Coal seam gas a risk, JP Morgan says December 15, 2010 - 5:49PM
AAP
One of the world's leading investment banks has poured cold water on Queensland's emerging $50 billion coal seam gas industry.
A report by JP Morgan says the industry has significant water risks, an unknown impact from growth and is a potential risk to public safety.
The report, by analyst Garry Sherriff, says costs involved in developing the projects, which involve piping gas from the Surat Basin to export terminals at Gladstone, are likely to blow out because of environmental concerns. Advertisement: Story continues below
It warns that towns and landowners risk reduced water supplies; there is a risk of reduced water quality; and of gas migrating to existing bores.
Once on the surface, the saline water extracted in the CSG mining process will have to be treated, stored and disposed of, the report says.
JP Morgan also expresses doubts about the cumulative impact from multiple CSG developments.
These water risks could translate into project cost increases, government intervention, changes to regulations and potential disruption to long-term gas supply contracts, the report says.
There is also a danger that a build-up of gas in water bores could result in large, uncontrolled gas releases which may pose a risk to public health and safety, the report says.
JP Morgan's report backs up community concerns over the industry, says Friends of the Earth campaigner Drew Hutton.
"It is time for the state government to start listening to community voices calling for a moratorium on the industry," Mr Hutton said.
"The report states there are so many environmental risks associated with the operation of coal seam gas that the government will need to change the rules along the way and this could create great uncertainty for the companies and their markets," Mr Hutton said.
He said when the impacts of the industry are realised, the public would demand much more rigorous regulation.
"This could drastically change the ground rules for the companies and cause cost blow-outs," he said.
"The state government is pursuing a very risky strategy for economic development by putting so much faith in this one fallible industry and the (state opposition) LNP is supporting it every inch of the way," Mr Hutton said.
"Investment experts are urging caution and I am calling on Queensland's leaders to do the same."
Resources Minister Stephen Robertson said the state government was committed to protecting groundwater resources.
"The emerging CSG industry offers enormous potential but the government insists this cannot come at any cost," he said.
"We passed legislation in parliament in November that strengthens the protection of Queensland's water bores and natural springs near coal seam gas projects.
"The government makes no apologies for insisting that all resource proposals are held to strict environmental and safety standards," Mr Robertson said.
"It's what the community expects."
Chief executive of the Queensland Resources Council Michael Roche said any resource project contained risk.
"You also need to look at the risk management strategies," he said.
"Those risk management strategies for LNG and coal seam gas projects are covered in huge detail," he said.
The strategies were in both the proponents' environmental impact statements and in government restrictions on the industry, Mr Roche said.
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