Chapter 1
Introduction
1.1
On 5 March 2015, the Senate, on the recommendation of the Selection of
Bills Committee, referred the Landholders' Right to Refuse (Gas and Coal) Bill
2015 to the Environment and Communications Legislation Committee for inquiry
and report.
1.2
The bill is a private senator's bill introduced by Senator Waters.
The bill proposes to:
-
make gas or coal mining activities undertaken by a constitutional
corporation without prior written authorisation from landholders unlawful; and
-
ban constitutional corporations from engaging in hydraulic
fracturing operations for coal seam gas (CSG), shale gas and tight gas.
1.3
Senator Waters has previously introduced bills in the 43rd and
44th Parliaments that sought to provide landholders with the right to
refuse the undertaking of gas and coal mining activities by corporations on certain
land. The previous bills were the:
-
Landholders' Right to Refuse (Coal Seam Gas) Bill 2011, which
lapsed at the end of the 43rd Parliament; and
-
Landholders' Right to Refuse (Gas and Coal) Bill 2013, which was
negatived at the second reading on 6 March 2014.
Conduct of the inquiry
1.4
The reporting date for the inquiry was initially 7 August 2015; however,
on 24 June 2015 the Senate granted an extension of time to report until 31
August 2015. The reporting date was subsequently further extended to 30
September 2015.
Submissions and correspondence
1.5
In accordance with its usual practice, the committee advertised the
inquiry on its website and wrote to relevant individuals and organisations
inviting submissions. The closing date for submissions was 29 May 2015. The
committee received 96 submissions, which are listed at Appendix 1. The
submissions may be accessed through the committee's website: www.aph.gov.au/senate_ec.
1.6
In addition to the published submissions, the committee received a
significant number of form letters and other correspondence that expressed
support for the bill. The committee agreed to publish an example of each type
of form letter as a submission. In total, 166 individuals provided a form
letter. The committee also received 115 emails that contained short statements
of support for the bill or discussed matters beyond the scope of this inquiry.
This correspondence was available to the committee throughout the inquiry,
however, the emails were not published as submissions.
Public hearings
1.7
Public hearings were held in Brisbane (on 27 July 2015), Canberra (on 28 July
2015 and 9 September 2015) and Tamworth (on 25 August 2015). A list of
witnesses who gave evidence at these hearings is at Appendix 2. The transcripts
of evidence may be accessed through the committee's website: www.aph.gov.au/senate_ec.
Acknowledgement
1.8
The committee thanks all of the organisations and individuals who
assisted the committee with the inquiry.
Consideration by other committees
1.9
When examining a bill or draft bill, the committee takes into account
any relevant comments published by the Senate Standing Committee for the
Scrutiny of Bills. The Scrutiny of Bills Committee assesses legislative
proposals against a set of accountability standards that focus on the effect of
proposed legislation on individual rights, liberties and obligations, and on
parliamentary propriety.
1.10
The bill was considered by the Scrutiny of Bills Committee in its Alert
Digest no. 3 of 2015. That committee had no comment on the bill.[1]
Scope of this inquiry and structure of this report
1.11
In undertaking this inquiry, the committee has given consideration to
the evidence received about coal and gas activities to the extent necessary to
understand what the bill seeks to achieve and the approach taken in drafting
the bill. However, the Senate has not asked the committee to conduct a
wide-ranging inquiry into issues associated with coal mining and onshore gas
extraction. Rather, the committee has examined a specific legislative proposal.
The committee's principal task is to formulate a recommendation to the Senate
as to whether this particular bill should be passed. Accordingly, this is not a
comprehensive report on various issues that are relevant to the extraction of
coal and gas. Many of the issues raised in submissions to this inquiry,
particularly those relating to the extraction of CSG, have been considered by
other inquiries. A non-exhaustive list of other inquiries is provided at
Appendix 3.
1.12
This report comprises four chapters:
-
The remaining paragraphs of this chapter provide an overview of
the resources that are relevant to the bill as well as a summary of the
provisions contained in the bill.
