. Shale deposits require hydraulic fracturing. Extraction has a much higher operational cost than conventional or coal seam gas due to its greater depths, high geological density and, therefore, more energy-intensive processes. Shale gas is typically extracted at depths of one to four kilometres. The low permeability of shale rock and the depth of the gas deposits mean that the potential effect on water resources is substantially lessened.

'Upward migration' of fluid and contaminants from hydraulic fracturing 'does not appear to be physically plausible'. Shale gas production does not require groundwater to be pumped to the surface. Shale gas has far less impact on land use compared with coal seam gas, as much of the activity occurs below the surface. Productive shale gas reservoirs tend to be more substantial and are only cost feasible for larger operators.

Hydraulic fracturing encompasses a range of different extraction techniques for unconventional gas and geothermal energy. The process invariably requires a series of steel pipe well casings sealed with concrete to mitigate gas and water migration. Through the well a combination of pressurised water, sand and a marginal portion of chemicals is blasted at strategic points to extract unconventional gas and oil. Poor casing is often cited as the likely cause of environmental damage.

Nationally, water management for coal seam gas has been of particular concern. The CSIRO has stated that, 'Groundwater contamination from coal seam gas operations is considered a low risk.' Much concern is made of the chemical component of different hydraulic fracturing practices. However, the CSIRO has also stated that, 'Most of the chemicals are of low inherent toxicity, undergo considerable dilution, and the majority (60 to 80 per cent) are understood to be removed during flow back of the hydraulic fracturing fluid to the well from the coal seam.'

The case of the Tara region in Queensland has received considerable media attention in particular. Many of the claims that were promulgated in the media about health concerns were comprehensively rejected by the Queensland health department's study into the region. Similarly, the American EPA's progress report into the effect of hydraulic fracturing on water has so far found no cases of contamination resultant from such operations. The international academic journal Science recently published a comprehensive literature review into the impact of shale gas on water quality, which concludes that, 'These technologies are not free from environmental risks,' however, 'the incidence rate of seal problems in unconventional gas wells is relatively low (1 to 3 per cent).'

It is important to reiterate that there are substantial differences between South Australia's geology and resources compared with overseas and interstate. Some of the sources the Hon. Mark Parnell cites are questionable. The first source he cites in his second reading speech is the American polemic documentary film Gasland, which has been widely criticised for selective information and staged falsifications. Second, he cites that the CSIRO and the National Water Commission have concluded that environmental concerns about hydraulic fracturing are still poorly understood. While research is continuing, the prima facie case for a blanket ban appears very weak. He also fails to acknowledge the CSIRO's determination that the risk of water contamination is low.

In a briefing from the Hon. Mark Parnell to the opposition, he also cited a report from Southern Cross University into methane emissions from coal seam gas. This research is incomplete and still under peer review process. The scientific evidence for the Greens' position is otherwise scant.

In Queensland, the former Labor government allowed unconventional gas developments without going through the proper planning and environmental impact processes. Coal seam gas projects were allowed to proceed without proper community consultation and development of the resource was mishandled. As a result, there was considerable community opposition. Since then, the Newman government has fixed the mess created by the former Labor government.

The federal Coalition resources spokesperson Mr Ian Macfarlane has informed the state opposition that some 3,000 farmers have now signed up to unconventional gas activities on their land. Improved remuneration to farmers has been an important instrument in this process. We are advised that as a consequence of the developments in Queensland, young people who had moved to the Queensland coast to take up jobs in other industries are now moving back to the country because they see a future on the family farm and a reliable drought-resistant income that was hitherto missing. Country communities in Queensland are now looking at growth after several years of uncertainty.

South Australia has an established history of hydraulic fracturing of shale gas in the Cooper Basin in the north-east. In addition, Beach Energy and other explorers are currently considering options for shale gas in the Otway Basin region of the South-East. Energy resources and unconventional gas is a particularly important export growth industry for South Australia. Domestic supply of gas is also crucial for our state, as approximately 52 per cent of our electricity supply is provided by gas. Limits to supply would have a flow-on economic effect on exports, utility prices, industry and manufacturing.

