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At what price Gorgon?

By Rachel Siewert - posted Monday, 21 September 2009


As its name suggests, Gorgon is a monster-sized project. With an export capacity of 15 million tonnes of liquefied natural gas annually, it will become Australia’s biggest-ever resources project, with an estimated $43 billion of investment and more than $140 billion of contracts to supply China, Japan, India, South Korea and North America from Australia’s largest known gas reserve.

Its massive scale also becomes clear when one examines the project’s greenhouse gas emissions. While natural gas is usually regarded as a “cleaner” fossil fuel, the gas to be processed by Gorgon is particularly high in carbon dioxide. This will be stripped off during processing, producing 8.81 million tonnes of CO2 annually, of which less than half - 38 per cent - is proposed to be sequestered underground, and the rest vented to the atmosphere.

Geo-sequestration is an unproven technology at an early stage of development and nothing of this scale has been tried before. If Gorgon's geo-sequestration plans are successful, its greenhouse gas emissions will still be equivalent to building five new 200-megawatt coal-fired power stations. However, if geo-sequestration fails, this project so falsely hailed by the Prime Minister and his Resources Minister as climate-saving, will result in annual emissions equivalent to building eight new coal-fired power stations.

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Barrow Island, where the Gorgon LNG processing plant will be located, is an A-class nature reserve. It is home to 24 species that are found nowhere else in the world, including the burrowing bettong, golden bandicoot and spectacled hare-wallaby - and it is also an ark for other species whose numbers are extremely restricted elsewhere. Because it is an isolated island that has been carefully managed, Barrow has to date provided a safe haven from cats, foxes, rats and other pests that have caused mainland Australia’s once plentiful and richly diverse native wildlife to be decimated. For this reason, as well as its bird, stygofauna and marine life (including dugongs and turtles), it was designated as a nature reserve 100 years ago.

Since the mid-60s, parts of Barrow Island have accommodated the oil industry, hosting a small operation initiated by West Australian Petroleum Pty Ltd which was later taken over by Chevron, Gorgon’s major shareholder. We can at least partly thank naturalist and former TV presenter Harry Butler, who worked on the island closely with the oil workers, for instilling in them some respect for the island’s natural values, thus helping ensure strict quarantine and protection measures were applied.

But the high standards of quarantine achievable on this small project will be impossible to achieve with the immensely larger footprint and significantly larger workforce of the massive Gorgon project - a view that the Western Australian Environmental Protection Authority (EPA) confirmed twice, recommending against the Gorgon proposal on Barrow Island in 2003 and again in 2006.

In each case, the EPA’s advice - the first time on the original two-LNG train proposal and the second time on the current expanded, three-train plan - was overturned by the West Australian government. The project also underwent a federal environmental assessment, but Minister Peter Garrett failed to inspire any confidence in this process, with the outcomes of his “assessment” that the project was environmentally sound coming days after Kevin Rudd and Martin Ferguson’s public announcements made it obvious that Cabinet had determined Gorgon would go ahead at all costs.

It is apparent that for the State and Federal governments the economic benefits of Gorgon have overridden all environmental concerns. In addition, it seems that they may also have thrown financial caution out of the window.

In August, the Barnett and Rudd governments agreed to accept joint liability for Gorgon’s plan to sequester 3.36 million tonnes of C02 per annum from the project. Pumping carbon dioxide into rock strata is not the tricky bit - the real challenge is ensuring that the CO2 stays there for a long, long time. Given that this technology is new and unproven and carbon capture and storage has not been attempted at this scale anywhere in the world - this is a massive leap of faith being made on behalf of Australian taxpayers.

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By the time that government takes over liability for the sequestered CO2 there is no doubt that a global carbon market will be operating and the price of carbon will be significant. The Federal and State governments have therefore accepted liability on our behalf for a process that they have no idea will in fact work, and they also do not know how much taxpayers could be liable for if it fails.

Even assuming a minimum price of $25-a-tonne, the liability for taxpayers would be $3 billion - and we have every reason to expect the cost could be much, much higher.

We believe that the risk of having to pay this cost is unacceptably high and consider this to be a reckless decision by both governments. Given that the Gorgon partners - multinationals Chevron, Exxon Mobil and Shell - stand to make a huge amount of money from the project, and are hardly known for their lack of funds, this also seems to be an unnecessary risk to transfer onto the shoulders of the public.

The billions that China, Japan and India will pay for Gorgon gas over coming decades sounds like an awful lot of money. However we need to remember that we are signing over a massive volume of a product that will only increase in value over time. China has its own gas reserves that are reported to be even larger than Australia’s - yet at the moment it is cheaper for China to buy our gas than it is to develop their own supplies. Where will this deal leave Australia in the future, as oil becomes scarcer and energy prices rise?

The Australian Greens are concerned that in the face of dwindling global oil supplies our natural gas reserves could have a crucial role to play as a transitional transport fuel in coming decades. We believe that we need to be taking into consideration these longer term strategic considerations and the future well-being of all Australians, rather than selling off our resources as quickly as we can. WA needs to learn the lesson of our past boom and bust cycles and use the opportunity that our resources provide to develop sustainably.

The Greens have been opposed the location of the Gorgon project on Barrow Island from day one, advocating for the project to be shifted to a mainland site. The EPA assessments have confirmed that compromising this island ark should never have been an option. We also continue to oppose transferring the risk for the company's carbon capture and storage promises to taxpayers by State and Federal government’s accepting liability for any future sequestration failures. And we question an economic strategy that sells our energy assets cheaply now, instead of preparing for the energy crises of the future.

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About the Author

Senator Rachel Siewert is the Australian Greens’ spokesperson on Community Services and the Environment: Natural Resource Management and Health.

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