Gas hearing in Hamilton

Beach Energy drilling for shale gas in South Australia. Photo: Beach Energy.
Beach Energy drilling for shale gas in South Australia. Photo: Beach Energy.

The Hamilton Spectator – September 26, 2015

A WIDE range of individuals and organisations provided testimony to a Hamilton hearing of Victoria’s parliamentary unconventional gas inquiry on Wednesday.

The individual speakers were local members of a variety of anti-gas groups or alliances, though they had varied opinions on whether the industry should be subject to an ongoing moratorium, a permanent ban, or rigorous regulation that favoured agriculture.

Mineral exploration company Mecrus Resources provided testimony on a potential oil shale deposit in south-west Victoria.

Gunditj Mirring Traditional Owners Aboriginal Corporation testified about its difficulty in managing native title agreements with gas companies.

Wannon Water gave testimony that it had not completed its own assessment of likely surface and ground water impacts from a gas
industry.
Lowan MP Emma Kealy told The Spectator that she was “surprised that the inquiry was originally not going to have a hearing in south-west Victoria, given all the exploration licences we have in the region”.

“I fought hard for a local hearing and that was worthwhile given the
large turnout,” she said.

“It was also an opportunity for myself to hear from local farmers, especially towards the end of the hearing when they spoke of their passion for the land and their views and concerns about unconventional gas.”

‘Risks not fully understood’: Mayor

HAMILTON’S State Government Gas Inquiry hearing
kicked off with an audience of about 40 people from
the local and Portland regions.

At the time of publication, representatives from four local governments had given testimony about a potential onshore unconventional gas industry on Wednesday.

A representative from Glenelg Shire said there was a concern that the industry would result in a reduction in environmental standards and risk to water and might damage the region’s green image.

Southern Grampians Mayor Peter Dark said that he shared those concerns and pointed to two separate motions passed by councillors that backed the “importance of protecting food, fibre, water aquifers”.

“In June 2015 The Southern Grampians Shire Council formally declared itself a gasfield free region due to community concerns,” he said.

“There is possibly a significant risk to agricultural
productivity.”

“The risks are not fully understood.”

Southern Grampians Shire Mayor Peter Dark. Photo: Hamilton Spectator.
Southern Grampians Shire Mayor Peter Dark. Photo: Hamilton Spectator.

Cr Dark said Southern Grampians was “dependent on agriculture” as it was the sector that provided the largest source of employment.

He said that the region had higher value per hectare than many other areas and “we have half a million hectares in agricultural production”.

“Southern Grampians Shire has invested heavily in a land use study to diversify local agriculture,” he said.

“We have untapped potential; we are well-placed to continue to support global food production with all the conditions to be a significant player.

“We have an obvious natural advantage: groundwater. The impact of gas needs to be considered.”

Cr Dark said that, compared to the “10/15 year lifespan of a gas field”, the “potential adverse impacts have a much longer lifespan”.

“The royalties paid to the State Government are potentially much less than the cost of damage,” he said.

Cr Dark’s testimony was met with a “hear hear” from
some in the audience.

A representative from Conrangamite shire said that the region’s existing onshore conventional gas plants provided significant employment.

He said that Conrangamite was one of the few areas that had “direct experience with onshore gas” and non-hydraulic fracturing operations “should be exempt” from the current moratorium.

“It is difficult to make informed decisions unless we know that the resource exists,” he said.

The Corangamite representative also said that there was a risk of the existing local gas operations could be put at risk by getting caught up in the push against unconventional gas.

A mineral exploration company, Wannon Water, local farmers and an anti-gas activist group were scheduled to give testimony at the hearing.

The human cost to farmers

SOUTH-WEST Victorian farmers have all spoken against the prospect of a new onshore unconventional gas industry, giving extensive and at times emotional testimony to a gas inquiry hearing in Hamilton on Wednesday.

Victorian Parliament’s Environment and Planning Committee, made up of MPs from a wide range of parties, heard from a mineral exploration company, Wannon Water and local Aboriginal traditional owners.

By far the largest number of individual speakers was made up of farmers from around the Hamilton and Portland regions, along with other locals.

Unconventional gas and hydraulic fracturing technology were compared by one farmer with the past industrial contamination scandals of DET and asbestos.

Another farmer said that he and his peers just wanted “to be left
alone”.

Branxholme farmer Colin Frawley said an unconventional gas
industry would “put us at risk”.

“For our livestock, we must have underground water,” he said.

Without groundwater, he said his farming business “would be totally compromised”.

“Gas may be very profitable but we as a farming community have
to carry the risk,” he said

“They will walk away in 10/15 years. We would still be here paying taxes and contributing to the community.”

Mr Frawley described the prospect of fracking as a “marketing nightmare” for the region’s “clean and green image” with wholesale and retail buyers.

