Thursday, February 2, 2012

Further thoughts

No need to Frac off.
Have you ever seen the hills around Queenstown in Tasmania ? They are bare, blasted, sterile walls of rock, devoid of topsoil and inhospitable to all vegetation. The hills and valleys of the region were once thickly forested, and home to an enormous variety of flora and fauna. The present condition of the area is a legacy of the mining industry. A lethal cloud of poisonous gases was created as a by- product of ore processing, which, when released in to the atmosphere , descended on to the surrounding hills and killed everything it enveloped. The Mount Lyell Mining Company, amongst others is responsible for this environmental catastrophe, but who do you think will ultimately be responsible for cleaning up the mess ? You and me in fact, not the shareholders or employees of the mining companies, who, for the best part of a century, took their profits and wages home, with little regard for the environmental consequences of their actions.
How is this relevant to the current debate about the coal seam gas industry ? Well, I think that it highlights the fact that private industry can be supremely good at generating profits, but can also be supremely good at avoiding responsibility for the non financial, non quantifiable effects of their activities (the carbon tax argument)
Opponents of the coal seam gas industry point out that the worst case scenarios of massive water table pollution, caused by fraccing could destroy farming, endanger communities, and potentially cost billions of dollars to rectify. The amounts of money in question may in fact exceed the capitalisation of miners and insurance companies alike. Who then would repair the damage? You already know the answer – the taxpayer!
Perhaps the question is an academic one, after all the Australian Petroleum Production and Exploration Association tells us that fraccing is perfectly safe – check out their website, We want CSG, yay !
But what if it isn't safe ? What if our worst fears are realised ? I suppose that the companies involved could fail, the shareholders could lose their investment, and the employees could lose their jobs, but all of this would be of cold comfort if we taxpayers ended up paying for the clean up. Modern approval processes implicate us in a companies decision making “ Yes its all gone pear shaped, but the government gave us permission, so its really their fault !” And don't forget that we have a queue forming of conservatives like O'Farrell, Bligh and Bailieu desperate to grant that permission for anybody to mine anything, anywhere, anyhow.
There is perhaps a way forward, however, which could be the key to rational development in this area. Don't forget by the way that fraccing is perfectly safe. Companies in Australia are generally formed under rules which limit the liability of the shareholders of that company. If you invest a few dollars in a company which makes some mistakes and goes belly up, the most you could lose would be your investment. Your liability for any losses incurred by the company is limited to your stake in it. But what if in this specific case they were not ? What if the CSG Industry were required to operate in conditions of unlimited liability ? How about we say that the shareholders and employees will be held financially responsible for any and all costs associated with negative environmental impacts. Don't forget as you consider this idea, that fraccing is perfectly safe !
As a shareholder, what could be the worse thing that would happen ? Well if the clean up costs exceeded the value of the company, the government would be entitled to seize your other assets, your cash, your super, your house – but don't forget fraccing is perfectly safe. I suppose that if the clean up costs exceeded the cost of the total shareholder and employees assets, which they well might, then shareholders and employees would be reduced to a near slave like future existence, unprotected by any bankruptcy laws, and with their income garnisheed in perpetuity. Of course I am certain that this would have no impact on investment decisions, after all fraccing is perfectly safe.
One of the exciting effects of this policy would be to limit taxpayers exposure to potentially enormous costs, and since at least one Australian political party has as its raison d'etre the minimisation of personal taxation, particularly for millionaires, I am sure this proposal will meet with their ardent approval. There is another thing I am certain of, and that is that mining companies will be falling over one another to sign up for an unlimited liability opportunity to indulge in fraccing, which as we know, is perfectly safe. The true integrity of these operators will be demonstrated when they they enthusiastically, embrace on a personal basis, the risks to which they are currently exposing farmers, landholders and the community.
One coincidental side effect of my researches into CSG is the amazing revelation that a rich, exploitable reserve of CSG may in fact exist under Mr Baillieu's Brighton home. Luckily, in this enlightened State I don't need his permission to enter his property, and start digging up his garden, in fact, I don't even have to tell him I'm coming, so I'll be there tomorrow with my drill rig, and lets get fraccing (which is perfectly safe)

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