Ian Townsend: Hello, welcome to Background Briefing. I'm Ian Townsend.
In the past few years, the world's biggest energy companies have forked out $20-billion for a stake in the natural gas locked up in coal seams beneath Queensland.
So much gas has now been found across the country that Australia's being compared with Russia and Qatar, as one of the world's biggest sources of natural gas, or methane. There's now a rush to sell this methane.
It's an economic bonanza, but it's pitting two of Australia's biggest industries against each other. The miners are after the gas, but the farmers say there's a more important resource at stake: water.
David Armstrong: One, two. We'll just try this PA system; we'll give everybody a couple of more minutes to come in a bit closer, the screen might make it a bit hard for some of you to hear.
Ian Townsend: At a rally on a farm on the Darling Downs last month, Michael Quinn held up a picture of what's become the farmers' number one enemy: the methane molecule.
Michael Quinn: I want youse to know what the biggest damage to your water is going to be. This is a methane molecule. I've been in constant contact with the Mines Department, the geologists and scientists behind all this coal-seam mining. Guess what this is? Toxic to your crops. You can put a gas detector on it....
Ian Townsend: He produced a bottle of water in which, he said, there was dissolved methane. A lot remains unknown about the effects of drilling gas wells, but the methane in the bottle, he said, proved that gas does mix with water and can pollute the farmers' bores.
Michael: Before it blows I shall remove the gas detector. They put wells all through here, your water is going to be infested in methane, ethane, nitrogen, heavy metals, fluorocarbons. I can assure you, your crops will not grow. At all. Once they do thousands of gas wells through here, don't use your water, don't drink the water.
Ian Townsend: The day before the rally, a safety officer from one of the gas companies did drink the water he'd also exposed to methane, to show how safe it was.
Peter Micciche: We're essentially to teach you a little bit about the safety of LFG ...
Ian Townsend: At a gas and oil conference in Brisbane, Peter Micciche, from ConocoPhillips, poured liquefied natural gas into a fish tank and then into a glass of water, and waited until it stopped vaporising.
Peter Micciche: So it may cool it down a little bit, and I'm comfortable enough that there's nothing remaining with this water that I don't mind drinking. And I used to just take a sip, and last time I was in Australia in October, a guy said, 'Well you take a sip; a bloke will take a sip of just about anything to prove a point', so I drink more of it now. And there's no flavour, it's a little cooler, you'll see ice in here with the fish.
Ian Townsend: But natural gas is leaving a bad taste in the mouths of farmers.
The big multi-national gas companies are sinking thousands of gas wells across the Darling Downs food bowl, which is now part of the 200,000 square kilometre Surat Energy Resource Province.
Representing some of the 2,000 to 3,000 farmers who'll have gas wells and pipelines on their properties is rural consultant, George Houen.
George Houen: Mining has always been an activity which directly affected only a small number of landholders at any single time, so there hasn't often been this kind of uprising before, because it was all about mining. Now suddenly you've got this enormous, tremendously increased level of activity and of intruding into properties on a scale never before seen. So suddenly there are hundreds and hundreds of landholders who have all got it happening, and that's why the concern is reaching such levels.
Ian Townsend: So the drillers are knocking on their doors, opening their gates?
George Houen: Yes, of course, and of course they are all in the big companies that are vying for LNG plants in Gladstone, have to get the gas, and so they're after wherever they've got their exploration, their authorities to prospect, then they're pouring enormous -
Ian Townsend: So the rush is on?
George Houen: Absolutely, yes indeed.
Ian Townsend: The rush is on because coal seam gas has to start making money, fast, to justify the billions of dollars invested in it.
The gas companies are aggressively trying to forward sell this gas around the world, and to do that they have to prove to buyers that it'll keep flowing in huge amounts for 10, 15 or 20 years. That means drilling thousands of exploratory wells, quickly.
The economic stakes are high, but so are the environmental ones.
Veteran environmental campaigner, Drew Hutton.
Drew Hutton: This is one of the biggest issues in the country today. It's not only an issue for farmers; it's not just simply about farmers are getting pushed around, getting a bit of a raw deal. The potential impacts on the Great Artesian Basin from this uncontrolled experiment that they're unleashing on the Darling Downs makes it one of the great environmental issues of our time.
Ian Townsend: The gas companies are disputing the links between their wells, the water in coal seams, and the water held in vast aquifers beneath the Darling Downs.
No-one quite knows yet how the aquifers might interact. The Queensland Government's working on a model of this underground water system, and wants to use it to make the gas companies produce 'groundwater impact reports'.
The Australian Petroleum Production and Exploration Association represents the gas companies. Its Queensland director is Matthew Paull.
