A nail in UCG’s coffin?

Underground Coal Gasification (UCG) hit the headlines in Australia for all of the wrong reasons in July. The Department of Energy and Mines (DEM) of the Queensland state government ordered a shutdown of the Cougar Energy UCG facility at Kingaroy, following the detection of benzene and toluene in monitoring bores.
Even though the company quickly managed to establish that the laboratory results – which it had submitted under voluntary reporting rules - had in fact been incorrect, and the Queensland Department of Environment and Resource Management (DERM) acknowledged that when it checked borehole results, levels of the chemicals were lower than permitted levels in Australian drinking water, the damage had already been done. DERM director general John Bradley actually came out and said that; "in all cases these are below the Australian Drinking Water Guideline standards. The maximum level of benzenes detected was 0.7 parts per billion (ppb) compared to an Australian drinking water guideline standard of 1.0 ppb and this was only detected at the Cougar Energy plant site itself. Although it is difficult to compare exposures from drinking water to those in air, by comparison, this is less than 10% of the benzene level in the air of a city street and up to six hundred times less than the air at a suburban petrol station.”
However, in spite of these reassurances, local residents have been up in arms, and the DERM has ordered that Cougar keep the Kingaroy plant closed until the government is “assured that groundwater resources are protected”. The company was forced to lay off staff and has been placed into a parlous financial position. Shares have plummeted to just 2.3 cents, and just as I was writing this came news that the company’s chief financial officer and company secretary Rodney Watson had resigned. The company posted a full year net loss of A$4.1million, up from A$2.9 million for 2008/09, and said that it might not be able to continue as a going concern, as forecast working capital requirements for the next 12 months exceeded its current cash position.
Cougar has placed the blame squarely at the government’s door for its demise, and not without justification, it seems. But if this is what happens even when chemical levels in water are within permitted drinking limits, one can only imagine what would happen if they were not!
Two other companies are also operating UCG bores at pilot plants in Queensland; Carbon Energy at Bloodwood Creek and Linc Energy at Chinchilla, the latter of which we reported on in Nitrogen+Syngas issue 303 (Jan/Feb 2010). While both are still operating, Queensland has imposed a moratorium on new operating licenses and issued Environmental Evaluation Notices to all of the projects. The matter has made its way to the Federal government, where the Green Party is now pushing to amend environmental legislation, while Senate candidate for Queensland and co-founder of the Republican Democrat party Peter Pyke has said that if elected he would fight to scrap UCG drilling country-wide.
As a potentially promising technology to harness coal reserves in a clean and safe way, an environmental scare – even an apparently spurious one - is really the last thing that UCG needed. As delegates at the UCG Partnership conference in London earlier this year told me, it was already difficult enough to try and convince investors in a technology which many had thought a dead end after abortive trials in the 1970s and 80s, but which has been given a new lease of life by modern drilling and computer modelling techniques. With the fate of Cougar Energy fresh in peoples’ minds, that task has just become harder still.