Coal seam gas wells leaking

Scientists say gas levels three times higher than surrounding areas

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published March 7, 2013 3:39 pm AEDT

Coal seam gas (CSG) wells in Queensland's Darling Downs are leaking at a greater rate than first thought, potentially proving to farmers, businesses and homeowners that their fears have been justified.

According to ABC News, a team of Lismore-based scientists at Southern Cross University tested for the naturally occurring radioactive radon gas at CSG wells near Tara on the Darling Downs. The study found gas levels are three times higher than the surrounding area. The Queensland Gas Company has a gas plant and wells in the area.

In 2010, 58 wells were tested at QGC's gas fields and 26 were found to be leaking, with five of those wells at 'flammable' levels.

The New South Wales government recently imposed a 2km buffer zone around towns, suburbs and areas earmarked for future development, limiting exploration for CSG in the state. Oil and gas companies, AGL Energy (ASX: AGK) and Santos Limited (ASX: STO) were outraged.

Associate Professor Isaac Santos has told the ABC that more research needs to be done, but the findings of the study indicate that emissions of radon gas are concentrated around CSG wells. But he added that it may a chicken or egg question. Do the wells produce the radon gas, or do we have lots of wells in a location that's gassy naturally?

More than 40,000 coal seam gas wells have been projected, and that's just in Queensland, over the next twenty years. An estimated 450 CSG wells are drilled in Queensland each year by companies including Santos, Origin Energy (ASX: ORG) and Drillsearch Energy (ASX: DLS). 70% of the gas produced by CSG is used by the state. The remainder is likely to find its way into export markets via the seven CSG-LNG (liquefied natural gas) projects proposed for the State, with three currently under construction.

Foolish takeaway

It seems that there is a lot of misunderstanding and loss of trust in the CSG industry. Origin Energy recently signed up rugby league legend Darren Lockyer to spruik the benefits of coal seam gas for the company. News that gas wells are leaking more than first thought certainly don't help the CSG industry.

Oil, copper, and gold continue to be in high-demand — and their popularity doesn't look to be slowing. We've uncovered three companies poised to benefit from the rising prices of these commodities. Get our brand-new report — "3 High-Risk/High-Reward Resources Stocks" — FREE!

More reading

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in Origin and Drillsearch.

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.