Introduction

Australia’s emissions

Australia publishes comprehensive reports on greenhouse gas emissions in the National Greenhouse Accounts. These reports are used to meet international reporting commitments and track progress against Australia’s emissions reduction targets, as well as inform policymakers and the public.

The Department of Climate Change and Energy Efficiency compiles the data and prepares the reports on behalf of the Australian Government. The Department is also responsible for setting out the methods to be used by businesses to estimate and report their emissions under the National Greenhouse and Energy Reporting (NGER) framework.

The Department reviews these emissions estimation methods to take account of the latest developments in Australia and overseas. In undertaking these reviews, the Department consults with stakeholders in Australia, and monitors scientific developments and technical improvements to other countries’ emissions reporting methodologies.

Assessments of other environmental impacts (i.e. other than greenhouse gas emissions) are carried out by the Department of Sustainability, Environment, Water, Population and Communities, and State and Territory governments.

1 AUSTRALIAN NATIONAL GREENHOUSE ACCOUNTS Coal Seam Gas: Estimation and Reporting of Greenhouse Gas Emissions

This fact sheet provides an overview of issues around the estimation and reporting of greenhouse gas emissions from coal seam gas projects in Australia and recent international developments.

Coal seam gas

Coal seam gas (CSG) refers to methane that is trapped within pores and fractures in underground coal deposits. Due to high underground pressures, the gas is usually found in a semi-liquid state, lining the inside surfaces of the coal matrix. CSG is chemically similar to conventional natural gas — methane is the main component of both. Other common names for CSG include coal seam methane, coal bed gas and coal bed methane. Methane gas can also be released from coal deposits by coal mining activity, which is known as coal mine waste gas.

CSG is extracted through wells drilled directly into coal seams. This became possible on a commercial scale relatively recently, especially since the 1990s, due to advances in drilling technology. Following extraction, CSG can be provided to residential and industrial customers through natural gas pipelines or exported via liquefied natural gas (LNG) terminals.

COAL SEAM GASESTIMATION AND REPORTING OF GREENHOUSE GAS EMISSIONSAustralian National Greenhouse AccountsNational Inventory

2 AUSTRALIAN NATIONAL GREENHOUSE ACCOUNTS Coal Seam Gas: Estimation and Reporting of Greenhouse Gas Emissions

Shale gas

Shale gas refers to methane gas trapped within underground deposits of shale, a sedimentary rock consisting of compressed mud or clay and other minerals.

While there are many similarities between shale gas and CSG and the methods used to extract them, there are also important distinctions. In particular, shale deposits are usually less porous than coal and are often located deeper underground. As a result, shale gas can be more difficult to extract than CSG, requiring greater use of extraction technologies such as hydraulic fracturing (see below).

In Australia, shale gas resources are largely found in remote regions, far away from potential domestic customers. As a result, the industry is still relatively small. However, exploration activities are taking place in the Perth Basin,5 and future development may include shale gas in more remote regions for export as LNG.

By contrast, shale gas has rapidly grown into a major industry in the United States. US shale gas resources are among the world’s largest, and are often located in accessible areas. In 2010, shale gas accounted for 23% of natural gas production in the US, up from less than 1% in the 1990s. By 2035, this is projected to reach 49%.6

The shale gas industry is projected to experience similar rates of expansion in several other major economic regions — including both Europe and China, where production is near zero today, but is expected to grow to a major source by 2035.7

Hydraulic fracturing (“fracking”)

Hydraulic fracturing, or “fracking”, is a technique used to boost the flow of gas from a new well. Large quantities of water and sand, together with certain chemicals, are pumped into a newly drilled well at high pressure, to create fractures in the underground rock layers such as shale deposits. Gas can then migrate through the fractures, reaching the well much faster than it would otherwise.

In Australia, large reserves of CSG exist in geological basins in eastern Australia, with the majority located in Queensland and New South Wales. The first commercial CSG well in Australia was established in 1996 in Queensland.1 The industry has developed rapidly since then.

In 2009-10, CSG accounted for approximately 10% of gas production in Australia,2 and is now growing. In Queensland, CSG provides approximately 90% of the domestic gas supply,3 and a number of projects to convert CSG to LNG for export are underway.4 Figure 1 provides an overview of CSG reserves and infrastructure in eastern Australia.

Emissions from the combustion of CSG — for example for electricity generation — depend on a range of factors, including the geological properties of the gas basin, the techniques used in gas extraction and processing, emissions during pipeline transportation, further processing and transportation emissions if CSG is converted to LNG for sale to overseas customers, and the efficiency of end use.