Matthew Paull: We understand the concerns that landowners have and we will be open about the impacts, if any, that we're having on their aquifers. If there is an impact there are laws in place that companies need to make good, so that could be drilling them a new bore, providing them with another source of water, or paying compensation.
Ian Townsend: When we're talking about natural gas, we're talking about the gas in fields of petroleum, coal and shale now discovered right across the country, from Bass Strait to the North West Shelf.
It's mostly methane, and around the world methane's used in manufacturing, for cooking and heating, and to run buses and trucks. But mainly, it's being used for generating electricity.
If it escapes into the air, methane is a potent greenhouse gas, but when it's burnt, it ends up being much less polluting than either coal or oil.
When it's burnt to generate electricity, it emits about half the carbon dioxide of coal. As the world becomes more carbon conscious, natural gas is becoming the new coal, and in some cases, the new oil.
The head of oil and gas for consultant Deloitte and Touche is Adi Karev.
Adi Karev: It is cheaper, right now, it is cleaner and once you've liquefied the natural gas, in theory you can move it as you would liquid oil. So it represents a cleaner balance, cheaper, and more manageable than to oil.
Ian Townsend: But driving the global sales of natural gas is the soaring demand everywhere for more electricity.
Industrialised countries are chewing up the power at a phenomenal rate. During the economic crisis last year, the world's stimulus packages encouraged people to buy electrical appliances. Australians spent a lot of that money on TVs and whitegoods.
Energy analyst, Dr Liam Wagner.
Liam Wagner: Well, everyone is trying to buy a bigger TV. Everyone tries to buy the biggest house they can have with the biggest TV in that house, and our electricity consumption is growing very, very rapidly on the evening peak. And so we're going to have to invest more in distribution infrastructure and transmission infrastructure and peaking gas-fired generation to deal with that evening peak of use.
Ian Townsend: That evening peak is the reason power bills have been soaring lately. The average household quarterly bill has more than doubled in the past 10 years, even though the wholesale price of electricity, the price power stations charge before sending it out in the grid, has fallen.
We're using more power. In fact, 39 percent more power than we did a decade ago. And at the peak, just after six in the evening, we're using twice as much as we did 10 years ago.
It's forced power companies to upgrade the poles and wires so the grid doesn't have a melt-down when everyone comes home and switches everything on. Nearly half of our power bill is being spent shoring up the grid just to handle the peak.
And increasingly, the peak is being met by power stations burning natural gas.
People living in south-east Queensland are among the biggest consumers of power in the country.
Jessica Coonan recently moved to the town of Beaudesert, south of Brisbane.
Jessica Coonan: The end bill that sort of sent me into shock was just over $800 for a quarter and we'd come from bills initially when we moved up here, of about $500, so to go so high so quick, I was just gobsmacked, I guess.
Ian Townsend: Jessica's could be described as a typical family home.
Jessica Coonan: All right, I'll show you through. So this is our first big TV.
Ian Townsend: A plasma?
Jessica Coonan: Flat screen plasma. The kitchen, I've got an electric oven with a gas cook-top, microwaves, kettles, coffee machines, toasters, dishwasher and you know, your pigeon pair fridge and freezer. My children tend to - my eldest daughter's got iPods and DS stations in this bedroom; we've got another television and laptops in bedrooms. Yes, Play Stations, so this is the kids' toy room, so we've got another flat screen plasma, a bit bigger than the other one, and Wii digital box, air-conditioning in both ends of the house, so down reverse cycle in the other end. I run two washing machines and a dryer, and a swimming pool, so we have lots of things that all use power.
Ian Townsend: Last year, Jessica Coonan joined a Queensland scheme called Climate Smart, where the government gave her a small wireless monitor that sits on a kitchen bench and tells her how much power she's using, as she uses it, in cents per hour.
Jessica Coonan: In the middle of summer we had sort of one day I was here and all of a sudden there was this noise and we were all, what's the noise? And we were all looking around and it was this beeping noise; we'd hit the monitor to $3 an hour and I'd never done that before so it was beeping frantically to tell me that we were using all this power and what I found was I had the oven going, the dishwasher, the air conditioner, TVs, probably the pool and we'd gone to $3 an hour, so it sort of let us know and we all sort of everyone in the house, it was like a group discussion. What can we turn off now, because it wouldn't stop beeping? So we did, we turned the swimming pool off and finished cooking dinner. But it was very interesting for all of us sort of to know, jeepers, look at what we're using.
Ian Townsend: If you could trace Jessica Coonan's electricity back down the powerlines, you'd find that most of it was produced by the turbines at the Swanbank Power Station, about 50 kilometres north of Beaudesert.
