Feedlot operator takes gas company to court over groundwater access

Source: Beef Central

A Dalby feedlot operator has launched Federal Court action against the Queensland Gas Company, in a case that underscores ongoing tensions between landholders and coal seam gas companies over access to groundwater.

After four years of negotiations to secure water produced from gas wells operated by Queensland Gas Company on their property in order to supplement their feedlot's water supply, but having received no water, Max and David Winders' Wambo Cattle Company commenced Federal Court action last week seeking an order for the company to supply it with water from its wells.

Coal Seam Gas (CSG) production required the extraction of large volumes of water from underground seams to release trapped gases.

The CSG industry's rapid growth in southern Queensland over the past decade has generated concerns from agricultural operators who rely on the same sources of groundwater, amidst reports of declining water pressures, falling water tables and gasification of long-established water bores.

Max and David Winders' Wambo Feedlot is located near Dalby in what has been informally dubbed the "Wambo Energy Junction".  Within close proximity to their feedlot are hundreds of CSG wells, several gas and water pipelines and three gas-fired power stations accessing the interconnector to the national energy grid.

The area has been identified in reports prepared by Queensland Government's Office of Groundwater Impact Assessment (established in 2011 to manage impacts of groundwater extraction by the resource industry) as an immediately-affected and long-term affected groundwater area.

Gas tenure holders are obliged under Queensland's Water Act 2010 to commence "male good" negotiations with owners of existing and new bores located within an immediately affected area, as well as to consider the potential impacts within a long term affected area.

Queensland's CSG Water management Policy of 2012 also prioritises the use of "associated water" from CSG developments for beneficial use for other users, for example agriculture, livestock and town water supplies, or for 'making good' impacts caused to existing and new mores by CSG extraction activities.

The development of the water supply to Wambo Cattle Company's (WCC's) 11,000 SCU feedlot, operational since 2005, was based on obtaining drinking water for cattle primarily from the property's surface water storage dams, and supplemented by groundwater extracted from bores sourcing Surat Basin aquifers such as the Precipice, Huttons and Walloon Coal Measures.

According to court t documents filed last week, this groundwater supplementation was expected to come from WCC's own bores, constructed in accordance with licenses WCC received prior to the development of the feedlot to its earlier-approved 24,000 SCU capacity.

The water licenses enabled the extraction of water from aquifers which had since become subject to dewatering through CSG extraction.

Court documents indicate that WCC has been able to supplement its groundwater supply through a successful beneficial water use partnership with CSG company Arrow Energy.

Arrow Energy began extracting water from the Walloon Coal Measures east of the feedlot to supply gas to two nearby gas-fired power stations around the same time the development of WCC's Wambo Feedlot commenced.

Beneficial use by WCC of some of the untreated CSG-water from Arrow's wells was initially achieved by WCC diverting a proportion of water from Arrow's well to the power stations via a pipeline along its eastern boundary.

WCC then constructed a pipeline from the Arrow pipeline to its water supply dam, to a point where the untreated CSG-water could be mixed and diluted with dam water to provide a stable and quite acceptable quality of water for cattle in the feedlot.

Arrow later constructed a separate pipeline to the feedlot water supply dam and the feedlot has received a reliable supply of good quality untreated CSG water from Arrow's nearby Daandine gas fields on an 'as-available/as-required basis', in terms of agreements formalised in a 2010 Water Usage Deed.

WCC said the water from Arrow had proven to be very useful in securing the ability of its custom feedlot to guarantee water supply to the owners of cattle on feed, and had assisted WCC in meeting its customers' expectations during low rainfall periods when the feedlot's services were most needed.

Following the successful augmentation of its feedlot's water supply with untreated water from Arrow Energy, in 2013 WCC began negotiating with Queensland Gas Company to receive water from its wells on the property.

Last week, after four years of negotiations and agreements but still not access to water from QGC, WCC commenced Federal Court action seeking an order for the company and its international owner Shell to supply it with CSG water (Shell also owns 50% share of Arrow Energy, with the other 50% owned by PetroChina).

Mr Winders' statement of claim lodged as part of the proceedings alleges the following:

• That QGC failed to take sufficient or reasonable steps to cooperate with Wambo Cattle Company (WCC) in the supply of CSG water pursuant to conditions in Conduct and Compensation Agreements (CCA) and Water Service Agreements (WSA) signed with WCC;
• That QGC had not used its statutory 'best endeavours' obligation to obtain information about WCC's bores in order to comply with its obligations under Queensland's Water Act;
• That QGC has not entered into a make good agreement with WCC;
• That QGC has failed to provide CSG water to WCC and failed to commit to a date certain by which they would provide CSG water to WCC;
• That QGC, through the course of negotiations with WCC, did not tell WCC it was negotiating to send untreated water to Chinchilla weir - an agreement the precluded it from supplying water to WCC - and did not inform WCC when that agreement was made;
• That QGC knew, or believed, throughout the course of negotiations with WCC, that it would be unable to, and that it in fact would not provided, WCC with access to CSG water.
• That QGC built a 'fake point of take works' to create a false impression it was complying with its obligations under the CCA and WSA with WCC, and its statutory best endeavours obligation;
• That in doing so QGC acted with 'reckless indifference' to the question whether it would or would not be able to provide WCC with CSG water.
• WCC alleges it informed QGC on multiple occasions throughout the negotiations that it believed the company was acting in contravention of the Australian Consumer Law (Competition and Consumer) Act 2010;
• WCC alleges that it has suffered financial losses as a result of the long delay in receiving water from QGC, as it was unable to expand the feedlot to meet the demand for additional pen space during that period;
• WCC also alleges that QGC's delay in commencing make good negotiations, as required under the Water Act 2000, further delayed the feedlot expansion to its approved 24,000 SCU capacity and this caused additional financial losses.

WCC's statement of claim seeks and order under Australian Consumer law fro QGC to provide it with water and to undertake 'make good' measures in accordance with the Queensland Water Act 2010, and is also seeking damages including accounting, hydrology, legal and valuation costs.

The matter is subject to a Federal Court action which limits what parties involved can say about the matter publicly.

A spokesperson for QGC told V+Beef Central that the company plans to strongly defend the matter, "with out preference being to continue to negotiate an outcome with WCC directly".

"It has always been and remains our intention to provide WCC with untreated water however this needs to be done so in accordance with necessary safety provisions".