CSM vs UCG in Queensland  

One company I mentioned in my post on coal to liquids (CTL) last year was Linc Energy, who are trying to produce CTL using underground coal gasification (UCG) in Queensland. The Australian reports that the state government is having second thoughts about allowing UCG projects to proceed, instead seemingly preferring the rapidly expanding coal seam methane (CSM) industry - State lets off steam in coal gasification plans.

THE Queensland Government appears to be putting the brakes on its emerging coal gasification industry as it considers environmental concerns and whether the industry can co-exist with plans for a $20 billion LNG export industry.

Queensland's coal fields have attracted an investment bonanza in recent years as companies including Santos and Queensland Gas Company plan to use coal seam methane to develop a massive new LNG export industry, and other firms such as Linc Energy continue long-standing efforts to commercialise the entirely different coal gasification technology, which burns coal deep underground to extract a gas that can be liquefied into diesel and aviation fuel.

Federal Resources Minister Martin Ferguson has hailed both CSM and coal gasification as crucial to Australia's future energy security.

But the Queensland Government has realised that in several cases it has issued rights over the same tenements to companies pursuing each of the technologies -- even though most say they are incompatible because the coal gasification process burns the methane that the CSM producers are seeking to extract. And the Government now believes that in the long run the market will support the full-scale development of only one of the technologies, with cost and greenhouse emission levels from the production process the deciding factors.

"I expect both will develop until the market works out which one is most cost effective, but at the end of the day only one of these technologies will emerge as the winner on cost and greenhouse grounds," Queensland Climate Change Minister Andrew McNamara told The Australian.

In the meantime, as it seeks to sort out the problem of overlapping coal gasification licences issued under the Minerals Resources Act and CSM licences issued under the Petroleum and Natural Gas Act, the Queensland Department of Mines has sought advice from the Queensland Conservation Council and has heard deep concerns about the environmental impact of the coal gasification process, including its carbon emissions and claims that it could contaminate ground water.

The QCC told The Australian that it considered coal gasification a "more environmentally questionable resource" than CSM and had recommended to the Government that no UCG project should receive approval to commercialise in Queensland.

A spokeswoman for Queensland Mines and Energy Minister Geoff Wilson said the Government "has no intention of granting production tenures for underground coal gasification for at least three years. Underground coal gasification is a new technology, untried in Australian conditions, and it poses some potential problems, especially with groundwater systems," she said. "We will only do what is best for Queensland. In this case, we don't believe it's in the best interests of Queensland to grant production tenures for technology that is untried."

And Mr McNamara said his department had asked Linc Energy -- the most advanced of the coal gasification companies -- to perform new demonstration trials so that the Environmental Protection Agency could monitor emissions and groundwater quality. "Linc has been asked to do another more rigorous trial of its technology; it is critical we make sure we don't contaminate our groundwater," he said.

Linc CEO Peter Bond, whose company has a market capitalisation of $1.45 billion and has seen its share price rise from just 20c to $3.50 over the past two years, rejects the notion that his technology is incompatible with CSM performing stringent environmental assessments entirely of its own volition.