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Environment and Communications Legislation Committee - 28/07/2015 - Landholders’ Right to Refuse (Gas and Coal) Bill 2013

PAULL, Mr Matthew, Policy Director, Queensland, Australian Petroleum Production and Exploration Association

WILKINSON, Mr Rick, Chief Technical Officer, Australian Petroleum Production and Exploration Association

[14:45]

CHAIR: Welcome. Information on parliamentary privilege and the protection of witnesses and evidence has been provided to you.

Mr Wilkinson : For the purposes of the Hansard, I would like to declare that I am a gas fields commissioner from Queensland, but I do not appear on that behalf.

CHAIR: Thank you. Before we proceed to questions, is there anything else you would like to add in addition to the submission that we have already received from your organisation?

Mr Wilkinson : I do have some opening remarks. The Australian Petroleum Production and Exploration Association welcomes the opportunity to appear before the committee today. Matthew Paull and I have many years of direct experience of the operation of the gas industry in a number of overseas and Australian jurisdictions. APPEA is the peak national body that represents companies engaged in petroleum exploration and production operations in Australia. Our members produce around 98 per cent of Australia's oil and gas. In Australia, the people of Australia, through the state governments, own the natural resources. How, when and who develops the resource is a government decision. Australians rightly expect that the governments adopt a sensible and science based approach to resource development and that this should deliver benefits to Australians. Such an approach is a key reason why, by the end of the decade, the oil and gas industry's contribution to the national GDP is expected to be more than $55 billion per year, while taxes and royalties paid to governments are expected to exceed $13 billion per year. The current phase of investment in the gas industry has seen the reinvigoration of many rural towns and communities across Australia with the building and funding of vital infrastructure. Whether it be through the expansion of airline services to remote communities, the funding of roads and emergency services or the supply of energy, the industry has brought many benefits to everyday Australians.

As stated in our submission, the industry does not support the bill. In our view, there is simply no justification for the Commonwealth government to override the existing power of state and territory governments to regulate access to resources that belong to them. Not only is it questionable whether this would be constitutional; it would also overturn a system that has served Australia well over many decades, if not centuries. APPEA strongly supports policies that foster coexistence and mutual benefit. There is ample evidence showing that regional businesses, agriculture and the gas industry can and do coexist through responsible cooperation and a spirit of goodwill. In Queensland alone, the industry has negotiated over 4,700 landholder access agreements. Queensland has established a new world-class gas export industry that successfully coexists with agriculture on some of the best farming land in the country. The Department of Agriculture and Fisheries' last forecast shows that the total value of Queensland's primary agricultural commodities for 2014-15 will be three per cent greater than the average for the past five years. This is in a state with more than 6,700 coal-seam gas wells operating and the start-up of the LNG export projects.

Support for Queensland's CSG industry is growing in the community it operates in as the locals see firsthand the standards the industry adheres to and the regional benefits it brings. Yet, like other states, Queensland does not have a landholder unfettered right of veto; nor does the state grant industry an unfettered right of access. The CSG industry in Queensland has instead been established without recourse to either of these extremes—clear evidence that the bill before the committee is not necessary. What is necessary is that all stakeholders engage constructively to build relationships based on genuine trust, science, goodwill and community engagement. This has been the key to the success of the Queensland CSG industry and it should continue to be the focus of responsible government, rather than the blunt, one-size-fits-all approach proposed by this bill.

Turning to the bill's proposal to ban hydraulic fracturing, APPEA submits that this clearly ignores extensive scientific evidence that hydraulic fracturing represents no greater risk to the environment or individuals than other industrial and agricultural processes. The Australian government, every state and the Northern Territory have undertaken or are currently undertaking reviews of unconventional gas, hydraulic fracturing or both. There is a clear message from these reviews: with a robust regulatory regime in place, the environmental risks associated with onshore gas operations, including hydraulic fracturing, can be managed effectively. For example, the inquiry into hydraulic fracturing in the Northern Territory—which was led by Dr Allan Hawke AC and completed in November 2014—found:

The substantive weight of agreed expert opinion leads the Inquiry to find that there is no justification whatsoever for the imposition of a moratorium of hydraulic fracturing in the Northern Territory.