After 18 months of fighting the proposal for an onshore unconventional gas industry, signs of wear and tear are staring to show.
Drumborg farmer Gary Everett, who described himself as a “passionate lamb producer”, talked of the “psychological burden” from campaigning.

He said stress had been placed on families and marriages.

Mr Everett primarily talked about his own land, saying his father bought the property 63 years ago and was a “pioneer” in a new community.
“You could buy land, you could buy a house, but you made the
farm and the family home” he said.

“Drumborg is a great community. We are fighting for our survival.”

Mr Everett said he was a member of one of the 67 anti-gas groups across the state, and they were gaining considerable followers on a daily basis.

“Some of us have become dismayed, let down or left angry by people in Government departments, politicians, energy companies, our own farming bodies the VFF and UDV, because for saying this industry can coexist with our farms.”

“This isn’t true.”

He became choked up when talking about the possibility of farmers being arrested for “trying to protect the land for future generation”.

Byaduk farmer Aggie Stevenson told a “story of little girl on a farm” who grew up with clean and fresh food, water and air.

“Someone is threatening to take away all these things, purely
driven by greed,” she said.

“I implore you not to be the villains in the story, be the heroes.”

Eastern Metropolitan Greens MP Samantha Dunn told the hearing that Mrs Stevenson’s story “goes to the heart of the level of anxiety, the psychological burden that is taking its toll”.

Eastern Metropolitan Labor MP Shaun Leane asked Mr Frawley to expand on the marketing issue.

Mr Frawley said he had neighbours that export food to Asia and that “Our point of difference is our image, and it you compromise that, you lose it.”

Mr Everett said that he had consulted with Meat and Livestock Australia, which had told him that the responsibility for meat contamination from petroleum was with the owners.

The Victorian State MPs on the committee for the inquiry into onshore unconventional gas in Victoria. Photo: Parliament of Victoria
The Victorian State MPs on the committee for the inquiry into onshore
unconventional gas
in Victoria. Photo: Parliament of Victoria

It has been almost 18 months since one of the first anti-fracking
meetings in south-west Victoria.

The one meeting in Digby saw many others follow and the ‘Lock the Gate’ movement grew from an outsider curiosity to spawning local variants.

Some of those local variants are now apparently trying to assert their independence from the ‘Friends of the Earth’ network of professional activists, possibly to gain more credibility with conservative MPs.

Western Victoria MP Simon Ramsay said during the hearing that he found it “troubling” that there were so many anti-gas groups “running around with different agendas”.

Along with committee chair David Davis, Mr Ramsay appeared to have difficulty at times with establishing the organisational and financial structures of various anti-gas groups and regional alliances, as well as their core beliefs.

Eastern Metropolitan Liberal MP Richard Dalla-Riva said the testimony given on Wednesday was similar to that from Gippsland but in Hamilton he had been given the “most detailed, real world example” of potential
agribusiness impacts.

It has been almost two years since the State Government’s ‘Independent Gas Market Taskforce’ report, now colloquially referred to as the ‘Reith report’, which recommended that Victoria “proactively” seek
onshore unconventional gas development.

With about a year to go before an election, the then-Victorian Coalition Government played down the report and recommitted to an industry moratorium.

Aboriginal owners not informed of fracking

GUNDITJ Mirring Traditional Owners Aboriginal Corporation was forced to renegotiate a prior Native Title Agreement due to a gas exploration company not mentioning that it planned to use hydraulic fracturing.

Gunditj Mirring chief executive Damein Bell told a Hamilton hearing of
Victoria’s parliamentary gas inquiry on Wednesday that the Aboriginal corporation had held a number of meetings and exchanged “hundreds of pages of documents” with an unnamed gas company.

“But nothing mentioning it (fracking),” Mr Bell said.

He told the hearing that the potential for fracking, the controversial gas
extraction technique at the centre of protests against unconventional gas, was only discovered when Gunditj Mirring members read the terms of the State Government exploration permit.

“The only reason they had to consult with us was the Native Title Act; I don’t know how they would have negotiated if they hadn’t been forced to.
“The second round of negotiations was friendly, in good faith; we asked why they didn’t mention fracking in the first round.

“They said it wasn’t a public issue back then.”

Gunditj Mirring Traditional Owners Aboriginal Corporation chief executive Damein Bell. Photo: GHCMA
Gunditj Mirring Traditional Owners Aboriginal Corporation chief executive Damein Bell. Photo: GHCMA

The inquiry’s committee of MPs asked Mr Bell which gas exploration
company had required a second round of negotiations.

Mr Bell declined and said it was “confidential” but invited the committee
to look up which companies held Petroleum Exploration Permits (PEP) over Gunditjmara land.

Earlier in the hearing, Mr Bell said that the Aboriginal Corporation had successfully negotiated native title land use for exploration in 2013.

Several ‘monthly full briefing’ meetings were then held in 2014 to discuss
the issue of potential fracking on land within the Gunditjmara Native Title
area.

