“I call this one ‘roo stew’,” says Tony Pickard, a semi-retired grazier who lives near the Pilliga, a vast inland forest in northwestern New South Wales. Pickard is referring to a photograph taken in August 2009 of a dead animal immersed in filthy, brackish fluid. Tufts of grey fur protrude from the liquid, but the animal is so decayed — almost dissolved — that it’s difficult to identify whether it is indeed a kangaroo, or some other type of carcass.

For the past four years, Pickard has scouted the forest, a ladder tucked under one arm, and a camera slung over the other. He’s captured images of a turtle, a goanna, and a dozen frogs, all floating dead in the cloudy ponds or wells that litter this coal seam gas (CSG) drilling site.

All this in a "Noah's Ark" for declining bird and mammal specials, as an ecological study released this week called the Pilliga forest.

In recent months, the state government has taken concrete steps to help CSG drilling expand. On September 11, NSW lifted its moratorium on fracking, a controversial method of extracting coal seam gas. The state has granted several new exploration licences and it has renewed others — including the licence that was granted over the Pilliga. And in early October, the NSW Resources and Energy Minister, Chris Hartcher, told a coal seam gas industry conference that he wanted to ramp up CSG production in NSW.

Tony Pickard

“I call this one ‘roo stew’,” says Tony Pickard, of his August 2009 photograph

But Pickard’s photos, as well as images taken by The Global Mail when we visited the forest in July, show dead animals and environmental destruction. Water and soil samples tested by independent experts show levels of contamination that they say could explain these animal deaths. And according to a former employee of the company responsible for most of the gas drilling in the Pilliga, this kind of damage had been occurring in the forest for years.

Altogether, our reporting shows a disturbing reality of coal seam gas extraction that the industry is at pains to hide, especially as it gears up to spread its operations throughout NSW.

Pickard believes that the state government has failed to properly police the rapidly expanding industry, and worries that what happened in the Pilliga could happen elsewhere across the state.

“I want people to understand how much raping and pillaging has been done of the Pilliga State Forest and its environs,” he says. “I want a complete cessation of the industry until the effects of what has already occurred are known and published.”

THE PILLIGA COULD BE the biggest forest you’ve never heard of. Covering more than 500,000 hectares, it’s the continent’s largest inland forest, bigger even than Tasmania’s iconic Tarkine Rainforest. Home to many vulnerable and endangered species, including koalas, the Pilliga is important for another reason: the forest grows on the layers of sandstone that filter water as it flows down into the Great Artesian Basin — one of the continent’s most important sources of fresh water.

Nature also endowed the area with deposits of methane gas buried deep beneath the ground. It’s that gas — often called coal seam gas, or CSG — that companies want to extract, and which has seen them drill dozens of wells throughout the forest since the Department of Trade and Investment granted a petroleum-exploration licence over the area in 2004.

In recent years, the race to drill natural gas has been compared to a modern-day gold rush. Especially in the United States, companies aiming to produce more climate-friendly energy sources have aggressively pursued leases on land that contains gas and have commenced drilling operations in multiple states; the companies regularly face opposition from critics claiming that that the drilling process has polluted water systems, and made humans and animals sick.

The drilling in the Pilliga was led by Eastern Star Gas, which started operations in the Pilliga in 2005, and carried them out until the company was bought by Santos in November 2011. Santos is Australia’s largest coal seam gas operator, and bills itself as the gold standard of environmental practices.

When Santos took charge of the Pilliga field, the company discovered problems so severe that it halted operations in mid December, according to a company spokesman, and pledged $20 million to help rehabilitate the site.

“Santos has become aware of a number of past practices and incidents that should be reported to Government,” the company wrote in a report to the NSW government released in February 2012. “Santos is committed to a full rehabilitation of the impacted areas and is implementing immediate improvements to Eastern Star’s operational practices.”

Mike Bowers/The Global Mail

Pond at the Bohena 7 site showing crystallisation just above the water level

The Santos report detailed spills and leaks from drilling operations, and multiple failures in Eastern Star’s documentation and reporting. The state environmental protection authority has subsequently fined Eastern Star $3,000 for environmental breaches, including flushing contaminated water into a creek, and covering up a spill from a drilling pond that killed off large numbers of trees.