-
Chapter 2 outlines some of the evidence the committee received
regarding the experiences of individuals who live near coal mining and
unconventional gas operations, and highlights the various concerns put to the
committee about the effect of these industries. That chapter also provides
overviews of:
-
the property and mineral rights framework in Australia, to the
extent relevant to the bill;
-
the existing state-based frameworks that govern issues related to
land access and compensation; and
-
the current role of the Commonwealth in land access issues and
unconventional gas.
-
Chapter 3 considers the evidence that the committee received about
the overall approach taken and specific drafting used in the bill.
-
The committee's conclusion and recommendation is provided at
Chapter 4.
Coal and unconventional gas resources in Australia
1.13
As will be outlined later in this chapter, the bill would apply to coal,
CSG, shale gas and tight gas resources. The following paragraphs provide background
information on these resources and how those resources are extracted.
Coal mining
1.14
Coal is Australia's largest energy resource. Substantial amounts of
black coal are located in the Sydney Basin (New South Wales) and the Bowen
Basin (Queensland). Substantial amounts of brown coal are located in Victoria's
Gippsland Basin.[2]
Coal mining occurs throughout Australia (see Figure 1.1). The second edition of
the Australian Energy Resource Assessment, published in 2014, noted that
there 'is significant potential for further discoveries of coal in
Australia', with estimates that 'over one trillion tonnes of additional coal
resources could be present in more than 25 underexplored coal-bearing
sedimentary basins within Australia'.[3]
Figure 1.1: Australia's operating black and
brown coal mines, 2012
![Figure 1.1: Australia's operating black and brown coal mines, 2012](~/media/Committees/ec_ctte/Gas_and_Coal/c01_1.jpg)
Source: Geoscience Australia
and Bureau of Resources and Energy Economics, Australian Energy Resource
Assessment, second edition, 2014, p. 129.
Unconventional gas and fracking
1.15
Natural resources that are classified as 'unconventional' are those that
require 'greater than industry-standard levels of technology or investment to
exploit'.[4]
With respect to natural gas, unconventional resources include natural
gas found in coal beds (CSG), in shale (shale gas), low quality reservoirs
(tight gas), or as gas hydrates.[5]
1.16
Figure 1.2 indicates the location of Australia's CSG reserves and gas
infrastructure, whereas Figure 1.3 does the same for tight gas and shale gas
resources.
Figure 1.2: Location of Australia's coal
seam gas reserves and gas infrastructure
![Figure 1.2: Location of Australia's coal seam gas reserves and gas infrastructure](~/media/Committees/ec_ctte/Gas_and_Coal/c01_2.jpg)
Source: Geoscience Australia
and Bureau of Resources and Energy Economics, Australian Energy Resource
Assessment, second edition, 2014, p. 97.
Figure 1.3: Tight gas and shale gas resource locations
and gas infrastructure
![Figure 1.3: Tight gas and shale gas resource locations and gas infrastructure](~/media/Committees/ec_ctte/Gas_and_Coal/c01_3.jpg)
*
shows the locations of all shale and tight gas discoveries with reported
contingent resources.
Source: Geoscience Australia
and Bureau of Resources and Energy Economics, Australian Energy Resource
Assessment, second edition, 2014, p. 99.
1.17
CSG was first produced in Australia as part of a standalone project in
Queensland in 1996.[6]
In 2012–13, CSG production accounted for 12 per cent of Australia's total gas
production.[7]
Ninety per cent of all natural gas produced in Queensland is CSG.[8]
Shale gas and tight gas are largely in the exploration stage; for example,
the Queensland Government advised that 'exploration for shale and tight
gas in Queensland is in its infancy and no production of gas from these
formations has occurred to date'.[9]
In South Australia, where most potential shale gas resources are located, the
first shale gas well started commercial production in October 2012.[10]
1.18
Growth in CSG exploration and production has been encouraged by
government decisions; in 2000, the then Queensland government decided that
13 per cent of all power supplied to the state electricity grid would
be generated by gas by 2005. This requirement was subsequently increased to 15
per cent by 2010 and 18 per cent by 2020.[11]
1.19
Most CSG production, and expected growth in CSG production, is from the
Bowen–Surat basins in Queensland.[12]
Australia's CSG production is expected to increase significantly, as shown
by Figure 1.4.