Mr Bell said the purpose of the briefings was to “gather all members to discuss business and make decisions” and said the gas company in question also attended some of those briefings.

The Spectator reported in April 2014 that Gunditjmara People were
to, in the words of Mr Bell, “revisit” their previous native title agreement over shale and tight gas exploration permits in south-west Victoria.

Adelaide-based oil and gas company Beach Energy had a large stake, along with other companies, in two major exploration permits in south west Victoria.

Beach Energy’s 2013 annual report stated that the company “and its
participants were awarded PEP 171 and PEP 150 in Victoria after completing negotiations with Native Title Claimants”.

At the time, a spokesperson for Beach Energy did not deny being involved in Native Title renegotiations but said it was committed to fulfilling its obligations under Native Title.

Beach Energy's gas drilling rig in the Cooper Basin, South Australia. Photo: Beach Energy.
Beach Energy’s gas drilling rig in the Cooper Basin, South Australia. Photo: Beach Energy.

Mecrus Resources, Somerton Energy, Bridgeport Eromanga Energy, Bass Strait Oil Company Limited and Mawson Petroleum also hold Petroleum Exploration Permits in areas covered by Gunditjmara Native Title areas.

When asked about the status of the Native Title renegotiation, Mr Bell said the Aboriginal corporation was “taking advantage of current moratorium” on onshore gas and the dispute resolution process was still open.

Eastern Metropolitan Greens MP Samantha Dunn asked Mr Bell if all extraction techniques should be included in native title negotiations.

Mr Bell said negotiating parties “shouldn’t hide that from one another”.

The gas inquiry committee was itself the subject of another complaint from Mr Bell.
Mr Bell said he was “extremely disappointed” that the inquiry’s interim report, which was handed down on September 1 this year, contained “no references to traditional owners”.

Inquiry committee chair David Davis MP said that it was only an interim report and that the committee “will have more to say” in the final report.

Mr Davis asked Mr Bell how indigenous views could be adequately represented in the report.

Mr Bell said that Native Title holders were the “first port of call” for new
industrial developments but the State Government process needs to provide opportunity for comment from Indigenous people.

He noted that Native Title holders could be taken to national arbitration, or be subject to overrides from the State Government, if companies accused them of negotiating in bad faith.

Northern Victoria Shooters and Fishers MP Daniel Young asked Mr Bell how the State Government could override native title holders.

Mr Bell said the Government had to “prove that they will not destroy our land” but Indigenous people “have no guarantees”.

Inquiry told further studies
needed in risks to water

WANNON Water has told a Hamilton hearing of Victoria’s parliamentary unconventional gas inquiry that it has not done its own assessment of the risks from a proposed onshore drilling and fracking.

A committee of MPs was told that State Government would most likely be left liable for cleanup costs if something went wrong with water supplies and the gas company responsible was unable to pay.

Branch manager of asset planning, Peter Wilson, told the hearing that a Victorian Government report had found a “low risk of aquifer depressurisation”, a low risk of water contamination, and a low risk of land subsidence from potential gas development.

Mr Wilson did say there was still “considerable uncertainty” due to “limited data availability” and risks to ground and surface water “need to be further studied”.

“The region is highly variable and some sites may have an unacceptable risk, particularly if community drinking water is present,” he said.

Gas inquiry committee chair David Davis MP asked what consultation had occurred between Wannon Water and gas exploration companies. Mr Wilson replied that he had “been in the role of planning for 15 years and been never approached by gas company”.

Eastern Metropolitan Labor MP Shaun Leane asked if the use of steel and concrete well casings could prevent cross contamination between saline and fresh aquifers.

Mr Wilson said that “concrete is a very robust material, considered to be best practise” but he would not say whether it would last indefinitely.

Northern Victoria Shooters and Fishers Party MP, Daniel Young, asked if the issue of well failure could apply to ordinary water bores as well.

Mr Wilson said it could but the “ramifications were different”.

“Linked wells won’t destroy the water resource with salinity, but things like introducing chemicals unfit for human consumption will,” he said.

Mr Wilson also said Wannon Water does not have a direct role in applications for drilling under Victoria’s mining and
petroleum acts.

360 million barrels under western Victoria

SOUTH – WEST Victoria’s oil shale deposit is between 15 and 30 times thicker than commercially viable deposits in the United States, according to mining exploration company Mecrus Resources.

Mecrus Resources believes there is a deposit of 360 million barrels of oil contained within its two exploration licence areas between Casterton and the South Australian border.

The exploration licence areas EL5298 and EL5297 in south-west Victoria, held by Mecrus Resources and believed by the company to contain 'world class' shale oil deposits. Graphic: JASON TULLY.
The exploration licence areas EL5298 and EL5297 in south-west Victoria, held by Mecrus Resources and believed by the company to contain ‘world class’ shale oil deposits. Graphic: JASON TULLY.