Alistair Brown: ... here it's all really to do with getting the steam out of the condenser. Once the steam goes through the steam turbine...
Ian Townsend: Swanbank is the oldest coal-fired power station in Queensland, but a few years ago it installed a gas turbine. The old coal power station is now being dismantled, to be replaced by a second gas turbine.
The project's called Swanbank F, and to build it the owner, CS Energy, needs amongst other things, a contract from a gas company that guarantees a gas supply for 15 years. The power station's manager, Alistair Brown, says he can't find anyone to sell him a 15 year contract.
Alistair Brown: In fact we've got a project, Swanbank F, and you can see the brochures here. That's how far down the track we are; that's the project, it's ready to go to market. We just cannot get the gas supplied for a 15 year contract.
Ian Townsend: Are they all holding on for export?
Alistair Brown: LNG yes.
Ian Townsend: The gas companies are holding on for the export market, he says, for Liquid Natural Gas, LNG.
The gas in coal seams is a potentially huge export commodity. There's a feeling that the gas companies want foreign contracts first, and that the gas is being held back until big new LNG exporting plants are built.
Last year, the Queensland Government considered quarantining some of the gas for the local market, but decided not to.
The Australian Petroleum Association's Matthew Paull.
Matthew Paull: What they did do is set up a process where they are going to appoint a Gas Commissioner. They are undertaking the first annual assessment of Queensland's gas market and what that assessment will look at is the functioning of the market. Is there enough supply, is there enough capacity in pipelines, are there any issues with people not being able to get gas and does that justify government intervention? So I think we've got a very good process there to manage those sorts of issues.
Ian Townsend: There's a process in place where some gas could be quarantined for the domestic market even if there's an enormous demand from overseas?
Matthew Paull: Well, we'd consider that to be a big step but the Queensland Government certainly has that option.
Ian Townsend: Matthew Paull is saying that the gas companies would prefer the market to decide who gets the gas, not the government.
But this coal seam gas bonanza has come along at just the right time for Australia's own electricity market. It's cleaner than coal and it's the quickest and cheapest way of meeting that grown in peak demand. You can switch a gas turbine on and off, and you can't do that with coal.
Stephen Robertson: I might do a short statement ...
Ian Townsend: A few weeks ago in Brisbane, the Queensland Minister for Natural Resources, Mines and Energy, Stephen Robertson, called a press conference to announce another steep rise in power bills.
Stephen Robertson: OK, right? As you all know, today the independent Queensland Competition Authority handed down its final decision on electricity prices for 2010-2011. The decision by the QCA to increase electricity prices by 13.29 percent is disappointing.
Ian Townsend: This price rise is again being blamed on our love affair with energy-hungry appliances.
Stephen Robertson: Over the last five years we've invested some $10 billion to bring our electricity infrastructure back to an appropriate level of resilience, that's why we don't see blackouts and brownouts anymore. But what we are seeing over the next five years is another $15 billion to be invested in our electricity network and that is about meeting increasing demand.
Ian Townsend: That's $15 billion on poles and wires in Queensland in the next five years. New South Wales is spending a similar amount, so in those two states alone it's going to cost more than $100 million a week to fix up the grid, mainly for peak power.
Stephen Robertson: We also have a policy in place that if the next electricity generator was to be coal, it would have to come with carbon capture and storage capabilities. So as a result of that policy it is more than likely that the next generator will in fact be gas-fired.
Ian Townsend: The Queensland Energy Minister is saying there that facing a choice between coal and gas for any new power station, Queensland will opt for gas.
The reason is that if and when an emissions trading scheme comes in after 2013, and a price is put on carbon, then it will be cheaper to make electricity from gas than coal.
Energy analyst, Liam Wagner.
Liam Wagner: Once we do get a price of carbon or a certainty on the price of carbon, then we'll start to see more of the natural gas-fired generation being installed, so more investment in those types of technologies, and you'll see that for instance the government-owned corporations that generate electricity in Queensland, they will start to retire some of their older and dirtier power stations, because they will become less competitive in the national market.
Ian Townsend: And that's already happening, as we heard earlier, at the Swanbank power station west of Brisbane.
Swanbank video: Welcome to Swanbank Power Station. Swanbank Power Station is a vital part of CS Energy's expansive power portfolio.
Ian Townsend: Swanbank is owned by CS Energy, a Queensland Government-owned corporation. Here, what's called a combined cycle generator burns the gas to turn a turbine. The left-over heat creates steam that's sent to turn another turbine. These turbines are like jet engines, but they run 24 hours a day.
