Fracking scares impede wealth creation

I have a piece in today’s Australian.

THE probable reserves of unconventional coal-seam and shale gas in Victoria, NSW and Queensland dwarf the conventional gas reserves in offshore Victoria and the Cooper Basin and may approach the magnitudes found off the North West Shelf.

The unconventional gas is extracted by fracturing rock – fracking – to allow gas and oil to escape. This is a process with a 60-year history throughout which it has never resulted in public harm.

Reserves of gas are, of course, valuable only if governments allow them to be extracted.

Although it is politically irresponsible for governments to prevent wealth creation on the basis of counterfeit scares, the Napthine and O’Farrell governments in Victoria and NSW have bowed to such scares. These scares are based on specious allegations that extracting coal-seam and shale gas through fracking will create environmental problems, especially groundwater pollution. The Coalition governments in both states face opposition to gas development from some of their own supporters as well as from the Labor Party seeking to tap a vein of voters with strongly held views and casting an anxious look at Greens rivals. That does not condone the vetoes.

The Victorian government has completely forbidden development of any unconventional gas reserves in the state.

In NSW, where radio shock jock Alan Jones spearheads the campaign against fracking, the government has banned mining close to towns and in prime agricultural land.

It claims the exclusion zones comprise about 20 per cent of the state but they contain the lowest cost prospects.

Regulatory impediments in NSW have meant the state, though having similar potential to Queensland, collected a mere $120,000 in gas royalties last year, compared with $850 million north of the Tweed.

Victoria commissioned Peter Reith to head an inquiry into the activity. Like every other responsible study, this found fears of inadvertent harm were groundless and any risks were easily prevented – indeed, there is already a commonwealth-state 18-point leading practice framework.

The Reith report also advised that Victoria has an urgent need for future supplies and fracking should be allowed to proceed immediately. It pointed out that the minerals belong to the crown and value in them is shared under a known royalty regime between the government and the discoverer, with landowners being fully compensated for any damage, inconvenience and disturbance from the activity.

In addition it warned that a gas reservation policy for local consumption would simply divert the product to firms seeking below-cost inputs and deter exploration.

Unfortunately, reports of this nature invariably raise other agenda items. Reith’s report is no exception. He felt the need to call for a new regulatory authority, the gas commissioner. Designed to promote better acceptance of drilling and fracking, this also incorporates an “independent water science program” to scrutinise and report on whatever it fancies, new guidelines, bans on certain chemicals, full disclosure of the chemicals being used and independent monitoring.

The report also advocates further and unnecessary government resources to forecast consumer demand for gas and transportation capacity.

To placate different interests, Reith also recommended siphoning off some of the royalties to a regional fund and doubling the de facto royalty paid to the landowner to $20,000 a well.

Offsetting this, the report advocates a lower royalty rate and a royalty holiday – measures that are surely unnecessary for an industry anxious to start exploration on established terms.

The Reith report also advocates requiring the Exxon-BHP joint venture to cease selling as a single unit. The objective is to force the two firms to compete with each other in the hope that this will drive down prices. Whether or not this would eventuate, and be desirable in the light of the report claiming that prices need to rise, a forced divestiture sets ugly precedents for future joint ventures.

The tragedy, though, is that just as the Reith report sensibly concluded fracking should go ahead, a timid Victorian government put in place a further review process, leaving bans in place until after the next election.

The government optimistically thinks a further pause will buy it time to make the right decision. However, ahead of the next election it will face pressure to maintain the moratorium – which, on its present record, it is unlikely to resist.

The corporatist state is so pervasively within the business decision making framework that it is paralysing innovation. We need to find ways that allow decisions to move forward under the rule of law without parties having only an incidental interest in developments being able to recruit regulatory barriers to block them.

The Gasland movie on which much of the anti fracking material is based is shown to be specious by PhelimMcAleer.

