The Australian Federal Government’s release of its ‘Future Gas Strategy’ in May 2024 solidified the role that gas will play in the transition to net zero by 2050. At the same time, coal mine owners are looking for additional decarbonisation strategies to further reduce their greenhouse gas emissions. This has made coal seam gas (CSG) a potentially attractive commodity for coal mine owners and will remain so, irrespective of the outcome of the upcoming Federal election.
There is a myriad of issues to work through when coal mine owners are considering the commercial opportunities arising from the extraction of CSG. These include:
- understanding what the CSG may be lawfully used for;
- the types of approvals required, which statutory safety regime applies; and
- what it means for overlapping tenements and any contractual arrangements.
Who has the rights to mine CSG?
De-gassing in advance of mining may be required where a coal seam contains high levels of methane; in this context the presence of CSG can be a significant safety hazard. Depending on the amount of CSG that is contained in the seams, there may be an opportunity to commercialise that gas.
Under the Mineral Resources Act 1989 (Qld), a coal miner is authorised to extract the CSG in the following limited circumstances:
- the mining happens as a necessary result of coal or oil shale mining carried out under the coal mining lease (ML); or
- the mining is necessary to ensure a safe mine working environment for coal or oil shale mining under the coal ML; or
- the mining is necessary to minimise the fugitive emission of methane during coal mining operations.
This is known as Incidental CSG (ICSG).
Although not the focus of this paper, alternative ways to access ICSG are available under specified mineral hydrocarbon ML and a coal ML holder may also apply for additional petroleum tenure.
What can ICSG lawfully be used for under a mining lease?
Under a coal ML, the ICSG can be used in the following ways:
- supplied/sold to another entity;
- used to generate power to supply to another entity;
- used beneficially under the coal ML or for an authorised activity under another resource authority; and
- processed, stored or transported within the area of the coal ML to facilitate another approved use.
Importantly, flaring of the ICSG will only be permitted in limited circumstances and where it is not commercially or technically feasible to use it beneficially for mining under the coal ML.
What are the limits on the rights to commercialise ICSG?
There are statutory limitations on the rights to commercialise ICSG. Older MLs which overlap with petroleum tenements may not permit the sale of ICSG at all. In addition, MLs may be required to first offer ICSG within their tenements to a holder of an overlapping authority to prospect or petroleum lease. Understanding the impact of legislative restrictions on the commercialisation of ICSG will be critical in making an informed commercial decision in respect of the extraction and use of ICSG.
The rights of a coal ML holder to ICSG may also be impacted by contractual arrangements that exist between the coal mine owner and any overlapping tenement holder, including the terms of any Co-Development Agreement. It is not uncommon for historical Co-Development Agreements to seek to restrict the coal ML holder’s ability to commercialise ICSG.
Is the ICSG extraction authorised under existing environmental approvals?
A thorough understanding of the gas extraction activities is required to establish whether the activities can fall under the ML and accompanying environmental authority (EA) for the ML, or whether the activities are properly characterised as petroleum activities and the relevant petroleum legislation is at play.
A review of the existing EA for the ML will be required to determine whether the ICSG extraction activities are authorised under the EA and whether the proposed activities can comply with the existing EA conditions. The activities must also comply with the Environmental Protection Act 1994 (Qld), including ‘the general environmental duty’ which requires all persons to take all reasonably practicable measures to prevent or minimise harm when undertaking an activity.
Importantly, an assessment of the environmental impacts of the activities will need to be undertaken to identify the need for amendments to the EA and whether those amendments are likely to be minor, or whether a major amendment is triggered – which would require public notification and open the EA up to third party challenge. The conditions imposed on an EA to authorise the ICSG extraction activities could include gas drainage, flaring, surface disturbance and additional bores.
Safety and health considerations
Two sets of safety legislation are enlivened in relation to the extraction of CSG under a ML, the Coal Mining Safety and Health Act 1999 (Qld) (CMSH Act) and the Petroleum and Gas (Production and Safety) Act 2004 (Qld) (PGPS Act). These Acts are complex in their own right.
Hidden within that existing complexity is a scaling up and transition from obligations being held solely under the CMSH Act to, depending on the use of the CSG, slowly evolving to dual regulation under both the CMSH Act and PGPS Act. Uniquely, the Site Senior Executive (SSE) of a coal mine (a role not recognised under the PGPS Act) may face expanded obligations depending on how the CSG is used.
Practically, it is critical that coal mine owners understand where they are in the transition between the two safety Acts. Most importantly, SSEs need to ensure their Safety and Health Management System appropriately expands to manage the unique risks and controls that arise for workers working with or near CSG.
Closing
An early and comprehensive understanding of the legislative and contractual constraints together with the approvals and safety framework is critical to analysing and unlocking the commercial opportunities for ICSG extraction activities on a coal mine.