Assessing the viability of agriculture and energy’s co-existence model

Author: Angus Duddy | Date: 02 Mar 2018

Call to action / take home messages

The study focused on key considerations and constraints in managing the impact of extractive energy industries and agriculture co-existing in close environmental proximity to each other. The challenge lies in managing the barriers to this co-existence including scientific, technological and social obstacles. Lessons from the United States and Canada shed light on various ways to foster a sustainable co-existence. These include; environmental bond legislation, extraction and reclamation processes, and increased communication of the values and interests of different industries. Ultimately, the goal is to initiate effective governance and adaptive management utilising a region-specific management technique.

Introduction

There is often an uneasy co-existence of the energy and agricultural industries, particularly in highly productive agricultural areas. The co-existence model is that resources and agricultural industries can operate together while maintaining and even enhancing the condition of natural, social/cultural, human and built assets in the region. This implies that all industries can be productive and profitable without exceeding sustainable limits of physical infrastructure, social systems or the environment (Collins, N. et al. 2013).

The challenge is to manage the various interests of different stakeholders and to overcome the scientific, technological and social barriers to achieve a suitable co-existence model. Facing this challenge is crucial as there is much at stake, including irreversible damage done to land and water.

Background

Prior to the recent scale back of the proposed coal mine in mid-2017, the Liverpool Plains region was one of the concentrated areas within Australia where the co-existence between extractive industries and agriculture was a topic of particular significance. This situation prompted this study.

Much of the argument for the development of the mines on the Liverpool Plains focused on the potential to provide employment and financial security to the region. Proponents of the mines argued that the mining industry and the local agricultural sector could continue to operate within close proximity to each other. This validity of this assumption was questioned by much of the local broadacre farming community who were concerned that the vast reserves of water held in underground alluvial aquifers would be disrupted by mining activities. The farmers argued that this water, a source for irrigation that sustains cropping activities and food production, provides the real financial security of the region.

The Liverpool Plains is also well known for its extremely high-quality soils that are capable of storing large amounts of plant available water, making the region a more reliable crop producing area than most other parts of the cropping belt.

Initially, the proposed mining projects sought to create a symbiotic relationship between the producer and the coal mining entities. As these projects moved through various levels of planning, potential impacts on the local environment and water reserves became clearer. Furthermore, there was evidence of a great lack of trust and confidence in government due process and in the companies developing the resource.

Objectives

Consideration of how mining and agriculture co-exist in other parts of the world can help to shed light on the viability of an agriculture and energy co-existence model in Australia. This study has focused on the assessment of the key considerations and constraints in managing the impact of extractive energy industries and agriculture coexisting in close environmental proximity to each other.

Lessons from the United States and Canada

Government legislative framework in Wyoming, United States

The state of Wyoming in the United States is heavily reliant on coal, oil and gas industries. Wyoming produces 39% of all of the coal mined in the U.S. The area was originally based on agriculture and is currently responsible for a large amount of high-value agricultural production including crops, livestock and poultry.

The Powder River Basin Resource Council was developed to assist landholders who were directly affected by energy development in Wyoming. Wyoming and Texas are somewhat unique as some landholders held their mineral rights as part of their original homesteading tenure, and holders can negotiate with coal and oil companies for the right for surface access arrangements through state process. One issue is that through a loophole there is provision for gas companies to access land without landholder consent. As the Coal Bed Methane (CBM) industry developed, landholders felt they had lost their voice, and in some situations landholders were host to 200+ CBM wells of which they had no control over their development.

Wyoming’s situation, although not isolated, is interesting, as the social values that are held by the landholders are derived from a long history associated with early homesteading. The landholder is nearly always multigenerational, with a strong intent to continue ranching into the future. Issues arise between the ranchers, the locals and the energy companies, with the ranchers becoming the target of public and mining company campaigns, that they are impeding the flow of mining royalties into the community. The contribution of coal to the state of Wyoming is in excess of US $1 billion per annum. Agriculture in Wyoming is in the situation that the support generated by the general population is proportional to its contribution to state revenue. This makes it hard for agriculture to compete against the energy industry.

Government legislative framework does provide some regulation to this contentious relationship. In the U.S., the Surface Mining Control and Reclamation Act 1977 requires that coal mining areas be restored to ‘a condition capable of supporting the uses which it was capable of supporting prior to any mining.’ This Act also requires mine operators to submit a mine reclamation plan prior to commencing extraction and also post a performance bond prior to development to ensure that funding will be available to complete this reclamation. The bond is not released to the mine operator until after the regulator has concluded that the reclamation is successful.