I turn my attention to the bill. The bill seeks to place a moratorium on the practice of hydraulic fracturing for two years on any land used for primary production, residential zones, environmentally protected zones or any other zone deemed necessary by regulation. Such a moratorium would immediately prevent energy resource production across the state. Of the $268 billion of resource development investment in Australia, $205 billion is in unconventional gas and oil.

The second measure the bill requires is that the minister provide a report to parliament into the possible impacts of fracturing on water quality, in additional to soil health, climate change and local economies. Such a measure ignores the considerable amount of government and academic research being dedicated to this technique and does not require legislative enforcement. DMITRE has been particularly proactive in regard to their unconventional gas roadmap to address these environmental concerns.

Currently, energy resource project development requires ministerial approval in accordance with the Petroleum and Geothermal Energy Act 2000. It is incumbent upon the energy resource project proponents to provide an environmental impact report that identifies the risks and impact mitigation strategy, including to water resources.

The minister maintains a discretion to revise environmental objectives as it relates to the environmental impact report or the Development Act for high impact activities. Failure to comply with this range of requirements under the environmental impact report can cause penalties of up to $120,000 and six months' imprisonment for each individual offence. This proper process works well and defies the proposition in the bill that there should be separate ministerial reports to parliament.

Obviously after tabling the bill, the Hon. Mark Parnell indicated that he needed to amend the bill. He needed to remove the retrospectivity so that it only applies to future activities, not existing wells, and exempt fracking for the purpose of geothermal energy exploration or production. As you would appreciate, the contamination of groundwater issues are very different for hot rocks energy extraction than for methane. These changes are illustrative of the Hon. Mr Parnell's misunderstanding of hydraulic fracturing.

The necessity for retrospectivity is due to the current hydraulic fracturing activities in the Cooper Basin. It is apparent that Mr Parnell was unaware that the practice had already been employed in the region for many decades. I will add that the member for Hammond, Adrian Pederick, in his younger days was a fracking pump operator in the Cooper Basin. The Greens' media release that accompanied this private member's bill somewhat inaccurately described the measure as a ban on coal seam gas, rather than on hydraulic fracturing.

As aforementioned, only 30 per cent of coal seam gas requires hydraulic fracturing. Despite the removal of retrospectivity the bill would still seriously impinge on the current operations of the industry in the Cooper Basin as exploration and investment in the region would decline. The cost effectiveness of the operations is dependent on an inferred economy of scale that will make the region attractive for investment and joint venture from larger partners such as Chevron, in the case of Beach Energy.

The second amendment that the Hon. Mark Parnell proposes to his private member's bill is for geothermal, which requires an even larger quantity of highly pressurised water to be injected into hot dry rock areas. Research into hydraulic fracturing required for geothermal energy is in fact much further behind the methods used for unconventional gas. Again, the amendment illustrates the Greens' ideological preference for geothermal energy and its simplistic opposition to the hydrocarbon industry, rather than genuine concerns about the practice of hydraulic fracturing.

We consulted with a number of stakeholders but one that is particularly dear to my heart is the relatively newly-formed Primary Producers SA who indicated that they had some concern over hydraulic fracturing, particularly in the South-East—and I will come back to the South-East—and the Otway Basin. However, they would prefer that the projects were managed diligently by the department in accordance with proper process already in place rather than a blanket moratorium.

Members would know that I have been farming in the South-East at a place just out of Bordertown, and twice in my life there have been major proposals not of extraction of gas but of mining coal that exists below the aquifer. Both times, with great fanfare, companies have come in and both times they have been unsuccessful because they could not guarantee, with the existing rules in place, the integrity of that water resource. So, I have seen firsthand an example where the rules and regulations we have in place have protected that resource.