In line with its image as the clean, green CSG operator, Santos has been outspoken about the problems it found in the Pilliga and its determination to fix them. Operations in the forest remain on hold, and the department responsible for investigating the problems in the Pilliga has renewed the company’s drilling licence, even though the investigation is ongoing.

But not all of the problems in the Pilliga can be blamed on Eastern Star. In July, the EPA issued Santos with a formal warning for what it called a “limited discharge event” that saw fluid containing high levels of ammonia released into the environment in December 2011. The EPA said it did not believe that the release had harmed the environment.

In April, the company said it had received government approval to rehabilitate the ponds, and expected to start that work “soon”. Santos has begun draining contaminated water out of some holding ponds, and says it will continue its attempts to rehabilitate the many trees that have been killed by toxic spills.

But The Global Mail's reporting showed that, as late as July, the ponds remained uncovered, without so much as a tarp thrown over to keep wildlife out. Emus and other birds were drinking from puddles, sitting on top of sludge that had spilled from the ponds onto the floor of the bush. And we saw ponds that were on the verge of overflowing, following heavy rains. We also found that the state government didn’t know the true state of affairs inside the Pilliga, until we and certain locals started asking questions.

Together, these factors raise troubling questions about the oversight of this growing industry within NSW.

EXTRACTING COAL SEAM GAS is a complex process. But it’s one that became very familiar to John Tough, a Narrabri local who worked at Eastern Star Gas from 2004 until 2009. His employment included a stint as a pipeline attendant, which involved ensuring that drilling went smoothly.

Since leaving Eastern Star, Tough has become that archetypal character — the former employee-turned-crusader, a man churned up about having participated in practices he now sees as wrong. He won a seat on the Narrabri Shire Council in September’s local elections, based in part on his stance against CSG drilling in the Pilliga.

Like many Narrabri and Gunnedah residents interviewed by The Global Mail, Tough doesn’t oppose CSG in principle, but has grave concerns about how the industry has conducted itself to date.

“I want a moratorium on it until they can prove that it’s not detrimental to the environment,” he says.

As its name suggests, coal seam gas is trapped between layers of coal, often buried hundreds of metres below the ground, depending on the local geology.

Mike Bowers/The Global Mail

Ponds of overflow water outside the Bibblewindi 16 site

Tough explains that, to release the gas, workers drill a deep hole, into which they insert a steel pipe that they encase with concrete. They blast ball bearings down the pipe to penetrate the layers of coal. The gas rises to the surface through the pipe, along with large volumes of water that are captured and stored in ponds.

The water can be extremely salty, and can also contain naturally occurring chemicals and heavy metals. Onsite water-treatment facilities are often used to improve the quality of the water, which is then put in ponds or taken off-site.

The use of ponds to store CSG water came under fire from a 2011 NSW parliamentary inquiry into the CSG industry. The committee handed down a highly critical report in May 2012, with 35 recommendations for changes to regulation and oversight. One of the recommendations was that “the NSW Government ban the open storage of produced water”.

So-called “evaporation ponds” — where drilling water was allowed to sit until it simply evaporated — were banned in July 2011, after Minister Hartcher promised to take action to strike a balance between the CSG industry, and agriculture. But the committee noted that “storage” and “holding” ponds can also increase “the risks of accidental leakages or spills of produced water, for example if tanks or storage ponds overflow as a result of extreme rain events or floods”.

“Given that produced water has the potential to contaminate ground and surface water systems, the Committee believes that produced water must be stored in closed tanks or taken off site for processing,” the report concluded.

The government is due to respond to the report on November 1. Minister Hartcher’s spokeswoman said the majority of the report’s recommendations would be adopted, but would not give any specific details of these or when the recommendations would be put into practice.

It was what happened in those storage ponds that began to sour Tough’s views on Eastern Star, and the CSG industry.

“The roos, when they drank out of the ponds, they’d be dead the next day,” Tough recalls. He remembers dragging kangaroo carcasses away from the drill sites at least once a week.

“Yeah, it upset me,” he says. “They’re on our coat of arms, and they’re getting poisoned and killed for no reason.”

