Tuesday, 14 June 2011

Lucas caught in fracking furore

3 June 2011, Page: 3

LIKE BHP Billiton before it, Sydney based AJ Lucas has been snared by the international environmental furore over the gas extraction technique, hydraulic fracturing (fracking). Lucas's 41% owned Cuadrilla Resources has suspended fracking at a shale gas drilling site near Blackpool in Britain after the British Geological Survey recorded an earthquake about two kilometres from the drill site.

BGS said: 'Any process that injects pressurised water into rocks at depths will cause the rock to fracture and possibly produce earthquakes". BusinessDay last week revealed that BHP Billiton was facing class action law suits in the US over the impact of fracking in Arkansas. Arkansas landowners allege BHP Billiton's recently acquired $US4.75 billion ($A4.44 billion) Fayetteville shale gas business is causing earthquakes, poisoning their water and polluting the soil and air.

Fracking involves injecting high pressure water, sand and chemicals into shale or coal seam gass to liberate tightly held gas. The fracking of deeply buried shale beds for gas is in its infancy in Britain, with the Cuadrilla Resources well the first for the country It is also in its infancy in Australia, but it is integral to the $50 billion coal seam gas industry being developed in Queensland.

Lucas is this country's biggest drilling services provider to the Australian coal seam gas industry It has invested more than $60 million in Cuadrilla Resources, which is developing an unconventional (shale and coal seam gas) business in Britain, Poland, Czech Republic, Hungary and the Netherlands.

Cuadrilla Resources chief executive Mark Miller said the suspension of operations near Blackpool showed it took its responsibilities seriously. The BGS recorded an earthquake early on May 27 at two kilometres and with a magnitude of 1.5. It said it had installed seismic measuring equipment near the well after a 2.3 magnitude earthquake was detected on April 1.

Lucas's shares have been suspended from the ASX since May 23 while it works on a recapitalisation plan. Lucas has previously laid the blame for its financial woes on its September 2008 acquisition of Mitchell Drilling. The US shale gas industry is the most developed but it too is causing environmental concerns. The US Energy Department is under directions from President Barack Obama to develop safety and environmental guidelines for fracking.

Fracking is a hot issue in Europe. France, which does not need a new gas source because of a reliance on nuclear power, is debating banning it. But last month the Commons Energy and Climate Change Committee in Britain said there was no evidence that a ban of shale gas drilling was warranted. Queensland Treasurer Andrew Fraser has said his state's booming coal seam gas industry has its supporters.