I have made it very clear that, while we will not be supporting the Hon. Mark Parnell's bill here this evening, as a farmer, and I think the only person probably ever in this parliament whose entire income prior to entering parliament was derived from water extracted from that aquifer, I know how very important it is.

Nonetheless it has been protected in the past and I know that the two proposed exploration wells near Robe are some 4,000 metres deep. The aquifer around Robe is actually quite shallow but I will use my example. The aquifer was at about 30 metres below the surface and then there was 80 metres of water and then you go into a whole range of other rock formations, so we are talking about 110 metres, yet the shale that they were trying to fracture is some 3,890 metres deeper into the earth, if it is at the same level. With those few words, I indicate that the opposition will not be supporting the Hon. Mark Parnell's bill.

The Hon. R.L. BROKENSHIRE (22:35): I will be brief because plenty has been said about this already. It is clear that both major parties, for reasons that they have outlined, will not be supporting this bill. Because of the composition of the bill, some briefings that we have had, and the differences between mining practices for the proposals in even a very sensitive area like the South-East compared to what has been incredibly damaging in parts of the United States, as one example, we are confident that the practices for this type of mining in South Australia will be totally different to that. We have had two if not three detailed briefings on this matter. Having said that, we will keep a close eye on what is happening in the South-East.

I respect what the Hon. Mark Parnell is trying to do with respect to the protection of an important region for the state. Indeed, we argue that three other areas need to be brought into legislation as well to protect prime farming areas. One is obviously proper mapping and zoning of mining per se in our most productive food bowl areas. The second is the right to farm legislation, and the third is some alterations generally to the Mining Act that give farmers more power than they have at the moment.

As we have often discussed in this house, we tried to make the Mining Act better and stronger for farmers in 2010 and did not succeed—just like the Hon. Mark Parnell probably will not succeed at this point—in giving farmers a more balanced opportunity to put mechanisms in place in the act that, where relevant, protect them and prevent them from having to go through what is occurring at moment. The reality is that, whenever you try to do anything with the Mining Act per se, SACOME in particular seems to have a much stronger voice than farmers.

Thermal energy is one thing that we hope will have some success in South Australia. I had a brief look at that in Innamincka some time ago. It is unfortunate that it has not been successful thus far, but, hopefully, for South Australia's clean, green energy supplies in the future thermal will be an opportunity. We would not want to prevent that at this time, that is for sure. As far as a blanket moratorium goes, we just think that it is too broad, but we will watch very closely what is occurring and if anything adverse occurs in the event of exploration.

We have also had a briefing from the major exploration company down there, and there are still a lot of question marks around whether or not they will ultimately go into mining practices in the South-East. However, if those approvals and practices do at some point in the future become adverse to that community, we would join forces with the Hon. Mark Parnell and anybody else in the parliament who wanted to bring in some legislation to ensure additional protection or prohibition. As the Hon. David Ridgway has already said, there are quite a lot of checks and balances within the existing act, and there are plenty of people who are watching very carefully what is happening down there.

We are not anti-mining at all costs, but we are arguing that mining should occur where appropriate and not occur where inappropriate. Obviously this government is not going to do it, but we would like to see the continuation of the concept of proper mapping and zoning for our mining areas in a comprehensive and scientific way and have relevant economic analysis done to have zoned-in areas for farming and zoned-in areas for mining. Perhaps a future government, maybe a new government next year, will do that. With those few remarks that puts our position in the Hansard at the moment. We will be watching very closely as things may or may not proceed, particularly in the South-East, with fracking.