The independent review into coal seam gas by the New South Wales Chief Scientist and Engineer found:

… there is now considerable investment and experience in the development and refinement of technologies to maximise production while minimising adverse impacts.

…   …   …

… the risks associated with CSG exploration and production can be managed.

The Australian Council of Learned Academies, which includes the Australian Academy of Science and the Australian Academy of Technological Sciences and Engineering, found:

… industry … challenges … can be minimised where an effective regulatory system and best monitoring practice are in place …

APPEA submits that the benchmark of good policy is science. It is therefore unfortunate that the bill before this committee fails to reflect the inconvenient truth of scientific consensus. I would be pleased to provide additional comments or answer questions.

CHAIR: Thank you. Did you want to add anything, Mr Paull?

Mr Paull : No.

Senator URQUHART: We know that the states have responsibility for mining regulation and land access issues. However, the submission from the EDOs of Australia states:

Landholder rights and fracking are … issues of national significance in urgent need of national regulation.

I just wonder if you would like to respond to that argument put by the EDOs.

Mr Wilkinson : I think my reference already in my opening remarks to the science behind hydraulic fracturing suggests that that is far from the truth. We have had several investigations into hydraulic fracturing and the practices around Australia, and there have been 2.5 million fracks around the world. There is ample evidence that this is a safe process.

Senator URQUHART: When you talk about the science and the reviews of that, what has been the time frame for those scientific reviews that have taken place?

Mr Wilkinson : There have been several. The state ones have been in the last few years.

Senator URQUHART: So more recent ones, obviously.

Mr Wilkinson : Very recent, yes.

Senator URQUHART: Australia's CSG production is expected to increase significantly over the next few years, with most production and expected growth in the Bowen and Surat Basins in Queensland. What impact will the planned increase in this development have on the amount of water drawn from the Great Artesian Basin?

Mr Wilkinson : I think that is a good example. There is a great example there, with lessons that can be drawn for the committee's attention, and those are that the best way to understand that is to create or have a very good independent water model that examines exactly this, not just today and in the next few months but going on for decades. The Office of Groundwater Impact Assessment has such a model. It is the size of Germany, with 17 layers. It has one-kilometre cells, down to 250 by 250 metres, across the important irrigation areas, in 17 layers. It tests and models the impact of the coal seam gas activity upon those important aquifers. It also goes much deeper than most of the aquifers used by agriculture and domestic stock, which are at 100 to 200 metres. Remember that with coal seam gas we generally operate between 300 metres and 1,000 metres deeper than that. This is an independent model. It is funded to the tune of about $6 million per annum by a levy on the industry. It is independent and it keeps an eye on the impacts. Of the 21,000-odd water wells that are in that study, they have identified a little over 500 that will undergo an impact and fewer than 100 for which that will be in the short to medium term. That then clearly states what the impact is and puts an onus upon the gas companies to address those issues and make good.

Senator URQUHART: So was it is the impact? Will existing water uses be displaced by that production? Is that what the impact will be?

Mr Wilkinson : The main wells that I mentioned are drilled into and taking water from the Walloon coals, which is the primary source of the coal seam gas. So, as we depressurise those coals, you would expect the pressure in those water wells drilled into those coals to drop as well, and that is because we share a common area. The recourse there, of course, is to find a better aquifer or to deepen the well so that, when that pressure drop occurs, the farmer still has access to water. That is the process that, under law, is required of the gas companies—to do exactly that.

Senator URQUHART: In the South Australian government's submission they suggested that the bill:

… would also introduce an element of sovereign risk to the industry that has not previously existed, potentially affecting future investment decisions with negative flow on impacts for the Australian economy.

I would be interested in your view about that comment from the South Australian government.

Mr Wilkinson : Our starting point is that the people of the state own the resource, and the state government are the ones who decide how and when and where those resources are being developed. They are accountable every election to the people of the state to do that properly in a way that benefits the local communities and the local state. We think that arrangement, which has stood us well for decades, if not centuries, is the right way to continue forward. We see no benefit or improvement in having another layer of that in there. In fact, it increases uncertainty, and uncertainty has a very bad impact on potential investors as they scan the world for potential resource development.

Senator URQUHART: How does it add uncertainty? Can you explain how you see it from the industry's perspective.