The Pilliga is often dry at the surface. The creeks that run through the forest are known as “inverted”, meaning that the water flows through layers of sand beneath the ground. So rare is available water that animals are likely to drink whatever water they can find.

At the peak of drilling, there were around 50 ponds throughout the forest.

The Global Mail observed a dozen still-filled ponds in the Pilliga, including in areas where previous spills had occurred.

Mike Bowers/The Global Mail

Tony Pickard documents overflow around the Bibblewindi water treatment and gas gathering site

The ponds varied in size from little larger than a bath, to enormous bays far larger than an Olympic pool. Some were lined with thick plastic, but others were scraped-together mounds of dirt with a hole in the middle where the water sits.

All the ponds were uncovered, presenting not only a potential drinking hazard but also a drowning hazard. While a four-metre high fence surrounded what is known to be the largest pond in the forest, other fences were just a little taller than a metre. Locals say even small kangaroos clear these fences without difficulty.

“A lot have come for a drink and slipped in, and they couldn’t get back out,” Tough says.

And it wasn’t just kangaroos that he would find dead in or near the drilling ponds. Like Tony Pickard, Tough says he discovered wallabies, goannas, turtles — once, even a goat — floating in the toxic brine, or lying dead near a well.

Drew Hutton, president of the Lock the Gate campaign, an alliance of farmers and environmentalists opposed to CSG, says he’s seen similar scenes at coal seam gas sites around New South Wales and Queensland. Reliable, official information about the total number of CSG wells is very hard to come by, but a national study by the Australian Broadcasting Corporation last year found that nearly 2,000 wells had been approved in Queensland, which has more than any other state (as you can see in their map).

“All across the areas where the coal seam gas companies have their tenements, there are native animals being slaughtered,” he says. “In Queensland — that’s where most of the development is now — you always see dead animals in holding ponds. Always. They’re usually wallabies or kangaroos, but they can be birds or other native animals. They come there for a drink and end up falling in or being poisoned.”

A new report, commissioned by the Northern Inland Council for the Environment, found that drilling in the Pilliga could threaten the survival of endangered species, such as the Pilliga Mouse.

Matthew Doman, a Santos spokesman, didn’t directly deny Tough’s allegations, but said animal deaths at the Pilliga site are “not a regular occurrence”, and that the company has found five dead kangaroos in CSG ponds since it took over.

“They were drownings, rather than poisonings. But that’s not to say they were in any way acceptable,” he said.

But Tough, for one, believes that the animals don’t just die by drowning. He thinks there’s a link between the frequent animal deaths and the chemicals used in the drilling process.

In addition to gas and water, also bubbling up from the depths of the wells comes a sludge-like, chemical-laden substance that Tough calls “returns”, which he and other workers stored in bags.

“If the bags were too hard to be broken up with a sledgehammer, they were just thrown into the ponds,” he says.

What was in those bags?

Mike Bowers/The Global Mail

Farmers and graziers Alistair Donaldson, David Quince and Tony Pickard in one of the overflow sites around the Bibblewindi water and gas gathering site

The coal seam gas industry has come under fierce criticism in other countries for refusing to disclose what chemicals are used in its drilling processes. Australian mining companies have dismissed concerns, saying the chemicals used here are safe.

Doman said Santos couldn’t comment on Tough’s claim that Eastern Star dumped chemicals into the ponds, but said the drilling fluids used by Eastern Star were “in line with those used across the industry”, and that the main additives were salts and biodegradable gels.

But the contents of the ponds in the Pilliga are more than capable of poisoning plants and wildlife, according to independent experts consulted by The Global Mail, who reviewed test results of soil and water samples taken from the forest. The samples came from sites that were drilled before Santos took control of the site.

The tests were conducted by the ALS Group, a global company that specialises in minerals testing and analysis. ALS’s Tamworth branch examined soils and waters taken from numerous areas of the forest, including holding ponds and spill sites. Though the samples were taken after Santos took control of the site, many of these drilling holes were put in by Eastern Star Gas.

While some samples showed only moderate amounts of salts, others contained elevated levels of chloride and barium, or were so saline that they could have killed any plants and animals that came into sustained contact with them.