Commercial oil production in Alberta, Canada

ConocoPhillips Surmount II in Fort McMurray, Alberta is a commercial oil production site. The site has a total build value of over U.S. $10 billion and is designed to produce approximately 118,000 barrels of oil per day over its 40-year production lifespan. Steam-Assisted Gravity Drainage (SAGD) is used to remove the oil from deep below the surface. SAGD is the most commonly used method to recover oil in the Athabasca Oil Sands region. Two horizontal wells are directionally drilled from a central well pad. Steam travels from a nearby plant to the wells where it heats the oil to a temperature at which it can flow by gravity into the producing well. The process of steam injection and oil production happens continuously and simultaneously. The resulting oil and condensed steam emulsion is piped from the producing well to the plant where it is separated and treated. 90% of the water is recycled. In a process which uses 2.5 barrels of water to produce one barrel of oil, a 90% recycle rate is crucial to maintain environmental integrity.

ConocoPhillips has stated that it is totally committed to the complete reclamation of the nearly one square mile of land that the project site resides on. However, there will be unavoidable impacts. The Directorate General for Internal Polices Policy Department stated

“An unavoidable impact of shale gas and tight oil extraction is a high land occupation due to drilling pads, parking and manoeuvring areas for trucks, equipment, gas processing and transporting facilities as well as access roads. Major possible impacts are air emissions of pollutants, groundwater contamination due to uncontrolled gas or fluid flows due to blowouts or spills, leaking fracturing fluid and uncontrolled waste water discharge.”

The value of agriculture in Bluegrass County, Lexington, Kentucky, United States

In January 2013, the University of Kentucky was engaged to measure the influence of the agricultural cluster on the Fayette County economy. The paper found that historical nature of measuring agriculture in the county focused on production agriculture. However when the cluster was expanded to include the agricultural inputs, food processing, transport, communications, wholesale, retail and service industries, the real value was discovered. The findings were that one-in-nine jobs were directly linked to agriculture (16,676 in total) and that the cluster generated US $2.4 billion in output annually with a further $1.32 billion in additional income, profit and dividends.

The value of the industry is reflected in the Purchase of Development Rights Program. The program helps conserve the precious Bluegrass landscape by purchasing conservation easements on 50,000 acres in the Rural Service Area to secure a critical mass of protected farmland for general agriculture, equine and tourism industries. Essentially, a permanent agricultural land easement is created over the associated lands on a voluntary basis, whereby the landholder forgoes their right for development and leaves the land in agriculture for perpetuity.

Extraction and regeneration in Indiana, United States

The state of Indiana prides itself on the process of extraction and sustainable regeneration. Before mining begins, operators must plan for the replacement of topsoil after the coal has been removed. Details about the removal, storage, replacement and protection of the topsoil from wind and water erosion are listed in the mine operation plan. A ‘Citizens Guide to Coal Mining and Reclamation in Indiana’ states that topsoil is removed in a separate layer from areas to be mined and immediately replaced or stored at approved locations. Careful handling of the topsoil and subsoil is crucial for reclamation because this is the medium on which the success or failure of plant growth on the reclaimed site is determined.

Anson Family Farms in Indiana produces corn, soybean, storage, turkeys and cover cropping. Multiple acres of their farming land have been reclaimed from pillar and block and open cast mining. The results of the reclamation were outstanding.

Recommendations

The study focused on key considerations and constraints in managing the impact of extractive energy industries and agriculture co-existing in close environmental proximity to each other. It is clear that there must be an understanding of the true value of the agricultural and energy resources, as well as consideration of the societal effects.

The values that farmers hold with regards to the impact of the landscape as it changes during the mine development are not well communicated by the landholders to extraction companies. Better compensatory processes could be established in Australia if there was a better understanding between landholders and miners of their perceptions of land value. Examples from overseas have shown that community consultations and transparency in the development of projects have led to positive outcomes for all involved.

Co-existence of these industries also requires a legislative framework that accounts for the environmental, economic, social and cultural values. The overarching governmental framework differs in Australia to other parts of the world. One example of this is the environmental bond policy which puts necessary economic deterrents in place for mineral and petroleum companies to instigate best practice.

Environmental bonding is critical to produce positive outcomes with regards to sustainable energy extraction. It is crucial that the implications of environmental default are such that the financial viability of the operation would be jeopardised by a company’s incompetence. In conjunction, negative measurable impacts to ground and surface water sources should negate any development proposal no matter its size or economic value.

Conclusion

It is unchallenged that agriculture and energy industries are closely interconnected, and the choices and actions made in one domain greatly affect the other. The challenge lies in managing the barriers to this co-existence, including scientific, technological and social obstacles. Ultimately, the goal is to initiate effective governance and adaptive management utilising a region-specific management technique.

The issue that underpinned all sites visited was that the sustainability of water resources is always compromised if energy extraction of any sort is undertaken close to water resources, either underground or on the surface.

Acknowledgements

Thank you to Nuffield Australia, the Grains Research and Development Corporation (GRDC), my family, our staff and my forever understanding wife, all Nuffield associates, co-operators and associated people and Brazil Global focus program group 2016.

Contact details

Angus Duddy
929 Rossmar Park Road, Quirindi, NSW
Mb: 0400 369 723
Email: angusduddy@bigpond.com