Mr Wilkinson : Simply, because you go through the same regulatory loops again and you have more than one clear set of criteria being applied at any one particular time. So, every time you go into an assessment process, you always expose yourself to a risk that that will not necessarily come out the way you want it. It adds time to the process as well, so that you may do it once here, but have a different outcome in the second circumstance.

Senator URQUHART: In your submission you say:

There is ample evidence showing that farming and gas extraction can and does co-exist through responsible cooperation …

I think you were sitting in the room when I pointed out some of the evidence that we heard yesterday. I am not sure whether you would deem what we heard yesterday as 'responsible cooperation'. I am interested in your comments around the statements that were made yesterday, particularly from the farmers and the community people.

Mr Wilkinson : I do not have direct access to all of those, but let me try and address your question in three parts. The first part is: can agriculture and a petroleum industry, a gas industry, coexist? The answer is: of course it can. It does exist. An overseas example is Texas, which is smaller than New South Wales, smaller than Queensland, which has an agricultural output rate greater than either of those states. Texas has 218,000 onshore wells on agricultural land. The industry has been there for more than a century. Clearly that example from overseas shows that that is the case. Canada is similar to Australia, with the same crown law and so forth. It has exactly the same arrangements.

Coming back to Australia, I think the best example is the experience that we have—we do not have to refer overseas—in Roma, Chinchilla and Miles in Queensland, where there are 6,700 wells currently operating, in the agricultural area, which is some of the best agricultural area in Australia, and operating in a very positive way. As I said in my opening remarks, we not only now have the start-up of the LNG export facilities and all of the royalties that accrue to the state; the state also has had one of its record years of agricultural output. So both of those have come at the same time.

The third area I would like to address is a specific case. On Landline just a week or two ago, a farmer spoke about his experience of coal seam gas on his property. He made a couple of points. One was that his income on that property was greater from the gas on the property that it was from his beef operations. I know that property quite well. I have visited it several times, including with New South Wales parliamentarians and bureaucrats. I also know that the beef production on that property is at record levels. So, on one hand, they had an income which passed the beef production on the property; but the beef production, the food production, is now at record levels. How is that possible? It is because they receive capital payments as part of the access and they receive water that they are using for irrigation to accelerate the crops and increase the carrying capacity. The cash payments also allowed for pasture improvements, which was very long process that that that family of several generations had been involved with. They were able to bring that forward and increase the pastures. So overseas, Australia and that specific example are what I quote for coexistence.

Senator URQUHART: Interestingly, some of the complaints yesterday were from around the Chinchilla area. I am not suggesting that, just because we get one or two complaints or a handful, the whole thing is flawed. As I said previously, if you get complaints as an industry then you need to look at how you fix those complaints, and I do not think that has been happening very well. In Queensland at the moment there are people who have got issues around discussion, appropriate opportunities to negotiate properly, and they do not seem to be there. People feel threatened and bullied. Finally, can you tell me which countries around the world have banned fracking?

Mr Wilkinson : I might have to take that question on notice. I know that France has banned it.

Senator URQUHART: If you need to take it on notice, that is fine. I do not want to put you on the spot. Also, if you could give us some information about why the bans were introduced, that would be helpful as well.

Mr Wilkinson : Yes. My experience generally is that it is more about the politics than it is about the science. For example, France may have the luxury of that because they are more than 60 per cent nuclear powered, so they have a different mix and a different driver of priorities than what we might have here. I think we should take that on notice.

Senator URQUHART: Yes, if you could drill that down a bit and provide an answer on notice, that would be helpful.

Senator SINODINOS: In attachment 1 to your submission, you state:

… individual landholders could effectively ‘veto’ access to land by resource companies (by withholding consent to access). Although the State would retain ownership of mineral resources - and resource companies would still be granted rights by the State to develop those resources - individuals who fall within a very broadly defined category of persons with ‘ownership interests’ … could exercise a significant degree of control over how, when and where those resources are developed and exploited.

The point you are coming to is:

… unlike the existing land access regime under the P&G Act—

which is a reference to the Queensland act—

the Bill does not provide a legislative pathway through which resource companies can further negotiate to secure access to land, where consent is withheld by those with ownership interests.

Are you saying that, in those circumstances, there is a stalemate?