Figure 1.4: Australian gas production
outlook by type
![Figure 1.4: Australian gas production outlook by type](~/media/Committees/ec_ctte/Gas_and_Coal/c01_4.jpg)
Department of Industry and
Science, Resources and Energy Quarterly, March 2015, www.industry.gov.au/industry/Office-of-the-Chief-Economist/Publications/Documents/req/REQ-March15.pdf
(accessed 29 April 2015), p. 66.
Hydraulic fracturing
1.20
The practice of hydraulic fracturing (commonly known as 'fracking', or 'fraccing')
is the most common method used by petroleum companies to increase production
from a CSG well.[13]
Hydraulic fracturing involves fluid being pumped into a well to cause fractures
in the surrounding rock, increasing the rate and total amount of the petroleum
resource extracted from reservoirs. In Australia, hydraulic fracturing is
used in approximately 20 to 40 per cent of CSG wells. Hydraulic
fracturing is used for 'wells that intersect lower permeability coal seams',
which 'are usually deeper seams'.[14]
However, hydraulic fracturing is required for all shale and tight gas wells.[15]
1.21
The fluid used for hydraulic fracturing operations consists of:
-
water (84 to 96 per cent of the fracking fluid);
-
proppant, such as sand (three to 15 per cent); and
-
added chemicals (about one per cent), which commonly include:
-
guar gum (a food thickening agent), which is used to create a gel
that transports sand through the fracture;
-
bactericides, such as sodium hypochlorite (pool chlorine) and
sodium hydroxide (used to make soap), which are used to prevent bacterial
growth that can contaminate gas and restrict gas flow;
-
'breakers', such as ammonium persulfate (which dissolve hydraulic
fracturing gels so that they can transmit water); and gas surfactants, such as
ethanol and the cleaning agent orange oil (which are used to increase fluid
recovery from the fracture); and
-
acids as alkalis 'acids and alkalis, such as acetic acid
(vinegar) and sodium carbonate (washing soda) to control the acid balance of
the hydraulic fracturing fluid'.[16]
1.22
The CSIRO provides the following explanation of how fracking is carried
out:
Typically, a well is fully cased from top to bottom with
steel casing. To gain access to the coal, the casing is perforated at
specific intervals along the well, where the fracture treatment is to be
carried out. Hydraulic fracturing typically involves injecting fluid made up of
water, sand and chemical additives under high pressure into the cased well. The
pressure caused by the injection typically creates a fracture in the coal seam
where the well is perforated. For a large CSG treatment, the fracture might
typically extend to a distance of 200 to 300 metres from the well. The fractures
grow slowly. For example, an average velocity may be less than 10 metres per
minute initially and slowing to less than one metre per minute at the end of
the treatment. The sand in the hydraulic fracturing fluid acts to keep the
fracture open after injection stops, and forms a conductive channel in the coal
through which the water and gas can travel back to the well. After the
fracturing is complete, most of the hydraulic fracturing fluid is, over time,
brought back to the surface and treated before being used again or disposed of.[17]
Overview of the bill
1.23
When reviewing proposed Commonwealth legislation, it is essential to
consider whether the clauses are supported by a constitutional power and
whether any constitutional prohibitions have been contravened. The bill and its
explanatory memorandum do not expressly state which of the constitutional heads
of power the bill is relying on. It is clear, however, that the bill relies on
the corporations power in paragraph 51(xx) of the Constitution, as the
prohibitions contained in the bill apply to constitutional corporations.[18]
Evidence received by the committee about the constitutional law matters
relevant to the bill is outlined in Chapter 3.
