In a development with important lessons on managing relationships with regulators, the Queensland Government won't allow Cougar Energy to restart its underground coal gasification trial, after receiving an independent scientific report that unfavourably contrasts the company's risk management approaches with those of another UCG business.
"The only activity that Cougar will be authorised to undertake in the future is the full rehabilitation of the site," Climate and Sustainability Minister Kate Jones said on Friday.
The company today told the ASX it would respond to the decision before the opening of trading tomorrow, adding that "none" of the groundwater samples that have triggered the Government's decision exceeded Australian Drinking Water Guidelines – a statement that appears to be at odds with the conclusion of an independent scientific panel advising the Government.
Meanwhile, Jones said Linc Energy's underground coal gasification (UCG) pilot project near Chinchilla can "continue as planned".
Three pilot projects
Cougar and Linc – along with Carbon Energy – had been authorised to conduct pilot UCG trials as part of the Queensland Government's investigation of the merits of developing a large-scale UCG industry in the state.
A 2009 UCG policy paper indicated the Government would wait on the results of the three pilot projects before approving others, "unless they have a strong ability to further demonstrate the efficacy of UCG technology".
But the three projects, particularly Cougar's, have not had an easy run.
The environment department last July ordered Cougar to suspend operations at its flagship Kingaroy project, after one result from a monitoring bore near the gasification chamber indicated elevated benzene and a result from another bore indicated elevated toluene.
In the same month, the department issued a similar order to Carbon Energy following a surface release of wastewater at its Kogan site. Carbon Energy expects to hear next month whether it will be able to resume operations, with Jones last week acknowledging the wastewater had caused "no ongoing environmental harm".
The department also last year twice instructed Linc to evaluate the reasons for above-guideline levels of salinity in an overburden aquifer at its Chinchilla site.
The department last month accepted Linc's conclusion that the cause was an incorrectly-set guideline value and had nothing to do with UCG operations, Linc told CE Daily today.
Linc 'well prepared'
The government's decision to prevent Cougar continuing its Kingaroy trial and to allow Linc to proceed accords with the advice of reports by an independent scientific panel, established under the terms of the UCG policy paper.
Led by Professor Chris Moran, head of Queensland University's Sustainable Minerals Institute, the panel will ultimately provide a report to Government on the technical viability and environmental sustainability of a large-scale UCG industry in Queensland.
The panel's reports on Linc and Cougar show the two companies took very different approaches to risk management and their dealings with the panel.
In its public report on Linc, the panel says that when it met with the company, Linc was "well prepared and a great deal of information was communicated".
The company was "open and willing to engage with the [panel] to ensure good understanding of its technologies, operational protocols, modelling capabilities and data from monitoring."
Linc also "willingly communicated challenges with its operating environment", had a database "with a considerable quantity of information and with associated QA/QC protocols" and demonstrated "a significant build-up of technical capacity in the company", the report says.
Linc's most recent annual report reveals the panel's conclusions reflect a deliberate strategy by the company.
Linc hired extra environmental engineers and "undertook an extensive campaign to educate key government regulators", involving technical briefing sessions.
It also reviewed and enhanced its groundwater monitoring program in early 2010, resulting the creation of "the most comprehensive groundwater dataset ever compiled on a UCG operation, providing a quality controlled and third party reviewed groundwater database", the annual report says.
A consultant and a whiteboard
The scientific panel's positive comments on Linc contrast with its appraisal of Cougar.
Cougar Energy takes the view that it is not piloting a new technology but establishing a small-scale facility "using a well-tested technology", the panel's public report on the company's operation notes.
"Consequently, they assert, they do not need a lot of in-house technical capability and can rely on consultants as required."
The report says that when the panel interviewed Cougar in their offices, a consultant "via use of a whiteboard alone", explained their underground design and operational approach.
The panel "prefers the approach adopted by another company of building strong internal technical capacity".
The panel report says Cougar's environmental evaluation and monitoring information has "generally lacked detail and been less-than-clear in explanation".
It also concludes that the location of Cougar's Kingaroy trial was "not optimal", partly because of the complexity of the local hydrogeology.
Although Cougar says the benzene and toluene bore results were not in breach of drinking water guidelines, the panel describes them as being "less than stock water limits but greater than drinking water limits".
It said Cougar's coal gasification trial should not be restarted as the incident was "very likely" the result of "compromised" infrastructure.