Mr Paull : Essentially, yes. There is no out, if you like. There is no mediation and there is no arbitration. Broadening the definition of 'landholder' beyond what you might traditionally consider a landholder—the person who might be living there or occupying the land—quite considerably complicates the matter. There have been occasions—I think in New South Wales they repealed a law where the ownership interest was being interpreted as including the bank. So you had to go to ANZ to get their agreement to access somebody's land. Even if that landowner agreed, the bank might not. The bank could still sit there and say, 'No, unless you are compensated.'

Senator SINODINOS: The bank being a mortgagor or whatever?

Mr Paull : Yes.

Senator SINODINOS: So in this sort of case you are saying that, under the bill as it stands, there is no mechanism to bring about some sort of potential for agreement even?

Mr Paull : No; whereas under the current system there are alternative dispute mechanisms, there is mediation and there is arbitration in some states. Queensland has mediation and what they call an alternative dispute resolution process. There are a number of ways that you can mediate disputes, that you can resolve those.

Senator SINODINOS: Did you say anything earlier about the constitutionality of this bill?

Mr Paull : We have not sent it off to a constitutional lawyer, but we did note that a number of submitters to the committee have raised constitutional issues. I think a number of state governments have.

Senator SINODINOS: But in a situation where effectively companies are unable to access these resources, even if they had been given the right to do so by a state government, are you suggesting in your submission that these companies may have a right of recourse to someone—to the Commonwealth or whatever—in those circumstances?

Mr Paull : I am not sure I understand the question.

Senator SINODINOS: In your submission you talk about the fact that the landholder may have a veto but the state still has vested in it the resources and can confer the right to those resources. In those circumstances, if a company came to some sort of agreement with the state, would it be then seeking compensation for its lack of capacity to actually access the land and exploit those resources?

Mr Paull : I think there would potentially be an issue. For companies that have already been granted tenures by the state that then cannot access them, there may be an issue there.

Senator SINODINOS: You also talk about a precedent for other industries. What did you have in mind there?

Mr Paull : There are a number of industries that access land. There are, for example, power lines, public infrastructure and highways. The experience in Queensland is that the CSG industry has in some sense lifted the standards for those industries. We have had utility companies approach us about the approach adopted by our members in land access seeking to learn from that, because landholders are now expecting a new standard and they are expecting increased compensation packages. That has all been a product of the CSG industry. As we have said in our submission, gas is a publicly owned resource and there are a number of public interests that may need to access land.

Senator WATERS: You have said in your submission—as some other industry folk have also contended—that the sheer number of conduct and compensation agreements indicates that people are happy with the situation. I do not accept that that flows when they do not have an ability to refuse to enter into that agreement. Do you have any way of measuring whether the signatories to those agreements are in fact happy with the outcome? Do you collect any data or do your members collect any sort of data?

Mr Wilkinson : There are a number of different ways those issues are redressed. Probably the easiest one to take the temperature of are the community leadership meetings and consultation meetings that are held throughout the Surat Basin on a monthly or bi-monthly basis, where there is every opportunity for people to come along and make comment about the difficulties they are having in those particular areas. That is not in and of itself sufficient, but it is one piece of evidence. The second one is of course the local councils, who are the people concerned about local issues, regional development and the health and prosperity of those regional areas. They would very quickly hear if there were serious problems in those particular areas. The third is the agricultural associations. There is a resource there. Fourthly, there is GasFields Commission and the Land and Water Commission in New South Wales and other areas. All those are sounding boards as to how this is going.

The other one, which is a more informal one, is just a simple walk up and down Roma, Chinchilla and Miles. When I do that—and I visit those areas fairly regularly—I see very few anti-gas signs. There are a lot in other towns. There is a lot in Byron Bay. The last time I walked the streets of Roma, Chinchilla and Miles I did not see one anti-gas sign up. You would think that if a large proportion—such as half, as has been implied—of the landholders were unhappy with the situation that would not be the case and that there would be more visible examples across the board of calls for making it better or improving it.

Is everybody happy? No. There are individuals who feel aggrieved and will make it known. They have obviously taken the opportunity to be witnesses before the committee. But that in and of itself is not evidence that there is a systemic problem across the board. In the same way you get very few people on the front page of the newspaper saying, 'I'm really pleased with the way that politics is going and how government is being run,' it is very difficult to get those people who are happy and comfortable with the situation to take a visible position.