Alistair Brown: Very much like an F1-11, very noisy. The gas turbine itself has got its own little house which is thickly insulated, and keeps the noise down out here to a reasonable level.
Ian Townsend: Until renewable sources of energy such as the wind, or the sun, can reliably supply more of the market, this is what most new power stations are going to look like. Swanbank manager, Alistair Brown.
Alistair Brown: Yes, the fuel's a little bit more expensive, but in terms of CO2 the gas is half as CO2-generated I guess, so from that point of view it's much more efficient, and it's also about a quarter of the water. So half the CO2 and a quarter the water being used in the gas plant.
Ian Townsend: This power station's part of the grid and a computer screen shows the national spot price for electricity. It changes every five minutes, depending on demand, but at six in the evening, demand suddenly spikes, and so does the price.
Alistair Brown: It's really a supply and demand, so if there's a lot of generation on the system, not much demand, the price will be low. If the demand is high and some of the generators have had trouble and fallen off for whatever reason, and demand is getting tight, then that price will rise and it can rise from $20, $10 on any normal day, right up to as high as $10,000. And it does.
Ian Townsend: $10,000? From $20?
Alistair Brown: Yes, that's the capping price, if you like, in the market.
Ian Townsend: Most of us are insulated from these heart-stopping fluctuations in the electricity price because we have contracts with electricity retailers. We pay a fixed price, but one way or another we do end up paying for this peak in our ever-rising power bills.
It's a bit like insurance. We're covered, but if there's a big flood or fire, everyone's premiums go up.
It's really only a few hours of the year that the spot price for power reaches that $10,000 a megawatt hour. That happens on the heatwave days, when everyone in south eastern Australia has their air conditioners running at the same time.
That's what happened early last year, when there was a heatwave just before the Black Saturday bushfires.
The World Today (Simon Santo): For millions of South Australians and Victorians, it's been a week of record-breaking temperatures. The thermometer has been up and over 40 degrees during the day and at night there's been precious little relief from the heatwave. For some Adelaide residents it's been a case of sundown, and lights and appliances out, as the mercury stays stubbornly in the 30s.
Woman: Well, our power went off about 5.30 on Wednesday evening, and it's just come back on again at 5am this morning. So I'm now sitting in a nice comfortable, air-conditioned lunge on the same chair I've been sitting on for the last two days with my feet up.
The World Today (Simon Santo): The national energy grid is under strain as it struggles to cope under the load of air-conditioners and increased power demand.
Ian Townsend: The grid in South Australia and Victoria needed all the spare power it could get, and that's where new gas-fired power stations can kick in, to push more power into the grid when it's needed. This is why a number of peaking plants, small power stations that kick in at those peak times of the day, have been built in the gas fields on the Darling Downs.
But most of the gas in Queensland is being earmarked for export, and some very big foreign companies are now calling the shots.
The Malaysian petroleum company Petronas has a deal with Santos; BG, British Gas, now owns the Queensland Gas Company; ConocoPhillips has half of Origin's coal seam gas, and PetroChina and Shell are taking over Arrow Energy.
There are several big LNG plants on the books for the Queensland coast, but none has been finalised, and just one has locked in a long-term contract to sell Liquid Natural Gas, LNG, to the Chinese.
It's a different story in Western Australia, where LNG's been exported for a decade. There, the gas comes from conventional oilfields offshore. Chevron, ExxonMobil and Shell are spending $43-billion on the country's biggest project, the Gorgon LNG plant. Most of that gas has already been sold.
Two years ago, Background Briefing asked Geoscience Australia why we seem to have a lot of gas, but not that much oil.
This is what senior petroleum advisor Marita Bradshaw said back then.
Marita Bradshaw: Really for excellent oil source rocks, you really need a lot of marine sediments, and the last time we had big seaways over the top of Australia was more than 100 million years ago. And we've got some nice marine source rocks deposited then, but they never got buried deep enough to cook up; they're still sort of sitting out there uncooked, and we're really very much relying on what's on the margin, so we've got to go offshore to really find the oil and gas in Australia, unless we look for the really old rocks where the risks are inherently higher; that's mostly what we've got onshore. And the other thing is, a lot of our organic matter, we see a lot of contributions from land plants, which pushes us towards being gas-prone, rather than oil-prone.
Ian Townsend: The international measure of natural gas is in trillions of cubic feet. To give you an idea, Australia currently uses about one trillion cubic feet of gas a year.
If we wanted to use it all for ourselves, then the Gorgon gas field alone would last us 40 years.
There's enough gas in all proven fields offshore to last the country 164 years, and there's probably another 200 years worth of methane in the coal seams beneath New South Wales and Queensland.