Figure 1Map of CSG reserves and gas infrastructure in eastern Australia (EDR = economic demonstrated resources, PJ = petajoules). Source: Geoscience Australia, Australian Energy Resource Assessment, Chapter 4: Gas (adapted from Figure 4.19, p. 98).

1 Geoscience Australia: http://www.ga.gov.au/energy/petroleum-resources/coal-seam-gas.html.

2 Department of Resources Energy and Tourism (2011), Energy in Australia 2011, Table: Australian gas production by state, p. 46, available at: http://www.ret.gov.au/energy/Documents/facts-stats-pubs/Energy-in-Australia-2011.pdf.

3 Queensland Government, Industry Development: http://www.industry.qld.gov.au/lng/key-points.html.

4 Queensland Government, Industry Development: http://www.industry.qld.gov.au/lng/projects-queensland.html.

5 ABC News, 6 March 2012: http://www.abc.net.au/news/2012-03-06/awe-gets-nod-for-shale-gas-fracking/3871208.

6 US Energy Information Administration: http://www.eia.gov/energy_in_brief/about_shale_gas.cfm.

3 AUSTRALIAN NATIONAL GREENHOUSE ACCOUNTS Coal Seam Gas: Estimation and Reporting of Greenhouse Gas Emissions

The technique has been used extensively in the US during the expansion of the shale gas industry from the 1990s onwards. However, several countries have recently introduced restrictions due to possible environmental effects. In Australia, Queensland has recently banned certain chemicals (benzene, toluene, ethylbenzene and xylenein, or BTEX) from being added to hydraulic fracturing fluids.8 During the first few days after well completion, “flowback” water returning to the surface through the well can also be accompanied by fugitive methane emissions.

In Australia, hydraulic fracturing is not as widespread as in the US in deposits exploited so far. This is because the coal deposits that contain CSG, which are relatively common in Australia, typically have a high permeability. This means that gas can migrate to wells more easily, even without fracturing, as well as allowing the use of “in seam directional drilling” techniques, which enhance the flow of gas but are only possible in reasonably permeable seams. By contrast, shale deposits, which are a common source of gas in the US, are generally much less permeable, and therefore require hydraulic fracturing to create economic gas flows.

In Queensland, hydraulic fracturing is estimated to have been used in around 8% of CSG wells drilled to date. However, this proportion is expected to rise to 10% to 40% as the industry and production increase.9

Emissions from coal seam gas

Emissions occur at several stages during the production, supply and use of CSG.

Fugitive emissions of methane are a significant source during the production phase. This includes methane released from exploration drilling, production testing and well completion, and gas production activities including processing, venting and flaring. Methane is a potent greenhouse gas, with a global warming potential more than 20 times that of carbon dioxide over 100 years.10

In 2008-09, fugitive emissions from the natural gas sector, which includes CSG as well as conventional gas, were estimated to be 9.3 million tonnes of carbon dioxide equivalent (CO2-e), or around 1.6% of the national inventory total.11

Other sources include fugitive emissions during transportation and supply (for example leakage from pipelines), emissions from fossil fuel use during the development and operation of CSG facilities, and emissions from end-use combustion of CSG (for example for heating or electricity generation).

Australia’s National Greenhouse Accounts

Emissions from all stages of CSG production, supply and use are reported by the Department of Climate Change and Energy Efficiency in Australia’s National Greenhouse Accounts.

Estimates of fugitive emissions of methane during CSG extraction activities are based on facility level data submitted by companies through the National Greenhouse and Energy Reporting System (NGERS). These estimates are reported by the Department within the National Greenhouse Accounts as part of fugitive emissions from gas exploration, natural gas production and processing, venting and flaring.

The emissions estimation methods used in the National Greenhouse Accounts are subject to external independent review each year by an Expert Review Team selected by the United Nations Framework Convention on Climate Change (UNFCCC).12

The National Greenhouse Accounts are available at www.climatechange.gov.au/emissions. This includes the National Inventory Report — Australia’s official submission to the UNFCCC — as well as a range of supporting documents.

National Greenhouse and Energy Reporting (NGER) estimation methods

The National Greenhouse and Energy Reporting Act 2007 (the NGER Act) and accompanying National Greenhouse and Energy Reporting Regulations 2008 (the NGER Regulations) introduced a single national framework for emissions reporting by corporations. Corporations that meet the reporting thresholds must report their greenhouse gas emissions, energy production, energy consumption, and any other information specified under NGER legislation. The reporting thresholds are 25 kilotonnes of CO2-e emitted (or 100 terajoules of energy consumed or produced) per year for facilities, or 50 kilotonnes of CO2-e emitted (or 200 terajoules of energy consumed or produced) per year for corporations.