Senator WATERS: Does the presence of confidentiality clauses in many of those agreements limit people's ability to speak out either way?

Mr Wilkinson : Thank you for raising that. I want to be very clear on this topic. The APPEA members have all agreed that, upon request from a landholder or farmer party to a confidentiality agreement, they will release them from that. It is not the gas companies that are enforcing confidentiality. If there is any issue such that someone would like to be released and are having difficulties, please call me at APPEA or make that known and I will help facilitate their release. Because it is a business-to-business negotiation, we are finding that landholders do not like the idea of finding it pinned to the noticeboard in the local pub or elsewhere in the public arena. But the onus is completely on the landholder; it is not on the gas companies.

Senator WATERS: We heard yesterday from a number of witnesses, including some from the Basin Sustainability Alliance and also some Queensland regional lawyers who are acting for many landholders, that 'very often' CSG companies will threaten to take a landholder to court at the beginning of the negotiation process. One of the other assertions was that it is a constant threat, if I recollect correctly. Would you admit or do you accept that some of your members engage in that conduct? Do you think that is appropriate? What steps are you as a representative body taking to correct that highly improper behaviour?

Mr Wilkinson : Skipping over for the moment the conflict of interest there where someone from the legal side might want to make that a particular issue—obviously the more difficult you make a negotiation sound the more the legal fraternity may profit from that—no, I do not believe threats in a negotiation are appropriate at all. They should be discouraged. Any time it comes to my attention I would certainly take it up with the party concerned to make sure it does not happen again.

What are we doing to make sure we are improving the standard? I think all parties, both industry and landholders, are learning and building experience in this area. In APPEA we have a regular meeting of the CEOs of the major gas companies in Queensland, for example. We talk about issues that relate to the community and the issues that might exist for the industry in doing business in the regions and how we can do better. Those are the sorts of forums where issues such as one of those parties being heavy-handed in a negotiation can be discussed.

Notwithstanding all of that, I would encourage anyone who found themselves in that situation to take it up with the GasFields Commission or the Land and Water Commissioner and rate it as unacceptable behaviour. Then I am sure they will get the attention that they need.

Senator WATERS: Thank you. Just staying with the theme of some evidence that we were given yesterday, it was suggested to us that it was held out that the template conduct and compensation agreements were somewhat flexible and that landholders were able to suggest certain areas were not appropriate for coal seam gas wells. The one example given—you might have heard me ask the previous witnesses—is where the landholder requested certain areas be off limits. That was incorporated into the draft CCA, but then, when that went off to Brisbane—we do not know where it went, but that was the evidence—none of those changes were incorporated. Yet, in some of the submissions by you and by the earlier witnesses, it is contended that flexibility is being sought and you are trying to accommodate the landholders and everybody is best friends. How do those two contentions that are inconsistent—

Mr Wilkinson : I would like to reinforce your observations that the industry is wanting to be flexible in taking account of the business plans and agricultural plans that each individual landholder may have and adapting to those requirements. In the areas that you have cited, I would like to think that they are rare and that they are uncommon, and that is my experience. But, in the event that they do occur, I would again advocate escalating it within the companies to make sure that those things are properly heard. There is a high degree of flexibility. For example, in some of my operational days I have drilled a well horizontally for two kilometres. That means you have a high degree of ability, when the geology is correct, to move a well into the right spot so that you minimise the impact on agriculture. Certainly there should not be a reason to drill on, for example, laser levelled land, cotton crops or irrigated land, so we want to be accommodating and fit in with the agriculture. That is what coexistence is about, and I think we should deal with those exceptions that you have cited and deal with them properly.

Senator WATERS: I am pleased to hear you say that, and I hope you do indeed act upon that. In the same vein, we heard that, in New South Wales, AGL and Santos had, for gas well land only—not for land where infrastructure would be but just for the gas wells themselves—entered into an agreement with New South Wales Farmers', New South Wales Irrigators' Council and Cotton Australia for landholders to be able to refuse permission. Unfortunately, we learn that that is just confined to New South Wales. Are you aware of whether those companies or any others that might be in your membership are seeking to replicate that and ideally expand that?