But really, we have no idea exactly how much we're sitting on. And the gas discoveries keep coming.
In South Australia, Beach Energy has been looking for gas in shale.
The company's managing director is Reg Nelson.
Reg Nelson: We've moved onto what I think is the next big thing, and if anyone has followed what's happened in the US in the last ten years, but in the last three in particular, shale gas is the big thing. It's set to overtake coal-seam gas in the US; it has less of the problems of water disposal and there's much stronger production per well.
Ian Townsend: The amount of gas locked away in shale seems to be enormous.
Reg Nelson: We believe in the Cooper Basin and the area we are looking at, we have something like 200-plus trillion cubic feet of gas. To put that in context, that is the equivalent of the combined coal-seam gas of Queensland and New South Wales.
Ian Townsend: The gas seems to be everywhere, and Australia has much more than it needs.
To export natural gas from Australia, you have to put it on a ship, and that means turning it into a liquid. It's chilled to minus 160-degrees Celsius, which reduces a basketball of gas to a ping-pong ball of liquid. Once it's liquid, or LNG, it can be poured into big containers on special ships and sent overseas.
More gas is being found around the world, but Australia seems to have won the gas lottery.
Qatar in the Middle East is the world's largest exporter of LNG, but Australia's catching up and both countries are now competing for markets in Asia.
The biggest are South Korea and Japan. Everyone knows how big an influence China is becoming, but at the moment, China doesn't import much LNG. But that is changing.
Adi Karev is an oil and gas analyst based in New York.
Adi Karev: Australia is certainly an area that everyone is understanding has a potential for being a global player in terms of size, but supplying mainly Asia.
Ian Townsend: Are the Asian countries tooling up for LNG?
Adi Karev: China is tooling up, absolutely China is tooling up for a higher degree and intensity of LNG and gas trade.
Ian Townsend: China's building half a dozen plants along its coast, ready to start receiving liquid natural gas.
The question is; how closely will Australia's LNG future now be linked to China?
Adi Karev: It's an interesting question because I think that it's not just Australia needs China, it's China needs Australia. If you look at the balancing mix of increasing the amount of gas in their portfolio from four percent to 10 percent by 2020, to a very large degree that depends on the ability to get into counter-party agreements with stable close proximity, predictable supply-capable countries, and companies. And Australia represents that.
Ian Townsend: Global oil and gas analyst, Adi Karev.
This is Background Briefing on Radio National, and we're talking about the new gas rush in south east Queensland, which is creating tension between two critical industries: exploration and farming.
In the 2008-2009 financial year, Australia exported about 16 million tonnes of LNG worth about $10 billion.
The Reserve Bank last year talked about LNG exports tripling or quadrupling in the next five years, to around 50 million tonnes. That means the gas industry will be two-and-a-half percent of the economy, rivalling coal and iron ore as the country's biggest export commodity.
Last month, Australia's oil and gas industry held its annual conference in Brisbane. Much of the talk was about gas, rather than oil. And whether the resource super profits tax would make foreign investors re-think new gas projects.
But it was their environmental credentials that all companies really wanted to talk about.
A company that supplies equipment for the oil and gas industry brought along two saltwater crocodiles.
Man: Yes, it's a baby, oh, isn't that cute? Oh, that's my hand, so it's a - I'm due for another coffee. Yes, no, okay I will.
Ian Townsend: Andrew Steele works for Darwin-based company, Shorelands.
Andrew Steele: We thought what a novel idea, is to bring them down here to Queensland and just introduce some of these people to some locals from the Darwin region.
Ian Townsend: Is the conservation issue an important part of your message?
Andrew Steele: It is. Shorelands prides itself on the fact that it's carbon neutral. We tend to buy trees whenever we buy new equipment. Now we've just acquired four new trucks which are all carbon neutral. So the environment is a fairly big part in the way we go to business.
Ian Townsend: Also at the conference, an employee from the big gas company, ConocoPhillips, was handing out postcards embedded with seeds.
Man: Yes, you can sort of see the seeds are embedded in the postcard.
Ian Townsend: Soak the postcard in water, put it in the ground, and it grows into a bottlebrush tree.
Man: It's just really an opportunity to talk a little bit about how ConocoPhillips works as a sustainable business, but it's just a neat piece of communication using real seeds to create a plant. So instead of something that's going to create an impact on the environment, it's actually going to turn into a positive for the environment.
Ian Townsend: At the same time the conference was on in Brisbane, about 200 kilometres west, on the Darling Downs, farmers were meeting in a ploughed cornfield, and they were talking about the environment, too.