 

 

 

 

 

 

 

 

 

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28 Responses to Fracking scares impede wealth creation

  1. Token

    Great article. We need many more consistently posted to break down the scare campaign which were mobilised by the endless pots of funds that are the US endowments.

  2. Gab

    We need many more consistently posted to break down the scare campaign

    currently being waged by Alan Jones.

  3. C.L.

    Jones is essentially a Greens Party member these days.

  4. Elizabeth (Lizzie) B.

    I’ve read of some major coal-seam gas fields around Coober Pedy. What’s happening there, if anything?

    The thing with coal-seam gas is that world-wide there is so much of it. Glorious and abundant cheap energy. We should get fracking.

  5. Dorothy

    Whenever Alan Jones starts on this fraccing rubbish I turn off my radio,and it makes me furious when he recommends the viewing of the Gasland films. It baffles me how one man can effectively destroy a vital industry, and there is no one who seams to be able to stand up to him on this

  6. wazsah

    Society is paying the price for a few decades of the Green movement getting accustomed to no opposition as it gazumps and distorts science in media campaigns.
    Public service and academic scientists should have stood up.
    Unless there are some funded counter campaigns nothing will change.
    I was saying this 20 years ago.

  7. Infidel Tiger

    Jones is dead against people exploiting any crevasse gas might leak out of.

  8. C.L.

    Whenever Alan Jones starts on this fraccing rubbish I turn off my radio …

    I think a lot of people are in that boat.

    I listen for the anti-Labor red meat.

    Then it begins …

    “Now, moving on to that report on the dangers of CSG …”

    *click*

  9. .

    That Mercedes Benz thing about Gillard and “dying of shame” was a blessing in disguise and we spurned it the way you’d spurn a rabid dog.

    We were fools.

  10. Ivan Denisovich

    I’d like to see the States have responsibility for a much greater proportion of revenue raising, with Canberra’s size of government and role in revenue raising minimised. Establishing genuine competition between the States should encourage the removal of green tape.

  11. .

    Maybe the solution is thus:

    “Hi Alan, I’m a long time listener and first time caller…I would just like to say I was disappointed in the dishonesty in gasland and how this will impact on hundreds of thousands of Australian jobs…”

    The reality is, he is backed by and has advertisements from the Maildra Group.

    They are a grain processor with interests in ethanol.

    Follow the money.

  12. Infidel Tiger

    The reality is, he is backed by and has advertisements from the Maildra Group.

    They are a grain processor with interests in ethanol.

    Follow the money.

    He also has big interests in horse properties in the Hunter.

    He’s talking his own book.

  13. Token

    currently being waged by Alan Jones.

    Listening over time it sounds like he is mixing up the CSG arguments with the anti- wind farm & solar compaigns in a crazy attempt to stop the campaign against coal.

    I say crazy because as so many have picked up is that noone looks at his end goal as he provides succour to the greens.

  14. cohenite

    Good article Alan.

    I don’t know why Jones is so stupid about gas and fracking. The onomatopoeic qualities of the word make it a delight for a start. Jones has been taken as a sucker by the Greens under the guise of the Lock the Gate people.

    There is no doubt there is an issue about due recompense for property used for any mineral or energy extraction but that is a different issue to claiming fracking is going to set the world on fire.

    The gas companies have not attempted to do much about allaying community concern about this and it has been left up to the likes of the McAleers.

  15. Token

    I think a lot of people are in that boat.

    I listen for the anti-Labor red meat.

    David Mamet noted on Uncommon Knowledge that one of the key differences he noted between people on the centre-right and the left is that the left will blindly follow a cause (note he is another lefty that has been driven to the centre-right so he has personal experience over a lifetime).

    I loved his line where he compared lefty causes to Indycar racing. A lot of excitement & energy which ultimately leads one to endlessly go in circles.

  16. Jannie

    Yeah, I turn off old Jones mostly, even though I supported him by bollocksing my Bank for boycotting him on 2GB year or so back. Sadly, he seems to have lost the plot, getting old like you do.

