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Use of Incidental Coal Seam Gas

The Queensland Government has released an industry White Paper to consult on proposed legislation covering the incidental use of coal seam gas associated with coal mining.

Industry has identified that the current restrictions on the use of incidental coal seam gas (ICSG) prevent more efficient use of this valuable resource. The use of ICSG by the holder of a coal mining lease has also been addressed by the industry White Paper. This is to provide for the use of ICSG by the holder of a coal mining lease where it overlaps a petroleum lease, subject to the mining lease holder satisfying the certain requirements under the new coal and CSG overlapping tenure framework.

Currently, section 318CN of the MRA limits the use of ICSG mined within the area of a mining lease for:

  • beneficial use for mining within the area of that mining lease;
  • transporting or storing within the area of that mining lease to allow it to be used beneficially; or;
  • giving it to an overlapping petroleum lease holder.

Under current section 318CO, where ICSG cannot be used beneficially and there is no overlapping petroleum lease (or the holder of an overlapping petroleum authority has rejected the gas), it may be flared or vented (subject to conditions).

The draft legislation proposes new uses of ICSG by the holder of a coal mining lease, not only when the new coal and CSG overlapping scheme has been satisfied, but also when there is not an overlapping petroleum authority. While in many cases, there is likely to be an overlapping petroleum authority, it is timely to consider both situations in light of the changes proposed under the White Paper.

The proposed changes also support the implementation of the ICSG principles of the White Paper in that ICSG may be commercialised by a mining lease holder after the requirements of the overlapping scheme for coal and CSG have been met.

Therefore, the following uses of ICSG by a coal miner are proposed (after first satisfying the overlapping scheme if required):

  • ICSG may be used beneficially within the area of the mining lease or on other mining operations held by the same holder. This may include uses such as power generation for equipment used for any mining or heating.
  • Transport ICSG from one or more mining leases across lease boundaries (including where leases are not contiguous). Any approvals under other applicable legislation would be first required e.g. pipeline licence under the P&G Act.
  • Store ICSG within the area of a mining lease or in the area of another mining operation to allow it to be used for any of the above purposes.
  • Commercialise ICSG by selling it to another party, as would be possible by a petroleum lease holder. This may include the sale of the gas to other mining or petroleum operations where it may be used beneficially.
  • ICSG may be transported to a central power generation facility. The electricity generated may be used beneficially or commercialised. Use or sale of electricity generated is only allowable if any necessary approvals are obtained under other applicable legislation e.g. Electricity Act 1994.
  • Flare or vent the gas if it is not commercially or technically feasible to use the ICSG beneficially or commercially.

It is not intended for the changes to directly authorise storage or transportation of ICSG on other resource authorities without any necessary approvals, unless that authority already expressly authorises the activity (e.g. another mining lease). For example, it is not intended that a holder of an exploration permit for coal could construct a pipeline to transport ICSG without necessary approvals under the P&G Act.

Allowing a coal miner to commercialise ICSG or use it beneficially within projects (after satisfying the coal and CSG overlapping scheme requirements if required) provides an opportunity for this genuine resource to be used rather than being flared or vented. The benefits of this proposal include the following:

  • protects economic benefits to the State and regional communities by supporting the viability of existing coal mines to reduce costs by finding more efficient uses of ICSG.
  • encourages future investment in the State by providing an environment for industry to develop lower cost coal production
  • provides environmental benefits through encouragement of greenhouse gas abatement schemes and the use of less greenhouse gas intensive power generation (using ICSG rather than sourcing electricity from coal fired power generation).

Please note that the proposals outlined in this article are a work in progress by the Queensland Department of Natural Resources and Mines and have been released for consultation purposes.  Interested members should contact the Department to discuss the proposals or seek further information.

 

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