The company’s ultimate plan to develop the deposit would see a total of 16 wells drilled on a single site about one hectare in size.

These wells would go down 2500 metres to access the oil shale, which is believed to be contained in a layer that is 1500m thick.

Horizontal drilling would be used, with side wells trailing off between two and 3.5 kilometres in any direction.

If one of these sites were successful, then Mecrus could “clone” the operation for “multiple” potential oil deposits thought to be in the region.

These new details were contained in spoken testimony to Victoria’s parliamentary inquiry into unconventional gas, which held a hearing in Hamilton on Wednesday.

Mecrus Resources managing director Barry Richards told the inquiry committee of MPs that Mecrus was a private company that was not obliged to give public statements, but it wanted to engage with the community.

The Spectator reported on Tuesday that a written submission from Mecrus to the inquiry stated that the “prospectivity” of the south-west Victoria deposit was “beyond doubt”.

Mecrus indicated that the deposit could produce $600 million in royalty payments to the State Government over 40 years, putting its commercial value at up to $6 billion.

Almost all the information that Mecrus provided to the inquiry has been in relation to a potential oil shale deposit contained with an 1500 square kilometre exploration region between Strathdownie and Lake Mundi, about 10km west of Casterton.

Mecrus senior petroleum consultant, Dr Rodney Halyburton, told the hearing that the oil shale industry in the United States “got very excited” when they found deposits of between 50 and 100 metres in thickness.

Dr Halyburton said the company’s assessment, along with an independent
study, of the potential deposit was “based on very conservative numbers”.

He said the study was “focused primarily” on a well drilled in 2006 that was the “only onshore well in Australia” that had been producing oil shale, and he found it “amazing” that oil had started flowing from the test well while it was being drilled.

Mecrus Resources managing director Barry Richards. Photo: Mecrus Resources
Mecrus Resources managing director Barry Richards. Photo: Mecrus Resources

Mr Richards also said the company’s report on south-west Victoria was “conservative, but it does indicate significant resources in our area”.

Eastern Metropolitan Liberal MP Richard Dalla-Riva said the inquiry had previously heard from areas in Victoria with “lots of population, lots of dairy,” but not so much over near Casterton.
“I’m not talking any disrespect to be people over near South Australia; it seems to me that that’s an area where it may have limited impact. Could that happen in this area?” Mr Dalla-Riva asked.

Mr Richards replied that everything the company had been talking about
at the hearing concerned its exploration permits between Casterton and SA.

He described Mecrus as a “diverse organisation” and a “significant explorer of resources in Victoria” with over 140 employees, a “large percentage” of which were in Victoria.

Mr Richards said Mecrus itself had completed no drilling in south-west
Victoria and its further assessments since gaining the exploration licence were based on soil samples, water samples and ground
surveys. “Our people get out and talk to the landholders,” he said.

“That provides feedback to management and as exploration continues we will make ourselves available to the community.

“We have licences in Victoria that have Native Title negotiations and
agreements in place. We believe we are a very responsible community member.”

Mr Richards said the company had tried to contact various groups about its oil exploration, including the Victorian Farmers Federation, but claimed that emails had not been returned.

Mecrus’s written submission stated that hydraulic fracturing, AKA ‘fracking’, would not be an “enabling technology” for shale oil in south-west Victoria as the rock layers were “naturally fractured”.

However, fracking would likely be used to multiply the oil “recovery factor”, or percentage of oil that can be successfully extracted from the ground.

In response to the committee’s questions about safety precautions, Dr Halyburton said that “fracking has been conducted for 50 years, it’s nothing new”.

“People have to be careful. With cowboys, things can go wrong. But we will do everything according to the book,” he said.

Dr Halyburton said the oil industry had learned to be careful with spillage because accidents at offshore rigs were much more difficult to clean up than at onshore operations.

Eastern Victoria Labor MP Harriet Shing asked if an oil industry would create a net economic loss for agriculture, particularly if the marketing image of prime beef was damaged by the proximity to an oil field.

Mr Richards said “I actually fail to see how our industry would damage other industries.”

“Victoria’s lobster industry is huge throughout the world, yet we have
Bass Strait (offshore gas production).”

When asked who would pay for costs and damages in a “worst case scenario”,

Dr Halyburton said the company would take out “significant insurance” for any oil production operation.

According to Dr Halyburton, rock cuttings and excess gas from any oil project would be “reinjected” into the ground.

Gas could also be burned off in a ‘flare’, but that was not likely to happen and a local landfill would also be needed for some waste.

In terms of water management, Dr Halyburton said “Mecrus
will use proprietary technology” from its wholly owned subsidiary company ‘Desalin8’.

According to Desaln8’s website, the company offers “opportunities for extracting high quality freshwater supplies from poor quality brackish groundwater using In Situ Desalination (ISD) technology”.

