* Santos confirms three spills from former Eastern Star Gas operations
* Greens say U.S. study calls into question climate benefits of gas
* Gas industry group says will be required to pay carbon tax for emissions
By Rebekah Kebede
PERTH, Feb 10 Australia's Santos on Friday reported three spills of contaminated water containing heavy metals from its coal seam gas operations in the country's eastern New South Wales state.
The revelation gives ammunition to Australia's influential Greens party, environmental groups, and farmers who have been calling for a moratorium on developments of the unconventional gas, chiefly for fear it may affect water supplies.
Santos said the spills were from operations formerly owned by Eastern Star Gas, which the former took over in November 2011, and took place immediately after the acquisition.
"(The spills) shouldn't have happened, they are preventable and we are upgrading the Eastern Star operations and processes to ensure that they don't continue to happen," Santos spokeman Matthew Doman said.
"We believe these leaks represented no material risk to the environment."
The Wilderness Society did independent tests on the site and reported high levels of arsenic, lead, and chromium. Santos said it did not dispute the findings.
In January, Santos reported a spill of 10,000 litres of untreated coal seam water by Eastern Star in June 2011, which occurred before Santos had taken control of the firm.
Producing coal seam gas, also known as coal seam methane, requires drawing large amounts of water from coal beds or seams to unlock gas. The water, often very saline and containing heavy metals, is supposed to be treated in reverse osmosis plants before being released back into the environment.
Opponents of coal seam gas, especially farmers who draw on groundwater for livestock and crops, worry there are insufficient safeguards to keep contaminated coal seam gas water out of the groundwater and off arable land.
The coal seam gas industry is in its infancy in New South Wales, where the spills occurred, but has been booming in the last few years in the neighbouring state of Queensland, with Santos, BG Group and Origin Energy heading up $45 billion worth of coal seam gas export projects.
CSG NO BOON TO CLIMATE?
Coal seam gas operations have also drawn criticism over industry claims that the unconventional gas can reduce emissions by replacing coal.
Australia's influential Greens Party on Friday urged a study of emissions from coal seam gas wells, saying a recent U.S. study on shale gas production, which has some similarities to coal seam gas production, debunks industry claims that the fuel is better for the climate than coal.
A U.S. National Oceanic and Atmospheric Administration (NOAA) study of shale gas wells showed greenhouse gas leakage around the wells was almost twice that of the industry's official figures, according to the U.S.-based journal Nature.
"The coal seam gas industry's claims to be better for the climate than coal are increasingly being called into question by the evidence," Australian Greens Deputy Leader, Senator Christine Milne, said, reiterating calls for a ban on coal seam gas operations.
"Because methane is so much more powerful a greenhouse gas than carbon dioxide, a small amount of leakage can undermine the climate benefit."
An Australian coal seam gas industry lobby says on its website that using coal seam gas to generate electricity instead of coal can cut greenhouse gas emissions by up to 70 percent and help cut emissions in other countries as will.
"Unlike the American industry, Australian gas producers will very shortly have a carbon pricing scheme that requires they pay for all emissions and which provides an even greater incentive to reduce emissions," said Michael Bradley, spokesman for the Australian Petroleum Production & Exploration Association.
Australia will institute a carbon tax of A$23 from July, switching to full emissions trading from July 2015. LNG projects will get free carbon permits for at least half their liability.