Coal seam gas extraction is set to become a huge industry in Queensland, where massive contracts are being written to supply gas to China and Japan after 2014. Liquid natural gas companies have already boosted the state's economy with about $50billion of investment in coal seam gas extraction and its processing into LNG for export. Moreover, the Queensland government will eventually reap about $1billion a year in royalties.
However, conflicting claims about whether the gas is ''greenhouse friendly'' abound. The differences in the findings turn on assumptions about the quantity of gas that escapes into the atmosphere from coal seam gas operations, and the gas's global-warming potential.
Vastly different claims are being made about the green credentials of coal seam gas and LNG. A study issued in April by engineering consultancy firm WorleyParsons concluded that, for every tonne of greenhouse gases emitted by a new coal-fired power plant in China, only 0.54 tonnes will be emitted by a new Chinese LNG plant.
And, according to WorleyParsons, while emissions from Australian operations to prepare LNG for export were almost five times higher than for preparing black coal for export, for each tonne of greenhouse gas emitted by gas production in Australia, 4.6 tonnes are saved globally.
Opposing claims - that natural gas is not more greenhouse-friendly than coal - are made by academics such as Cornell University's Professor Robert Howarth and the University of Adelaide's Dr Tom Wigley, both reporting this year in the journal Climatic Change. Their studies' findings are based on actual experience with shale gas in the United States, rather than best practice for coal seam gas used by WorleyParsons. The academics find the footprint of natural gas is usually greater than for coal due to leaks from wells, pipes and in processing. Shale gas extraction emits slightly more greenhouse gas than coal seam gas, but their conclusions are still valid.
Why the discrepancies? The first main difference between the academics and WorleyParsons is in the amount of leakage of natural gas; so-called ''fugitive'' emissions. WorleyParsons assumes best practice and very little fugitive emissions for the planned Queensland LNG developments. But its estimates are not independent; it took most fugitive-emissions estimates straight from the environmental impact statements of mining companies Santos Gladstone LNG and Australia Pacific LNG. (It's noteworthy that, even with best practice, the environmental impact statements of Australia Pacific LNG forecast peak annual emissions in Australia for five LNG projects to be a hefty 35million tonnes of CO2 equivalent a year.)
The US researchers, in contrast, use actual data on fugitive sources; and these are considerably higher than those used by WorleyParsons.
A second reason for the discrepancy is the global-warming potential assigned to fugitive methane by WorleyParsons, as opposed to that of Howarth and Wigley.
WorleyParsons adopts the factor of 21 for fugitive methane emissions from coal seam gas operations (1tonne of methane gas has a global warming potential of 21tonnes of CO2equivalent), which is the factor adopted by the United Nations Framework Convention on Climate Change, the Australian government and the US Environmental Protection Agency.
In contrast, Howarth and Wigley use more recent research in their estimates. NASA scientist Dr Drew Shindell, reporting in Science, found that methane, over a 100-year horizon, was 33 times more powerful than carbon dioxide in terms of its global warming potential, and 105 times more powerful over a 20-year horizon. (The reason methane is less powerful in 100 years than over 20 is that it has a much shorter life in the atmosphere than does carbon dioxide.)
Applying this updated estimate of the warming potential of methane, together with accounting for the increasing level of methane emissions by coal seam and shale gas projects in many countries, has profound implications for meeting global greenhouse targets.
Monitoring gas in Queensland
WorleyParsons has a large stake in the oil and gas industry, and it's understandable it will assume best practice in its report. However, there appears to be a great deal of urgency in the development of Queensland gas fields and processing plants to meet export contracts in 2014.
This begs the question of whether best practice will be achieved or whether, in practice, losses of methane to the atmosphere will be akin to those in Texas (of about 5percent). Companies in Texas are hardly forthcoming on gas ''lost and unaccounted for'', partly because of the costs of monitoring.
If Queensland is to do better, it will need tight regulation by the state government, and companies will need to make commensurate investment in measurement technology and metering.
Accounting and tax implications
An update of greenhouse accounting by the federal Climate Change Department should include both a quantification of fugitive methane emissions based on actual data and the application to them of an updated warming factor. We won't know the level of escaped methane emissions from LNG exports until the projects are in production and properly monitored.
When fugitive emissions are known, their full global-warming potential must be taken into account when taxing LNG export projects under the clean energy laws that come into force next year. But, with respect to the tax rate to be applied to methane, there is room for debate. Is the application of a global-warming factor of 105 times that of CO2 (1tonne of methane equals 105tonnes of CO2equivalent) most appropriate for assessing the global-warming potential of methane, and therefore for taxing it?
Reducing greenhouse gases over a 20-year horizon is critical in addressing global warming. To reflect the nature of the effect of methane on the atmosphere in this time horizon, the factor of 105 seems most appropriate (rather than the factor of 21 presently applied). The updated factor would be used in forecasting Australia's 2020 emissions of CO2equivalent and in calculating the increase above the year 2000. A result will be that Australia's 2020 greenhouse targets will harder to meet because there will be an increase in emissions accounted for in the period 2000 to 2020.
LNG is a trade-exposed industry under the clean energy legislation, so the effects of a higher tax would be ameliorated. However, the coal export industry would feel the full effects of an updated rate.
While industry will no doubt oppose the proposed changes, targets set using accurate accounting will have more meaning, in terms of the war on global warming, than ones that fail to quantify fugitive methane and, moreover, discount its potency.