    As for fracking, I think it will sort itself out. There seems to be so much CSG available, that even if the Greens manage to lock up 95% of it, some places will exploit it and make a lot of money. Indeed those who exploit CSG will benefit greatly from the Greens who seek to limit supply.

  17. Token

    …that even if the Greens manage to lock up 95% of it, some places will exploit it and make a lot of money

    Watch the Labor mates be allocated permits Obeid style when the Libs get booted in Vic in few months time. That pot of cash is too tempting.

  18. stackja

    The unconventional gas is extracted by fracturing rock – fracking – to allow gas and oil to escape. This is a process with a 60-year history throughout which it has never resulted in public harm.

    At the request of Congress, EPA is conducting a study to better understand any potential impacts of hydraulic fracturing on drinking water resources. The scope of the research includes the full lifespan of water in hydraulic fracturing. The progress report was released in December 2012 and a draft report is expected to be released for public comment and peer review in 2014.

    There seems to be only one side getting a mention on safety so far Alan. Alan I remain a sceptic. Regarding Alan Jones prove him wrong not just abuse him.

  19. Alan Moran

    Stackja
    I do not wish to abuse Alan Jones. The fact is that the material purportedly showing damage from fracking is false if this is not the intent.

    The highly politicised green head of the US EPA, Lisa Jackson, has targeted fracking at every turn but has been unable to come up with evidence that it is harmful. It is never possible to prove anything positive in the Popperish world but there have been tens of thousands of wells sunk, many in the face of deep green hostility, yet only fabricated evidence of harm has been produced.

  20. cohenite

    I repeat the industry needs to do more to publicise the benign nature of fracking as shown by this paper:

    http://www.sciencedirect.com/science/article/pii/S0883292713001133

    And Professor Garry Willgoose’s work:

    http://www.awa.asn.au/uploadedFiles/Prof%20Garry%20Willgoose.pdf

    Willgoose, incidentally is a believer in AGW.

  21. jupes

    Willgoose, incidentally is a believer in AGW.

    Hence the name.

  22. Token

    Regarding Alan Jones prove him wrong not just abuse him.

    If AJ would allow a dialog with relevant experts to tease out the issue, I would have more time for the CSG segments.

  23. .

    Yes, he becomes completely unreasonable. I think IT and I have laid out why.

  24. jupes

    If AJ would allow a dialog with relevant experts to tease out the issue, I would have more time for the CSG segments.

    Like so many people, rather than entertain the thought that he is wrong, Jones goes in even harder.

    He was/is wrong on Shapelle Corby and he is wrong on CSG.

  25. AP

    Alan Jones is a raving idiot. I’ve heard him claim that a company is developing an “open cut coal seam gas mine”. Like I said, an idiot. If you want evidence of the looneys pushing this debate, go take a look at the tinfoil hat submissions to the NSW chief scientist on CSG – these people are more nutty than a Cadburys fruit and nut block. One woman claimed to have been “researching” CSG for two years and then quoted Womens Weekly as a source. Incidentally, the Chief Scientist is an idiot too – she has commissioned enormously expensive baseline satellite measurements to measure the “subsidence impacts” from CSG. Hint: there are none in the measurable range, above background movement due to swelling clays which vary with moisture content (i.e. rainfall). The other issue is that satellite measurements can’t tell the difference between one, two or more phase shifts, so they are next to useless for measuring vertical ground movements.

  26. The article fails to deliver the full picture; a bunch of greenies & a raving talk show host are stopping wealth creation by talking about fracking. Sorry there is a lot more impacts to the coal seam gas industry and there are being felt first hand by people who aren’t greenies & don’t listen to 2GB.
    The article says about Reith’s report

    It pointed out that the minerals belong to the crown and value in them is shared under a known royalty regime between the government and the discoverer, with landowners being fully compensated for any damage, inconvenience and disturbance from the activity.

    No in Qld the landowners are not being fully compensated and the impacts go far beyond mere inconvenience.

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