Farmer Ian Hayllor, from Dalby.
Ian Hayllor: I think the coal seam gas companies are where we were 100 years ago; come in, rape and pillage, grab what you can and leave. And we're not going to let them do that. They're going to have to be sustainable. If they want to work in our environment, they've got to be sustainable. They can come in, take the gas, but they're not going to destroy the environment they're working in. If they can leave it the way they found it, we'll accept them onto our properties.
Ian Townsend: The talk at the rally was of barricading properties to stop the gas companies drilling more wells, until they could prove that they were doing no harm to the environment.
Man: We understand that they have the legislative authority to come on here and physically do this. But what they don't have is the community acceptance.
Man: Hell, no!
Man: And we're not about to give them that until they come up with a whole lot more answers.
Ian Townsend: The rally was being held at Cecil Plains, a part of the Darling Downs where the soil's deep and black; some of the best farmland in the country.
Beneath it is the Great Artesian Basin and seams of Jurassic-age coal that happen to be full of methane.
To release the gas, the coal has to be fractured and the water that's in it, pumped to the surface. That water is salty and for the time being it's dumped, by the millions of litres, in large evaporation ponds.
The farmers are worried that fresh water from their bores will pour into the coal seams, lowering the water level. Or that the chemicals in the coal, when it's fractured, will poison their water or leach into the Great Artesian Basin.
Speaker: So, at the end of the day, we may not have the law on our side, but I've been saying that when it comes down to it, if all else fails, we will physically keep them off. And I think that is probably our only option.
Man: Hit the road, Arrow, and don't you come back no more, no more. Hit the road, Arrow!
Ian Townsend: Arrow Energy is the gas company that's drilling in this part of the Darling Downs, and Arrow happens to be the subject of a big takeover bid by PetroChina and Shell.
Arrow has declined to comment, but the lobby group representing the gas companies says stopping the drilling now would help no-one.
The Australian Petroleum Association's Queensland director is Matthew Paull.
Matthew Paull: We need a future where agriculture can thrive and the CSG industry can thrive. There are some concerned landholders absolutely. What we need to do is explain how we're doing business, what the industry is about, and in the experience of our member companies, when there is that full understanding of what is actually being proposed, landholders are generally a lot more comfortable than they may have started.
Ian Townsend: A lot of farmers are far from comfortable with the answers they've been given.
At the rally was Scott Collins, who has a small block of land at Tara, about 60 kilometres west of Cecil Plains.
Scott Collins: Now, you've got thousands of people in a small area with all these wells running, 10 to 15 at a time, the noise is just going to be unbelievable. And they want to build walls around our property. Who moved out to the bush to have a six-metre steel wall with a bit of foam shoved in it? Unbelievable. You know, we will be prisoners in our own home, because they want to give us air-conditioning and tint our windows, and think, well, you won't hear a thing then, because you've got tinted windows. So, the way QGC have just come onto the estates, we didn't know nothing about it, the first thing we knew about it was all of a sudden we could hear the drilling. So they're leaking, I don't care what the government says, I don't care what QGC say, those gas mines are leaking. Now if we get a bushfire, that will turn into an inferno. You've got gas pipes running everywhere, you've got wells leaking, you've got thousands of people, it's just a disgrace, it's a disaster waiting to happen. Thank you.
Ian Townsend: The Queensland Government's ordered gas companies to check every well to make sure they're not leaking.
The farm on which this rally was held is owned by the Armstrong family. With water, these fields can grow just about anything: corn or cotton, wheat or sorghum. But with each gas well comes an access road and pipes, cutting across these carefully cultivated fields.
The farmers can't stop the exploration by law, because they actually don't own the gas underneath their farms.
Ruth Armstrong says a gas company came to her door two months earlier, and said it was going to drill six exploratory wells on her property.
Ruth Armstrong: This farming sort of type in particular is very susceptible to these proposed activities. And it's not just about us and our farm, it's about our community and it's going to be affected as well. And even on a bigger scale, it's about all of us, all Queenslanders and all Australians, because we grow food here, and there isn't anywhere else where we can go to grow food. This is it. And we can't afford to waste it.
Ian Townsend: There may be scores of gas wells put onto this farm eventually. The rumbling of the gas drilling rigs across the Darling Downs seems unstoppable at the moment.
As we heard earlier in the program, the main reason the gas companies are moving so fast, is that they need to 'prove' their gas reserves quickly, so they can sell the gas, even before it's brought to the surface.
Back in Brisbane, at the University of Queensland, is energy analyst, Dr Liam Wagner.