Farmers voice concern over proposed oil shale project

The Hamilton Spectator – September 24, 2015

SOUTH-West Victorian farmers have expressed concern about a proposed oil shale drilling project between Casterton and the South Australian border.

They say that their focus is on what will happen to food production over the next century, rather than the economic benefits over the lifespan of an unconventional oil or gas field, which can be as low as a few years.

The Spectator reported on Tuesday that a Melbourne-based industrial engineering and miner exploration company had told the Victorian Parliament’s gas inquiry it was “beyond doubt” that there was a prospective oil shale deposit in the south west.
Mecrus Resources wrote in a submission to the inquiry that it had “invested significant money to date in detailed exploration” and it believed the deposit was “world class” and could last 40 years.

The company has two exploration licences covering 1500 square kilometres between Strathdownie and Lake Mundi.

The exploration licence areas EL5298 and EL5297 in south-west Victoria, held by Mecrus Resources and believed by the company to contain 'world class' shale oil deposits. Graphic: JASON TULLY.
The exploration licence areas EL5298 and EL5297 in south-west Victoria, held by Mecrus Resources and believed by the company to contain ‘world class’ shale oil deposits. Graphic: JASON TULLY.

Mecrus will probably have to use the ‘fracking’ extraction technique to improve yields at the oil field if the project goes ahead, and there is the possibility of natural gas at the site as well.

The issue of fracking has generated a considerable groundswell of opposition, which includes many local farmers who see it as a threat to agriculture.

Mecrus has stated that a successful shale oil project would bring “massive flow on effects for local communities” in terms of new jobs and businesses.

With beef, lamb and wool prices at high levels, farmers are planning to tell Victorian MPs that there is a strong economic case to give priority to farming.

Byaduk North prime lamb and premium beef farmer Mal Rowe told The Spectator that “extremely productive agricultural land” was being put at risk from oil and gas development.

He said south-west Victorian pasture was averaging 20 sheep per hectare but Queensland and NSW could only manage one to three sheep per HA.

“We are adamant; we are not going to back off,” he said.

“There is a buyer who has been sourcing steers form this region for 25 years.

“They are sent to Japan as top-quality restaurant beef. He knows exactly what animals he is going to get.

“It would only take one thing to upset this.”

Mr Rowe believes that oil drilling between Casterton and South Australia would threaten aquifers that provide water for local towns and farms.

“You have got to look at the percentage of wells that will fail: about one per cent. I don’t know the number of wells they might drill but some of them will eventually fail and that will put aquifers at risk,” he said.

“Forever is a very long time; I know that wells are encased in a number of layers of steel and concrete but they will never be as strong as the substrates.”

Mr Rowe pointed to recent ‘Food Not Gas’ rallies across the region, which have attracted 100 to 300 people at each event, as evidence that many other locals shared his views.

Mecrus specifically mentioned local aquifers in its submission to Parliament, stating that “The oil shale is quite deep and it is significantly separated from any utilised groundwater aquifers”.

A number of local landowners, along with about 1000 people, attended an anti-gas rally in Melbourne on Sunday that called for a permanent ban on fracking and onshore unconventional gas.

Victoria currently has a temporary moratorium on most aspects of onshore gas but its future will be influenced by the inquiry that received Mecrus’s submission, along with 1700 others.

The inquiry was due to hold a hearing in Hamilton yesterday, with speakers from local Aboriginal groups, governments, farmers and Wannon Water.

Mr Rowe said he was “pleasantly surprised by the number of people and overwhelmed by the support we got from both country and city people”.

“There are so many people opposed to the development of an unconventional gas industry, right across Victoria from Gippsland and the south west.”

Mr Rowe said he would be willing to support a strict regulatory regime instead of a ban “but the compliance would have to be so high as to leave no doubt that it wouldn’t compromise agriculture”.

Petroleum industry lobby group APPEA has told the Victorian inquiry that an onshore unconventional gas industry would boost the economies and populations of country areas.

As mining jobs and investment slows down in Australia’s northern states, there was some interest from ex-locals in returning to the region if a similar industry took off.

Comment: Global market is big influence on local gas policy

REX MARTINICH

Comment

Rising unemployment and declining manufacturing will collide with farmer-driven campaign against unconventional gas, but international markets will play the role of umpire.

 

The Victorian Liberal National Coalition has announced it will support an “extension of Victoria’s (current) onshore gas moratorium until 30 June 2020”.

It should be noted that the next Victorian state election is scheduled for November 2018, resulting in the policy’s effective length being 19 months (if the Coalition was returned to power).

Victoria has a moratorium on most aspects of onshore gas exploration and development, which was originally put in place by the previous Coalition Government and later expanded.

The current moratorium is so broad that it has even halted gas exploration projects that are unlikely to use hydraulic fracturing, such as Otway Basin works proposed by Lakes Oil.

