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Securing adequate funding is a critical component for establishing any scheme and the quantum and source of funding is an important consideration for project viability. Whilst considering the relative amounts of capital and operational funding required for specific scheme options, it is also necessary to consider the parties involved in funding negotiations. Options for securing this funding may include:

• _{Commonwealth Government;} • _{Queensland Government;} • _{Arrow Energy; and} • _{The wider CSG industry.}

The CSG industry has two key commitments: mitigation of the impacts of its extraction activities on groundwater; and safe disposal of CSG water. Meeting these two objectives is likely to have significant bearing on the discussions around funding negotiations.

This business case has costed a Baseline Substitution Option which reflects

Arrow Energy’s stated intentions of establishing a substitution only scheme on the CCA. These costs were of the order of 60 per cent of Option 1A (injection only using water supply profile A), noting that it is likely that additional costs will be incurred in order for Arrow Energy to dispose of all the CSG water produced by WTF9.

It is reasonable to expect that, providing Arrow Energy’s concerns regarding injection on the CCA can be addressed, that it would be prepared to commit at least what it would save if they did not have to proceed with a substitution scheme, and potentially additional funding that may be saved from not having to dispose of CSG water not used in the substitution scheme. It should also be remembered that an injection scheme is far less administratively complex than a substitution only scheme and Arrow Energy will likely save additional operational costs through reduced time in negotiating with individual irrigators.

The HHW Study was funded by the Commonwealth as a result of the Murray- Darling reform agenda. This business case has demonstrated the benefits to be achieved in the CCA through a recharge scheme using CSG water. It is not unreasonable to expect an ongoing commitment from the Commonwealth Government to achieve significant recharge to the CCA recharge which is a one- off opportunity to beneficially use available CSG water. There are no alternative sources of water to achieve such an outcome.

12.4

Legal and governance responsibilities

A key challenge to implementing any scheme involving aquifer injection will be for interested parties (potentially government, Arrow Energy, other CSG

companies and any third party operating the injection points) to agree to a legal framework for scheme operation and management. Within this legal framework, consideration will need to be given as to who a suitable third party may be to monitor the efficiency and impacts on the aquifer system.

Community and irrigators need confidence in monitoring and management of any CSG water disposal scheme.

The critical element of any direct aquifer injection scheme is likely to be the operation of the injection facilities. Securing a party with appropriate skills and experience in this area will be critical to the project’s success.

Under an option which involves injecting water into the CCA, the government will need to form a view on the level of risk associated with injection. Depending on this view of future risk and mechanisms to manage this risk, the government could choose to ensure the establishment of an injection recharge scheme by: • _{Working with CSG companies to establish an appropriate risk vehicle to bear}

this risk and potential liabilities; or

• Ensuring a regulatory regime is put in place to manage CSG companies injecting into the alluvium (assuming they follow all legislative and licencing procedures).

12.5

Contractual

Critical to ensuring the project’s success will be ensuring that the project is constructed and operated by parties with experience in delivering and operating networks of this nature. Government currently does not have the skills to operate an injection or a substitution network, and nor is it likely to consider it prudent to develop such skills in-house given such operations are not core government business. Further, delivering and operating a recharge scheme is also unlikely to be core business for Arrow Energy.

It is therefore likely that these project delivery elements would be contracted out to specialist infrastructure providers operating in Australia and overseas.

Assuming public funds are involved in financing the project costs, ownership of the network is likely to be determined under Queensland Treasury guidelines, whereby parties are requested to tender for the construction and operation of the system and possible ownership. With respect to construction and operation, these are largely determined as a financial decision based on pricing provided by experienced pre-qualified parties able to meet an agreed service delivery requirement. With respect to the ownership of the system, this will likely to be determined by price and operating competency considerations.

12.6

Engagement with other CSG Companies

Further discussions and negotiations with other CSG companies who may be able to transfer water from outside of the CCA (for example in the Chinchilla region) must occur in the near future so as to understand the potential availability of sufficient additional CSG water to justify investment in a pipeline. It will be necessary to understand what, if any, are the differing points of view other companies have and how best to incorporate any additional, unallocated water into the project.

It is clear from investigations undertaken for this project that there are significant and currently uncommitted future volumes of CSG water which companies will need to dispose of. It is also likely that other areas in addition to Chinchilla South

will also be developed in the future as CSG exploration expands with time. This may provide additional water supply options in the future.

Based on existing industry in these regions in reasonable proximity to the CCA, there is a limited need for water for irrigation purposes. A potentially viable option for these companies outside of the CCA to dispose of water may be to build a pipeline to link in with the Kenya-Chinchilla pipeline. If this is considered a viable option, it is likely that these companies may be open to building a

pipeline to the CCA to allow for additional water to be used in an injection scheme. Based on the projected volumes of water in this business case additional water of around 373 GL (Table 19) will be required to make economic a pipeline from the Chinchilla South region.

It is clear when all options are considered that broader regional considerations are important to the ultimate acceptance and viability of a recharge scheme for the CCA. In considering future options for additional water supplies, both local and regional benefits should be articulated in the decision framework.

12.7

Spatial distribution of scheme options

Equity issues regarding spatial distribution of some of the options considered in this business case were raised by the stakeholders present in the workshops. This is also consistent with views raised publicly by the Basin Sustainability Alliance and submissions through the GasFields Commission (see Part A, Section 5.1.4). The existence of equity concerns by stakeholders also supports the consideration of developing a framework to articulate broader regional benefits for the CCA, as opposed to specific locational benefits as desired by individual stakeholders. In regard to the use of CSG water available from Arrow Energy’s WTF9, work by Tree Crop Technologies (2013) established that the only other realistic alternative option for water of this volume is for supply to new or existing users close to the pipelines supplying Arrow Energy’s potential WTF9 location (Part A, Section 3.4.3). It is important to note that this use would not result in any improved sustainability outcomes for the CCA but would generate economic benefits to users who receive this water.

There are also perceptions that CSG water could and should be used in the northern part of the CCA if it is extracted from that area. This issue needs to be addressed with further modelling to demonstrate the longer-term benefits of injecting in the southern areas of the CCA where the water quality is better and where the direction of flow is towards the north. Further modelling is also

required to clarify the longer-term impacts of CSG extraction on the CCA so that the injection modelling can demonstrate what impacts are likely on these areas. Water supply profiles B and C require CSG water to be imported into the CCA from tenements around Miles and Chinchilla. Work conducted by Tree Crop Technologies (2013) identified two potential alternative uses for the similar volumes of CSG water from these areas (Part A, Section 3.4.3). Only one use (irrigation downstream of Condamine) could be considered as ‘local’. The other use involved transport of the water to the Kenya-Chinchilla pipeline for supply to existing and new irrigators. Regardless of the final decision, it is likely that some stakeholders may not be happy with the outcome. For this reason, ongoing