Liam Wagner: Natural-gas companies, to prove that they have the reserves, need to go out and spike wells so that they can show the flow of that gas, and that they can go on to bank a LNG train to get the gas to Gladstone to then export. So one of the things that's been happening is to show this bankability of a project and viability, is that they need to be able to sell that gas and to show that it's true 1P reserve. And selling it to electricity generators is a prime way of showing that you have a lot of supply where you can push it into a market and get revenue from that.
Ian Townsend: There are several small gas power stations on the Darling Downs that are using this gas, and they've been built to supply that peak demand for electricity.
The power industry, though, is still holding its breath for a price on carbon before spending its money on big, more efficient 24-hour a day gas power stations.
A carbon price is likely to make coal, the main fuel for electricity at the moment, more expensive than gas.
Coal has been so cheap for so long, that until recently no-one was too worried that most of the energy power stations generate, is wasted.
Liam Wagner is showing me a graph of the relative efficiencies of different power stations, black coal, brown coal, and gas.
Liam Wagner: You know, black coal-fired power stations are a glorified kettle, and they're not very efficient. And the main benefit with natural gas is that burning that fuel source is far more efficient over time.
Ian Townsend: So you've got here on your table, 68.4 percent of energy is wasted?
Liam Wagner: Essentially, yes.
Ian Townsend: More than two-thirds of it is wasted?
Liam Wagner: In the centralised electricity generation in Australia, more than two-thirds of energy is wasted in some way along the supply chain.
Ian Townsend: When we burn coal, most of the energy goes up in smoke, literally. The problem's compounded when the power is pushed out onto the grid.
There's a big effort at the moment, to make the grid work better. $100 million is being spent on a so-called 'smart grid' project in Newcastle, and there's also what's called 'distributed generation', where small power stations are put closer to where the power's needed, to stop that waste.
Already, micro generators the size of washing machines are being installed in homes in Victoria, in a trial to see if it's worth generating electricity straight out of the gas main.
Liam Wagner: Solar photovoltaics, micro-wind, small diesel gen-sets, even though they have a higher emissions intensity, you're not relying on pushing energy from in the middle of nowhere via transmission lines and a distribution network, to the demand centre. You're generating it on site, so you don't have those resistant line losses across the network.
Ian Townsend: It sounds great and it will save money, but it's likely our power bills are going to keep climbing anyway.
Liam Wagner: I think in the long run, electricity prices are going to go up, and that's something that's very concerning. The impact of carbon trading on electricity price is almost insignificant when you take into account demand growth on the peak and having to put in an inordinate amount of money into enforcing distribution networks so that they can deal with this few hours a year.
Ian Townsend: Earlier in the program we met Jessica Coonan from the town of Beaudesert, south of Brisbane. She's been taking part in a Queensland government scheme called Climate Smart. 176,000 people have signed up to it so far.
For $50, an electrician comes to your home and gives you a wireless monitor. Flick on a light switch or the oven, and you can see what it's costing in cents per hour.
Jessica Coonan watches the price rise as she turns on her TV.
Jessica Coonan: I've turned that on. This TV costs about four-cents an hour, to run once it's up and going. So we've gone to 7.1, so that's about four-cents for that. The other one that I always find amazing is the oven. I say now it's actually cheaper sometimes to buy your chicken at Coles, because by the time you roast it in the electric oven for two hours, it takes it right up. So that's just put 45 cents on.
Ian Townsend: 45 cents?
Jessica Coonan: To turn the oven on. So two hours, you're adding an extra 90 cents to a roast chook that you've pretty much, you think, 'Oh, I'm saving the money', but are you saving the money?
Ian Townsend: Despite all these attempts to save money, there are hidden costs whenever we turn on the oven.
On the Darling Downs, the concern is that the cost in lost agriculture might be too high a price to pay for this gas.
Here's landholder Michael Quinn again, addressing that farm rally at Cecil Plains.
Michael Quinn: What they're doing and what they're playing with will definitely impact everyone here, I'd imagine, unless you're a QGC worker.
Man: Fly in, fly out.
Michael Quinn: So I think you've got to start doing research and start finding out real answers, and I wonder what they're going to tell you in 10 years, when everything's going belly-up? They'll be in the Bahamas.
Ian Townsend: The drilling for gas is turning into a PR disaster for the gas companies. Also at the Cecil Plains rally was farm consultant, George Houen.
George Houen: In my 20 years as a consultant, I've seen where mining companies right at the low end of the scale in terms of the way they interact with the landholders, come to a realisation that it can be done a lot better, and become the best in the business. And it is all about approaching it on a fair basis, being prepared to meet the landholder at least half-way, at the point where today we've got big coal companies that are the pits, in terms of their treatment of landholders, and at the top end of the scale, where there is never so much as a cross word or an argument, and every single time they need to expand, they're able to do it in co-operation with the affected landholders, so that everybody is happy.