Global oil prices are less than half of what they were 18 months ago, which has placed huge pressure on the US shale oil industry following its fracking-powered boom times.

Many shale projects were given the green light with an expectation that investors would be paid back from oil prices of between $USD80 to $60 per barrel.

Oil prices have spent most of this year between $USD40 and $50 per barrel.

 

West Texas crude oil price index - 18 months to September 30, 2015. Source: nasdaq.com
West Texas crude oil price index – 18 months to September 30, 2015. Source: nasdaq.com

Liquified Natural Gas (LNG) prices were a little slower to follow oil prices but their recent fall has been considerable.

Japanese market regulators even skipped the monthly issue of LNG spot prices in June this year due to “a lack of trades”, a move that was widely interpreted as a sign of “tepid” demand.

US domestic and Japanese prices for Liquified Natural Gas (LNG) and crude oil imports to August 2015. Source: US Energy Information Administration.
US domestic and Japanese prices for Liquified Natural Gas (LNG) and crude oil imports to August 2015. Source: US Energy Information Administration.

The impact of low fossil fuel prices has been felt locally as well, with Adelaide-based oil and gas exploration company Beach Energy cutting $55 million from its capital expenditure budget in January this year.

Beach Energy was also hit by the departure of US energy giant Chevron, which had been a partner for Beach’s joint shale venture in remote South Australia.

The collapse of prices has become its own market-enforced moratorium on new unconventional gas projects, though recent sharp falls in the Australian dollar may help the fledgeling industry.

Meanwhile, an 18-month campaign against unconventional gas in rural areas in the southern half of Victoria, particularly in the rich farmlands of south-west Victoria and Gippsland, culminated in a 1000-strong protest in Melbourne this month.

Wool and red meat prices are rising and so are agribusiness wages, increasing the political clout of farmers and their representative bodies.

The upcoming state by-elections in South-West Coast and Polwarth, combined with over 1700 mostly anti-gas submissions to an ongoing parliamentary inquiry, undoubtedly had a influence in the Coalition’s new gas policy.

The Coalition’s policy appears largely based on the Victorian Farmers Federation policy, which was itself recently strengthened by a conference motion brought by farmers from south-west Victoria.

However, it must not be forgotten that agricultural exports also have floating prices and are influenced by the same global economic slowdown that has helped dragged down gas prices.

If China’s slowing economy results in anxious parents in Beijing and Shanghai no longer paying $AUD60 to $100 for Australian powdered infant formula, then an entire local industry is placed at risk.

If Japan reduces its appetite for premium Australian beef, or executives in Hong Kong take the scissors to business wear budgets, then the effects will be felt locally as well.

Fossil fuels may again dominate the economic stakes thanks to their high price inelasticity, causing large swings from relatively small changes to supply or demand.

The instant economic sugar hit that gas and oil fracking can provide could also be a future godsend for state and federal governments under pressure from rising unemployment and stagnating wages.

The estimates for how long a fracking operation can produce oil or gas varies from between three years and thirty years, but for any government under siege and facing an election that represents a lifetime.

Suffering from an impeding departure of local vehicle manufacturing and uncertainty over where new submarines are to be built, South Australia appears to be hitching its wagon to unconventional gas.

South Australian Treasurer Tom Koutsantonis, a member of a minority Labor Government, tweeted after the Victorian Coalition’s policy announcement that SA was “now the only welcoming jurisdiction for oil and gas investment supplying the Australian east coast markets”.

Should warnings from petroleum lobbyists come true, and a lack of domestic production does significantly increase local gas prices, then that could also become an election-defining issue for Victoria’s mainly urban population.

Providing that oil and gas companies have sufficient capital and shareholder goodwill, they could ride out the slowdown and return to their non-perishable oil deposits once global prices trend upwards again.

Bargain hunters have also been snapping up shares in oil and gas companies, hoping that their ‘buy in gloom, sell in boom’ strategy will pay off when the oil price rises.

For example, Kerry Stokes bought considerable Beach Energy holdings for as low as 62 cents on the dollar compared to boom times.

Potential $6 Billion Oil Deposit in SW Vic

The Hamilton Spectator – September 22, 2015 

SOUTH-WEST Victoria is potentially sitting on a $6 billion oil and gas deposit with a production capacity of 100,000 barrels per day, according to Melbourne-based industrial engineering and mining company Mecrus Resources.

Mecrus has told Victorian Parliament’s inquiry into a potential onshore unconventional gas inquiry, via a written submission, that there is a ‘shale oil’ and natural gas deposit between Casterton and the South Australian border.

The company believes the commercial prospects for this deposit are “beyond doubt” after it “invested significant money to date in detailed exploration and investigation” and commissioned an independent study.

Representatives from Mecrus are due to give testimony to a Gas inquiry hearing in Hamilton’s Performing Arts Centre on Wednesday.