1.24
The remaining paragraphs in this chapter provide an overview of the key
clauses in the bill.
A right for
landholders to refuse entry to land
1.25
Part 2 of the bill addresses property rights issues associated with gas
or coal mining. Key definitions in this part of the bill are 'gas or coal' and
'gas or coal mining activity', which are defined as follows:
-
'gas or coal' includes coal, CSG, shale gas and tight gas; and
-
'gas or coal mining activity' including any activity undertaken
for the purpose of exploring for gas or coal, or mining or producing gas or
coal (including underground coal gasification).[19]
1.26
A constitutional corporation would commit an offence if it conducted gas
or coal mining activities, or entered or remained on land to do so, without
having an 'ownership interest'[20]
in the land or having the prior written authorisation of each person with an
ownership interest in the land.[21]
1.27
The prior authorisation must contain certain information including,
among other things, 'an independent assessment of the current and future risks
associated with the proposed gas or coal mining activity on, or affecting, the
land and any associated groundwater systems'.[22]
1.28
The bill specifies circumstances where the authorisation would be
invalid. These circumstances include where the corporation applies to a person
who has an ownership interest in the land and the corporation does not advise
the person of their right to refuse authorisation, or that they should seek
independent advice about the authorisation before signing.[23]
1.29
The offence would apply to relevant gas or coal mining activities that
occur on or after commencement (the day after Royal Assent).[24]
Penalty
1.30
The maximum penalty for a constitutional corporation that commits the
offence in subclause 10(1) would be 5,000 penalty units (at the time of
writing, the penalty would be $900,000).[25]
Further, a constitutional corporation that commits this offence is deemed to
have committed 'a separate offence in relation to each day (including a day of
conviction for the offence or any later day) during which the contravention
continues'.[26]
Remedies and costs
1.31
Clause 13 of the bill provides that, without limiting the relief that a
court may grant to a plaintiff, the relief may include an injunction or interim
injunction. Any costs incurred by the plaintiff in seeking relief in court
are to be paid by the defendant, regardless of the outcome. Exceptions are
provided if the action was instituted vexatiously or without reasonable cause,
or if the court considers it would be unreasonable, in all the circumstances,
to order that the defendant pay all costs.
'Unreasonable' refusal
1.32
The bill does not address the issue of a landholder 'unreasonably'
refusing access. In her second reading speech, however, Senator Waters stated
that the resources remain vested in the states and if the resources are needed,
the existing compulsory acquisition arrangements available to the Commonwealth
and state governments provide 'a sufficient safeguard against a landholder
"unreasonably" refusing access authorisation'.[27]
Ban on hydraulic fracturing
1.33
Part 3 of the bill would ban constitutional corporations from engaging
in hydraulic fracturing operations (clause 14). The maximum civil penalty for
contraventions of clause 14 would be 50,000 penalty units (at the time of
writing, this would equate to $9 million). The Environment Minister may
apply to the Federal Court on behalf of the Commonwealth for a civil penalty
order within six years of a contravention.[28]
The court may order a pecuniary penalty for each contravention.[29]
1.34
Where a person has engaged in or proposes to engage in conduct contrary
to clause 14, under clause 15 of the bill the Environment Minister, an
interested person, or a person acting on behalf of an unincorporated
organisation that is an interested person, may apply to the Federal Court for a
prohibitory, mandatory or interim injunction. An interested person includes
individuals and organisations:
-
whose interests have been, are or would be affected by the
conduct or proposed conduct; or
-
that have engaged in 'a series of activities for the protection
or conservation of, or research into, the environment' at any time during the
two years immediately before the conduct or, in the case of proposed conduct,
during the two years before making the application for an injunction (in the
case of organisations, the organisation's objects or purposes must also include
environmental protection, conservation or research).[30]
1.35
For an individual to qualify as an interested person, they must also be
an Australian citizen or ordinarily resident in Australia or an external
territory. For an organisation to be considered an interested person, they must
also be incorporated or otherwise established in Australia or an external
territory.[31]
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