Ian Townsend: George Houen.
The gas companies admit they've had problems dealing with so many farmers, over such a big area.
The managing director of Origin Energy is Grant King.
Grant King: There's always a new community that hasn't yet experienced working with the companies in the coal seam gas sector, and that's a constant challenge for the industry to work with those communities and try and make sure we can continue what I think has generally been an effective working partnership. But we do recognise that growth brings with it its challenges, and there'll always be if you like, a frontier that's having its first experience with the industry and may well have very genuine concerns, and those concerns would need to be addressed.
Ian Townsend: A lot of the concerns are about things that are unknown. Does gas drilling damage the water table? How long is this gas boom going to last? Will the farms be viable if there are hundreds of gas wells on them? The gas companies do pay farmers compensation for every well drilled, but the farmers don't have a choice. If a gas company wants to drill a well, the farmers can't legally stop it.
From the gas industry, Matthew Paull.
Matthew Paull: What we have is a big new industry, significantly sized new industry, that's coming in to operate where farmers may have been for generations, so that's a fairly significant change, and I think with that in mind, some friction is understandable. But we certainly take our social licence to operate very seriously. I think without the community support in the long term, it's going to be difficult for this industry to operate.
Ian Townsend: But this fight over gas is becoming political.
During the rally at Cecil Plains, signs saying 'No Gas on our farms', mingled with other signs saying, 'Vote Green'.
Farmers and the Greens have been fighting for years in this area, over issues such as water use and tree clearing. Now, they're forming an alliance.
From Dalby, Ian Hayllor.
Ian Hayllor: We've had our differences in the past, but like I said, agriculture is becoming much more sustainable. Working with the Green movement or the environmentalists in this, is the right thing; we're here to protect the environment, and we have the same goals, to have Australia available for future generations.
Ian Townsend: The Greens are a political party. Are you considering a political change?
Ian Hayllor: No. Well, I don't know. If we were a marginal seat, we'd get a lot more respect from the government. Who knows? I mean, if they come up with the right policies and are prepared to really back the sustainability of this area, ensure it's got a future, ensure it's there for our children, maybe we will start looking at backing the Greens, because at the moment we're not getting heard too well by the existing parties.
Ian Townsend: Natural gas might be set to become of the country's most valuable exports, but it's starting to get a bad name.
The safely officer for the gas company, ConocoPhillips, Peter Micciche, is also the manager of a big Liquid Natural Gas plant in Alaska. He's been touring Australia, trying to persuade people that natural gas, and especially the big LNG plants being built, are safe.
At the petroleum conference in Brisbane last month, he dipped a cracker into liquid natural gas and then ate it.
Peter Micciche: So I'm going to take - eat half the cracker and slowly exhale. Go ahead, you'll taste a little tiny bit of a gaseous flavour, actually it's more of an aroma, there's nothing left in the cracker but you'll see that it's just a colder cracker.
You know, as you saw here today, you remove the lid and vapours come off of it, and it's like witches' brew for people. They were afraid of electricity. If you look at the history of electricity, there was a lot of fear about electricity. And you think about electricity, we send it to the homes of people. If a young child puts a paper clip, bad things happen, but we've learned how to use it safely and effectively. Same thing with natural gas. And the reality of it is in Australia, you look at the future of your industry and for next several generations, it becomes more important that they learn about a product that you'll be exporting for a very long time.
Ian Townsend: Peter Micciche.
What the farmers want is some guarantee that their farms will also be in business for a very long time.
George Houen: People have to realise that we're sitting on probably one of the greatest energy provinces n the world, and between the coal and the coal-seam gas, we have a resource here which is obviously going to be exploited for its value to the country, and we have to manage that. The population is going to be hugely increased, and a heck of a lot is going to change. In 20 years' time, you'll come back to southern inland Queensland; it'll be so different to what it is today. So we've got to manage that, and it's a challenge, and that's what we need to get stuck into.
Ian Townsend: Background Briefing's co-ordinating producer is Linda McGinness. Technical production, Phil McKellar. Research by Anna Whitfeld. The executive producer is Chris Bullock.
I'm Ian Townsend and this is ABC Radio National.
Further InformationWestern Downs Alliance
Australian Petroleum Production and Exploration Association
Swanbank Power Station
Basin Sustainability Alliance
BP World Energy Review 2010
Australian Energy Market
Australia Bureau of Agricultural and Resource Economics commodity analysis
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