7 US Energy Information Administration, International Energy Outlook 2011: http://www.eia.gov/forecasts/ieo/nat_gas.cfm.

8 Queensland Government, Department of Environment and Resource Management: http://www.derm.qld.gov.au/factsheets/pdf/csg/csg8.pdf.

9 Queensland Government, Department of Environment and Resource Management: http://www.derm.qld.gov.au/factsheets/pdf/environment/en10.pdf.

10 Intergovernmental Panel on Climate Change: http://www.ipcc.ch/.

11 Department of Climate Change and Energy Efficiency estimates.

12 The UNFCCC inventory review reports for all reporting countries are available at: http://unfccc.int/national_reports/annex_i_ghg_inventories/inventory_review_reports/items/6048.php.

4 AUSTRALIAN NATIONAL GREENHOUSE ACCOUNTS Coal Seam Gas: Estimation and Reporting of Greenhouse Gas Emissions

http://www.climatechange.gov.au/emissionsNeed more information?

The National Greenhouse and Energy Reporting (Measurement) Determination 2008 (the NGER Determination) provides methods and criteria for calculating emissions and energy data under the NGER Act. In addition, the National Greenhouse and Energy Reporting (Measurement) Technical Guidelines provide further information and calculation methods to assist with the application of the NGER Determination and the estimation of greenhouse gas emissions.

Operators of CSG facilities that meet reporting thresholds are required to report fugitive emissions from all stages of exploration, processing and production under the NGER Act and Regulations. Estimation methods must be consistent with the NGER Determination.13

Emissions that occur during other stages of the supply and use of CSG must also be reported under the NGER Determination if the relevant entities meet reporting thresholds. For example, suppliers may be required to report fugitive emissions due to leakage from pipelines, and large end-use customers are likely to meet thresholds for combustion of gas for heating or electricity generation purposes.

Since its introduction in 2008, the NGER Determination has been updated annually, reflecting improvements in estimation methods, emerging technologies and responding to feedback from stakeholders. This is an ongoing development process, and the Department is currently consulting with stakeholders in the preparation of amendments that will be applicable to the 2012-13 reporting year.

The NGER Act, Regulations, Determination and Technical Guidelines can be accessed through the Department’s website at www.climatechange.gov.au.

Recent international developments

The Department continuously monitors international developments in emissions estimation methods, which may result in updates to the methods and criteria in the National Greenhouse Accounts and NGER Determination following a process of internal review and consultation with stakeholders.

There have been a number of recent developments that are relevant to the estimation of CSG fugitive emissions.

In the United States, there have been significant developments around fugitive emissions from gas extraction, especially shale gas. In 2011, the US Environmental Protection Agency concluded a review of the reporting rule

methodologies for natural gas systems in the US Mandatory Greenhouse Gas Reporting Program. This led to the recent introduction (on 23 December 2011) of new methods for the estimation of fugitive emissions from gas extraction, including requirements for additional direct sampling and measurement from wells where hydraulic fracturing is used.

The latest US national inventory submission to the UNFCCC (in 2011) also included new emission factors for exploration and production gas well activities relating to shale gas. These updated emission factors will be reviewed through the UNFCCC Expert Review process this year.

Additionally, several assessments of fugitive emissions from shale gas production have been published recently in the peer-reviewed literature, with a range of findings.

There are important differences between US shale gas and CSG in Australia. The Department is currently considering how the developments in the US can best be applied to Australian conditions.

Future work

In April 2012, the Australian Government released the National Greenhouse Accounts for the 2010 inventory year and an exposure draft for public comment of the latest annual update to the NGER Determination. After reviewing stakeholder submissions, the Government will release the final draft of the NGER Determination update (to take effect from 1 July 2012 for the 2012-13 reporting year).

In preparing these publications, and future updates, the Department seeks to ensure that the best available emissions estimation methodologies are used in all sectors. This is achieved through a process of extensive stakeholder consultation and the ongoing monitoring of international developments.

With a view to implementing improvements over the longer term, the Department has recently sought an independent consultancy to review international best practice in measurement methods for estimating greenhouse gas emissions from CSG extraction. The results will be taken into consideration in the preparation of the 2013 updates to the National Greenhouse Accounts and the NGER Determination.

13 Methodologies for determining fugitive methane emissions from the extraction of CSG are provided in the NGER Determination under Divisions 3.3.2 (gas exploration) and 3.3.6 and 3.3.9 (gas production and processing). Methodologies for gas transmission and distribution are provided under Divisions 3.3.7 and 3.3.8.