The Hon. M. PARNELL (22:40): I thank the Hons Russell Wortley, David Ridgway and Robert Brokenshire for their contributions and I am disappointed that none of the Labor Party, Liberal Party or Family First will be supporting this legislation. I want to quickly put on the record, the Hon. David Ridgway referred to it, but the nature of debates in this place will not show the amendments that I circulated some time ago. Just so that it is on the record, if this bill were to get to committee stage, and I think it is unlikely, the amendments would ensure that the bill was not retrospective and did not apply to geothermal energy. The reason is fairly obvious. You do not have the same leakage of methane, and in fact hot rocks are not fossil fuels that damage the climate, so we do not need to impact on that renewable energy industry.

The Hon. Russell Wortley put all his faith in what he described as the robust regulatory framework. I have to say that my experience with this robust regulatory framework over a period of decades is that it is not in the least robust. I think I might have mentioned here before I attended an inquiry into mining accidents in the early 1990s and it was clear that the mining companies up in the Cooper Basin were breaching the law in relation to the pollution of land by hydrocarbons. Having drawn it to their attention, the mining department's response was the law must be wrong. It was not 'these mining companies are doing the wrong thing,' but the law must be wrong. They promptly proceeded to change the law to validate their dodgy polluting practices.

The Hon. David Ridgway again has faith in these robust regulatory frameworks. He says there is nothing to worry about. He talks about the depth to which the wells are sunk and of course he is a great believer in concrete, and he referred to the fact that these are concrete lined wells. We know that these wells leak and fracture and they are compromised and they do not retain their integrity—in some cases, not for very long at all—but there is plenty of evidence of wells being compromised and collapsing and therefore leaking. So, the idea that all of the gas will neatly come out of the pipe and everything will be captured and there will be no fugitive emissions I think is fanciful.

To say that the Southern Cross University studies have to do a bit more work—and it is pretty clear from the work they have done that there are fugitive methane emissions which, given the climate forcing potential of methane, are far more serious a climate change agent than simple carbon dioxide.

The Hon. David Ridgway talked about the Greens' 'simplistic opposition to hydrocarbons'. What the honourable member should do is pay attention to climate science, pay attention to the International Panel on Climate Change and the Climate Commission and other bodies who all agree that we have to leave most of the remaining fossil fuels in the ground if we are to avoid dangerous climate change. If they have to be left in the ground, is it that we just leave someone else's in the ground and we will dig all ours out? That is what is inherent in this argument. As soon as you find it, you dig it up!

I think the 'Fossil Fuel Party' (the Liberal Party)—and as a segue, $400 million taken off renewable energy just today. That is Mr Abbott's contribution to climate change. The 'Fossil Fuel Party' sees no merit in protecting farmland, protecting conservation land or protecting urban land. Their colleagues interstate do; their colleagues interstate have introduced exactly the same type of amendments that the Greens have introduced. The best the Hon. David Ridgway can see is, 'We're different. South Australia is different. Our geology is different. Our wells are different.' We could not possibly have any of these problems that occurred in New South Wales and the 'lock the gate' people are just scaremongers. A farmer-driven campaign against the damage to farmland is just scaremongering, clearly. That is the opposition's view. I am disappointed that this bill will not go any further today.

Certainly, I know that the community sector in South Australia, conservation groups and a new group that has been established fairly recently under the name of CLAW—Clean Land and Water—are paying attention to what this industry is doing. They do not accept the robust regulatory framework. They will be watching very carefully what goes on.

The Hon. J.M.A. Lensink: And you are going to be emailing them as soon as you get to your office.

The Hon. M. PARNELL: The Hon. Michelle Lensink is encouraging me to email community groups, and I can do nothing other than take her advice. What I will say is, I will be down in Mount Gambier. The Greens strongly believe in protecting regional economies and regional communities. I will be down in Mount Gambier talking to local farmers about what is coming their way.

Farmers down in the South-East are worried about what is coming. They have every right to be worried, and the Greens will be doing what we can to support our food growers against this industry which is a blight on the landscape. It is an additional forcing pressure for climate change, and we really do need to proceed very carefully. That is why the Greens have moved for the two-year moratorium and the permanent protection of conservation land, farming land and urban land.

Second reading negatived.