“The oil shale is quite deep and it is significantly separated from any utilised groundwater aquifers,” Mecrus managing director Barry Richards wrote in the submission.

“The identified resources in our primary target area are also extremely thick and of world class in nature”.

The primary target area is comprised of two mineral exploration licence areas held by Mecrus with a combined size of about 1500 square kilometres.

The two tenements, EL5298 and EL5297, incorporate land from around Ardno, Strathdownie and Wilkin to the south, to around Lake Mundi and Tullich in the north.

The eastern border of the two adjacent tenements begins about 10 kms west of Casterton and is hemmed in by the variety of state nature reserves and Crown land between Casterton and the SA border.

The exploration licence areas EL5298 and EL5297 in south-west Victoria, held by Mecrus Resources and believed by the company to contain 'world class' shale oil deposits
The exploration licence areas EL5298 and EL5297 in south-west Victoria, held by Mecrus Resources and believed by the company to contain ‘world class’ shale oil deposits

“If the progression to the next stage from exploration to mining is successful, then it would be expected that many support companies would establish offices and service centres to support the development,” Mecrus’s submission stated.

Mecrus did not state how deep underground the oil deposit is meant to be, but other oil and gas companies have been exploring about four kilometres beneath the surface near Penola, SA.

The ‘Mecrus Group of Companies’ includes a variety of businesses focussed on groundwater management and desalination.

But its resources department is current focussed on mineral and petroleum exploration and not production.

The largest single project that Mecrus has worked on, according to public reports, is a $135 million contract to supply four giant coal-handling machines at the Abbot Point Coal Terminal in North Queensland.

Some of the company’s flagship contracts, listed as ‘case studies’ on its website, were worth between $2m and $10m.

The revelations in Mecrus’s submission could further agitate anti-gas activists and locals farmers who have joined their cause.

Landowners from south-west Victoria joined a protest rally in Melbourne on Sunday that called for the entire state to be declared “gasfield free” due to concerns that an onshore unconventional gas industry would damage agriculture.

Mecrus has also stated that, if an oil drilling project goes ahead, south-west Victoria could also be used for ‘carbon sequestration’ to held Australia meet its international emissions reduction targets by pumping greenhouse gas underground.

The Mecrus submission said the deposit as been “independently assessed” to likely contain 360 million barrels of oil as well as pockets of natural gas.

The deposit is believed to have a lifespan of 40 years and could produce more than $600 million in royalties for the Victorian Government during that time.

Given that oil royalty rates in Victoria are usually about 10 per cent of net production value, the economic value of the deposit could be as high as $6 billion.

If the project ever goes ahead it could, at peak production, create a yearly economic output larger than Iluka Resource’s Hamilton mineral sands separation plant or the Portland Aluminium Smelter,

Mecrus Resources notes that the “financial expenditure for such projects is extremely large” but says that it would bring “massive flow on effects for local communities”.

“If the progression to the next stage from exploration to mining is successful, then it would be expected that many support companies would establish offices and service centres to support the development,” Mecrus’s submission stated.

“This also will have a positive impact on the employment of local citizens through support functions to a new industry.”

The company says its exploration results indicate “there is a significant Oil Shale reserve and associated hydrocarbons contained within these Oil Shales” in the Otway Basin.

Mecrus has submitted ‘commercial in confidence’ documents to the parliamentary gas inquiry, including work and operation plans, an environmental management plan and groundwater contingency plan.

The managing director offered to give MPs a confidential briefing on request and stated in its submission that the aboveground impact from oil drilling in its exploration licence areas would be about one hectare in total.

Mecrus will probably have to use the controversial hydraulic fracturing, AKA ‘fracking’, technique to improve yields from any oil and gas deposits found in south-west Victoria.

Fracking involves pumping a mixture of water, sand and chemical underground to break up rock layers; the technology has been a major source of opposition to unconventional gas from farmers.

Mecrus has also proposed to fill the remaining underground void with carbon dioxide to cash in on the search for ‘carbon capture and storage’ facilities.

Brown coal power stations are a major contributor to Australia’s high per-capita carbon emissions.

A recent advertising campaign by the Mineral Council of Australia, promoting coal as “amazing”, has talked up the possibility of carbon capture to improve the economic and environmental virtues of the fossil fuel.

There is only one functional carbon capture operation in the world, located in Canada, but there are plans to use the technology to store emission from coal power stations in Victoria’s Latrobe Valley.

Mecrus has successfully completed a number of large construction and maintenance projects since the company was formed in 1999, but it has never started or delivered a mine or oil production site.

Mecrus established its mining and resource division in 2009 and was awarded its first exploration licence in 2010.

The collapse of oil and gas prices over the past 12 months has proven to be a challenge for Australia’s petroleum exploration and production companies.

South Australia’s Beach Energy, which holds a number of onshore gas exploration licences in south-west Victoria, was forced to slash capital expenditure after oil prices dropped and its share price plummeted.

