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Open season on UCG could backfire in Queensland
UNDERGROUND coal gasification in Queensland has had more hurdles put in its way than most new industries, but recent events have taken attacks on UCG to a new level.

And in an alarming development, at least one coal seam gas heavyweight has launched a public attack on its UCG counterparts.

PetroleumNews.net recently received an email from QGC stating that PNN could attribute it with the statement: We have long been concerned about the environmental acceptability of UCG and its potential to pollute groundwater.

The message was sent to PNN and presumably many other media outlets with the explanation that some journalists were inadvertently linking UCG to coal seam gas extraction.

While QGC presented the message as an effort to avoid misinformation, it included a clear and public attack on its upstream energy cousins.

Peter Bond, the managing director of Australias most advanced UCG company, Linc Energy, told PNN that some coal seam gas companies had been running campaigns against the UCG sector for years.

This started a couple of years ago with QGC when it needed to get it hands on as much acreage as possible to meet its ambitions for LNG, Bond said.

At the same time, the way the Queensland government handled competing claims between UCG and coal seam gas companies effectively meant a moratorium on UCG.

I saw this coming a couple of years ago. I have spent about $200 million buying up coal acreage in South Australia and the US so I can avoid clashing with the CSG industry.

What I have also discovered is that this whole overlapping tenement turf war issue seems to be unique to Queensland.

Bond said the campaign against UCG regained momentum last month when news broke that federal Environment Minister Peter Garrett was seeking more information from BG/QGC and Santos on their plans for managing water and the effects on groundwater of their proposed CSG-to-LNG projects.

We then had a question in Queensland Parliament about Cougar Energys Kingaroy project, which began an extraordinary chain of events, he said.

Bond said he was surprised QGC was still so aggressive after all these years.

In the early days we were competing for the same resources, but today we are targeting different coal seams in more than eight cases out of 10 and there are no overlaps or issues.

It might be a matter of resource efficiency. UCG achieves 22 times more energy out of the same tonne of coal, so maybe the concern is about UCG gaining commercial momentum, he said.

Linc has largely avoided the fallout from recent attacks on UCG technology, but at least one of its smaller rivals, Cougar Energy, has been hard hit.

Cougar suspending itself from the Australian Securities Exchange and started laying off staff after its Kingaroy UCG project was closed down on July 17 by Queenslands Department of Environment and Resource Management (DERM).

The company is still battling to clear itself of accusations of polluting groundwater, despite intensive testing by DERM that has failed to find anything wrong with water quality in the local bores at or near the Kingaroy project and any danger to human health or farming activities.

Cougar Energy this week submitted an environmental audit of its Kingaroy project which will be reviewed by DERM and an independent scientific panel.

The audit was originally required as part of a Queensland government freeze on UCG technology in Queensland while Linc, Cougar and Carbon Energy underwent a two-year test of their technological and environmental practices.

Cougars audit is now being used by DERM to determine whether to reverse last months shock decision to suspend the Kingaroy project.

Cougar has hit back this week, stating that it is obtaining legal advice on how to deal with misleading information being distributed by several parties in an apparent attempt to satisfy their own agendas.

Cougar managing director Len Walker told PNN it was clear there was no significant basis to the so-called environmental concerns about the Kingaroy project.

A few parties have used this as an opportunity to attack UCG technology. They have really stirred up emotions among landowners and local communities, and galvanised them into a strong force.

Thats potentially going to create some long-term problems for the coal seam gas industry as it tries to deal with tougher questions about managing water and salinity from its own projects. These are massive projects that have a footprint over thousands of square kilometres.

He echoed Bonds statement that it had been clear for the past two years that coal seam gas saw UCG as a competitor and was keen to get it out of Queensland, particularly the Surat Basin.

Walker said UCG had clear competitive advantages over coal seam gas, such as energy efficiency and vastly reduced land impact.

We have invested a lot of time and effort at Kingaroy and we are determined to pursue the project.

We will keep putting up rational arguments and explanations every time we get asked, but we are also hedging our bets by developing other projects in Western Australia, Victoria and even China.

In sharp contrast to Queenslands approach to UCG, the Primary Industries and Resources Department in South Australia has recently taken steps to form a public-private sector interest group to remove roadblocks for UCG and other unconventional energy players.

The group will identify infrastructure and technology needs to build export industries of unconventional gas, syngas and synfuels from South Australia.

Linc is rapidly advancing plans in South Australia for its first commercial UCG operation, based on a coal resource in the Walloway Basin, east of Port Augusta.

A UCG trial generator could be commissioned as early as the end of this year, based on the technology that Linc has laboured for years to prove at Chinchilla in Queensland.

This would be the first step towards a long-term goal of a 500-megawatt power station fuelled by syngas and even a gas-to-liquids plant producing 20,000 barrels of oil a day.

It would be sweet revenge for Linc and perhaps a sign of things to come from an industry that has been stifled in Queensland.