Mr Wilkinson : It is my understanding that one of those parties, Santos, has said that generally that is true, they would not enter upon land where they are not welcome, and their behaviour seems to be consistent with that. The particular issue is that, in New South Wales, that is two companies who, considering the local requirements and the issues within New South Wales, have reached that agreement with the New South Wales farmers association. They are in very early days of exploration and development and they have obviously made the decision that works for them. I would say that Queensland is different in that it is more mature, there is more experience and people have generally come to understand what is acceptable behaviour on the part of both the gas companies and the agricultural companies. So we have come to an understanding, and so there are less and less requirements for that.

Notwithstanding all of that, perhaps when you think about where the activists have gone, in the particular case of New South Wales—the most recent one at Bentley—it was not the farmer who was saying, 'I don't want the gas company.' Quite the opposite. That farmer in particular at Bentley had made the analysis themselves about what they would want on their property. They reached an agreement with the gas company. When the gates were blockaded and spikes were put on the road, that was done not by the farmer or at the request of a farmer but by third parties completely independent of that farmer. So, notwithstanding the commitment of those two companies that you mentioned, there are still the issues where, when the farmer says yes, there still seems to be a problem.

Senator WATERS: I just note that in that case it was the neighbour that had the concerns and was then facilitating people mentioning that.

Senator SINODINOS: Maybe the farmer should have the right to refuse demonstrators access to the land.

Senator WATERS: Just in relation to the chemicals, because there seems to be some confusion, do all of your companies disclose the chemicals that they use in all of their operations, including the hydraulic fracturing fluids? If so, where is that disclosed? If not, why not?

Mr Wilkinson : APIA has on its website the most common chemicals which are used in fracking.

Senator WATERS: All, or just the most common?

Mr Wilkinson : The most common.

Senator WATERS: Why not all?

Mr Wilkinson : All of the chemicals that are used are disclosed to government regulators, and each law is slightly different from one state to the next. For example, in Queensland, before a frack proceeds the government and the landholder—correct me if I am wrong—is given a list of the chemicals that are to be used in that frack before it goes ahead. Then, when the frack is completed, if there is any change or deviation from that, a complete list of those chemicals is made available again to the landholder and the government. I am correct?

Senator WATERS: Why is that not made more public? Why is it just confined to the regulator and the landholder—and that is the first time I have heard of the landholder? You say to correct you if you are wrong, so we will check on that. Why is it not made public to everyone?

Mr Paull : The companies make information available on their websites about their own practices. They do make information public. Disclosing it to a landholder, I would say, is making it public. It is disclosed to the Queensland government. The Queensland government publishes its own list of fracking chemicals.

Senator WATERS: You say that is published. Is that all of them or just the most common ones? I am just trying to find out where I go to find out.

Mr Paull : The practice evolves over time, so I cannot say that the list on their website is exactly all of the chemicals, but they do have a very comprehensive list on their website.

Senator WATERS: Is it all or is it just the common ones?

Mr Paull : As I say, the practice evolves over time.

Senator WATERS: You do not know.

Mr Paull : The industry seeks to improve its practices. It seeks to reduce its impact on the environment. I think you heard earlier that diesel used to be used. It is not used anymore. The industry continually evolves and improves its practices. I do not know that the website that DEHP has on this matter is completely up to date, but they do publish a list.

Senator URQUHART: I will ask one really quick question, just to show my total ignorance of the industry as such. Mr Wilkinson, there is a gas commissioner in Queensland. Is that replicated across other states?

Mr Wilkinson : No, it is not. It was part of the Peter Reith report to Victoria. It was a recommendation that there should be something similar there. There is a Land and Water Commissioner in New South Wales that is not staffed in the same way.

Senator URQUHART: So it is just called something different, but it looks at similar issues.

Mr Wilkinson : Yes. There are seven government appointed commissioners. They are appointed as individuals. As I stated in my declaration at the beginning, I am one. I am the only commissioner with industry experience, so the other six are a combination of farmers, professors, mayors—a fair representation of the community—and, if you like, I am there to give the technical input and industry connection.

Senator URQUHART: Sure. Thank you.

CHAIR: Thank you very much, gentlemen, for your time today and for your submission. That concludes our evidence for today. I declare the hearing closed.

Committee adjourned at 15:23