Mecrus is a privately owned company with a much lower profile than its publicly traded competitors and it does not have to publish its annual reports.

The Victorian Parliamentary submission by Mecrus represents a rare insight into the company, as its latest press release was issued in August 2011 and its last four-page newsletter came out in late 2013.

Backing up what the company told Victorian MPs in 2011, the July 2015 submission states that “we do not believe there is any commercially viable Coal Seam Gas reserve” in the Otway basin.

The company wants any future oil activity to be governed under Victoria’s Mineral Resources Sustainable Development Act, rather than the Petroleum Act.

This could see oil and gas projects go ahead in Mecrus’s south-west Victorian exploration licence areas even if the Victorian Government decided to extend its current moratorium into onshore gas exploration and fracking.

Mecrus argued that treating south-west Victorian oil extraction under mining legislation would “strengthen regulatory safeguards and prevent delays to development of the industry”.

Mecrus also urged MPs to take note of a report published by the US Environmental Protection Agency that downplayed the potential effects of hydraulic fracturing for oil on drinking water resources.

 

 

Western Victoria’s aquifers and surface water face a “low” risk from fracking

REX MARTINICH

The Hamilton Spectator – August 08, 2015 

WESTERN Victoria’s aquifers and surface water face a “low” risk from onshore unconventional gas fracking, according to a State Government report that has been harshly criticised by The Greens.

 

The report explored “hypothetical onshore natural gas development scenarios”, including a wide band of shale gas west of Casterton and three coal seam gas areas between Casterton, Merino and Dartmoor.

Another hypothetical coal seam gas field was modelled in the prime dairy region between Macarthur and Koroit.

Unconventional gas development involves, to varying degrees depending on the type of gas, the controversial extraction method of hydraulic fracturing or ‘fracking’.

Water, sand and chemicals are pumped underground at high pressure in order to ‘frack’ a gas well and the process has been depicted by activists as dangerous to the environment and human health.

Though the main body of the report presented unconventional gas as low risk, its introduction made candid statements about the proposed industry.

“Gas extraction depressurises the gas-bearing formation and may cause a decline in groundwater level, which could impact water users and ecosystems,” the report stated.

“Groundwater level decline may also cause land subsidence.

“Hydraulic fracturing can increase gas yield, but may unintentionally contaminate water supplies with hydraulic fracturing fluids and induce seismicity (earthquakes).”

Victorian Greens Leader Greg Barber has rejected a water table report’s main findings as “flawed” and accused the consulting company that produced it of having a commercial interest in seeing the fracking moratorium lifted.

“If the government is backing these findings, they seem to be saying that drilling in Western Victoria will be a lot lower risk than other places,” he said.

“I’m just not buying it.”

“There’s no actual evidence provided that the water table will only fall by 2 to 10 metres from gas drilling and extraction. All their other conclusions follow from that.

“That impact could be devastating enough to fragile farmlands and sensitive ecosystems, already stressed by drought and climate change.”

The Spectator has sought comment from Western Victoria Labor MP Gayle Tierney but she did not respond before publication deadline.

The ‘Otway region synthesis report: overview of the assessment of potential impacts on water resources’ was one of four submissions made by the Victorian Government for the State Parliament’s inquiry into unconventional gas.

The inquiry is due to report its findings to Parliament in December, and the recommendations could see the State Government lift or extend its current moratorium into most onshore gas exploration activities.

The water report stated that gas development in the Otways and Western Victoria would have a “low” impact on the water table with water flow changes and aquifer depressurisation “within historical ranges” and “the potential for chemical contamination of groundwater from hydraulic fracturing fluids is low”.

Lowan Nationals MP Emma Kealy repeated her party’s pledge to not approve any gas development that would pose a threat to agriculture.

“The Coalition has a strong history in unconventional gas, banning the use of dangerous BTEX chemicals, introducing the gas exploration moratorium, and commissioning extensive water and environmental studies and entering into a broad community consultation process,” she said.

“This is in stark contrast to Labor, who recklessly issued 72 gas exploration permits and 23 extraction licenses with no studies into the impact of fracking on our land, environment and water.

“This report forms just one of the submissions to (Parliament’s) Inquiry into Unconventional Gas. I await the final recommendations of the Inquiry with interest.”

The water report’s authors used test drilling results to estimate the water table impact of hypothetical shale and coal seam gas development in the Otways and Western Victoria regions.

Though much of south-west Victoria is covered by shale and tight gas exploration licences, The Spectator has only found one coal seam gas exploration licence that was granted in Western Victoria in previous years.

The private company that owned the licence, Mecrus Resources, “has ruled out CSG” according to a separate State Parliament report.

The current report found that “shale gas…is expected to exist in the Casterton Formation at depths greater than 2500m.”

“Prospective shale gas resources could be located near the South Australian border.”