How Clean and Green is Coal Seam Gas?

There are conflicting claims about the greenhouse friendly nature of coal seam gas in Australia. In this article, Colin Hunt finds that the differences turn on assumptions about the quantity of gas that escapes to the atmosphere from coal seam gas operations and the gas’ global warming potential. He argues that both better measurement of the fugitive emissions of coal seam gas and an official update of its greenhouse potency are required. These recommendations have important implications not only for meeting Australia’s greenhouse targets but for the tax rates on emissions under the Clean Energy legislation.

Coal seam gas extraction in Queensland is set to become a major export industry with massive contracts being written for the supply of gas to China and Japan post 2014.

The Queensland economy is already being boosted by some $50 billion of investment by LNG companies in coal seam gas (CSG) extraction and its processing to liquid natural gas (LNG) for export. Moreover the Queensland government will eventually reap about a billion dollars a year in royalties.

 

The claims

Vastly different claims are being made about the green credentials of CSG/LNG. A study released in April by engineering consultancy Worley Parsons concluded that for every tonne of greenhouse gas 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 Worley Parsons, while emissions involved in Australia in LNG for export were almost five times higher than for black coal for export, for every 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 Robert Howarth et al. and Tom Wigley, both reporting this year in the journal Climatic Change.

These studies base their findings on actual experience with shale gas in the U.S., rather than best practice for coal seam gas used by Worley Parsons. The academics find that the footprint of natural gas is usually greater than for coal due to leakages from wells, pipes and in processing.  Shale gas extraction emits slightly more greenhouse gas than coal seam gas but their conclusions are still valid.

What are the reasons for this discrepancy?

The first major difference between the academics and Worley Parsons is in the amount of leakage of natural gas, so called “fugitive” emissions.

Worley Parsons assume best practice and very little fugitive emissions for the planned Queensland LNG developments. But their estimates are not independent. They take most fugitive emissions estimates straight from the environmental impact statements (EIS) of Santos Gladstone LNG and Australia Pacific LNG.

(It is noteworthy that even with best practice the EIS of Australia Pacific LNG forecasts peak annual emissions in Australia for five LNG projects to be a hefty 35 million tonnes of carbon dioxide equivalent a year.)

The US researchers, in contrast, use actual data on fugitive sources; and these are considerably higher than those used by Worley Parsons.

A second major reason for the discrepancy is the global warming potential assigned to fugitive methane by Worley Parsons as opposed to that of Howarth and Wigley.

Worley and Parsons adopt the factor of 21 for fugitive methane emissions from coal seam gas operations (one tonne of methane gas has a global warming potential of 21 tonnes of carbon dioxide equivalent), which is the factor adopted by the United Nations Framework Convention on Climate Change, the Australian government and the EPA in the U.S.

In contrast, Howarth and Wigley use recent research in their estimates.

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 carbon dioxide.)

The application of 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, have profound implications for meeting global greenhouse targets.

 

Monitoring gas in Queensland

Worley Parsons has a large stake in the oil and gas industry and it is understandable that 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 whether the best practice will be achieved or whether, in practice, losses of methane to the atmosphere will be akin to those in Texas of about 5%. Companies in Texas are hardly forthcoming on gas “lost and unaccounted for”, partly because of the costs of monitoring, according to Pamela Percival, writing in Basin Oil and Gas, issue 31.

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 taxing implications

An update of greenhouse accounting by Australia’s Department of Climate Change and Energy Efficiency 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 export until the projects are in production and properly monitored.

When fugitive emissions are known, their full global warming potential must be taken into account in taxing LNG export projects under the Clean Energy legislation that will 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 (one tonne of methane equals 105 tonnes of carbon dioxide equivalent) 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 CO2e and in calculating the increase over 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 impact of a higher tax would be ameliorated. However, export coal mining 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.

 

Dr Colin Hunt, c.hunt3@uq.edu.au, is a Visiting Fellow in Economics at The University of Queensland.