The results alarmed Dr. Freeman Cook, a soil and water expert who worked at the CSIRO for two decades and is now an independent consultant based in Brisbane. Cook reviewed the test results for The Global Mail.

“It’s saltier than sea water,” Cook says. “This explains a tree die-off.”

Indeed, visitors to one Pilliga drilling site, in an area called Bibblewindi, the site of Eastern Star’s water-treatment plant Eastern Star’s water treatment plant was sited, can observe a large area of dead and dying trees surrounding the drill pond. Pink and white ribbons tied around their trunks by the company hired to rehabilitate the site denote which trees might be saved, and which cannot, according to Doman.

The trees stand on an area of forest floor that is coated with green-black sludge, the remains of a spill that occurred in June 2011.

Cook says the sampling results indicated levels of contamination that could easily explain such damage, a view that is consistent with Santos’s public statements on that spill. He said similar levels of salts and other contaminants were evident in samples taken from other drilling sites within the park.

“It’s unsuitable for crops and unsuitable for drinking water for animals,” Cook says, and would kill any animals that depended on it for drinking.

Locals worry that chemicals from CSG drilling could sink through the sands and pollute the Great Artesian Basin, Australia’s most important underground source of fresh water. The CSIRO was unable to say whether there is evidence to substantiate those concerns, but did confirm that the Pilliga is critical to the basin’s process of filtering water, and replenishing the aquifer.

When The Global Mail visited the Pilliga, we observed four unlined ponds, even though the government says that all CSG ponds should be lined, to prevent chemicals seeping into the ground beneath.

Mike Bowers/The Global Mail

Mike Bowers/The Global Mail

Mike Bowers/The Global Mail

Mike Bowers/The Global Mail

Mike Bowers/The Global Mail

Santos acknowledged to us that the area called Bohena 7 — where a spill killed off large numbers of trees — was unlined. Yet a spokeswoman for Minister Hartcher said that the only unlined pond in the Pilliga was Bohena 8. The minister’s spokeswoman did not respond to our query about the discrepancy, nor to whether this calls into question the effectiveness of the government’s oversight.

Neither conceded that the forest contained more than one unlined pond. Yet The Global Mail, along with locals such as Pickard and Tough, have observed and photographed unlined ponds at sites throughout Bohena and Bibblewindi — in particular, at the drill-sites surrounded by large areas where the bush had been cleared.

ONE WAY TO STOP ANIMAL DEATHS in the Pilliga could be to remove, or simply cover, the ponds in which toxic water is stored.

Santos pointed out that the law does not require ponds to be covered, but the company is nevertheless decommissioning many of them – which involves draining the fluid, removing some of the sludge, and taking it to a landfill in Newcastle, according to Doman.

Asked why — nearly a year after Santos took control of the site — so many problems remain, Doman said that the extensive nature of the work meant it took a long time to complete.

In the past week or two, the company has drained some ponds and removed the sludge, but locals are still unhappy about the state of the forest.

“They’ve excavated the sludge out of them [the ponds], which we believe to be the remnants of drilling fluids,” says David Quince, a local farmer who recently won a seat on Gunnedah Shire Council. “They’ve placed it on the dirt nearby the ponds, and it’s unlined again, so this stuff is coming into contact with more dirt.”

Doman says the company believes the sludge is non-toxic, but is removing it from the forest and taking it to a landfill in Newcastle. He says the company is also testing the soils near drilling sites to determine what, if any, toxic materials they contain.

The drilling operations in the Pilliga are unusual in that, unlike most coal seam gas exploration sites, these wells have been drilled on public land. As a result, locals, reporters and members of the public are free to visit the area, and see for themselves the toll that coal seam gas extraction exacts from the land.

“Much of the destruction that coal seam gas is wreaking is on private property and difficult for the public to get a clear idea of,” says Hutton, the campaigner for Lock the Gate. “In the Pilliga, however, which is public land, the destruction is there for all to see.”

A spokesman for the Australian Petroleum Production & Exploration Association, which represents coal seam gas companies, says the Pilliga does not represent the way gas exploration and extraction is usually carried out.

“Aspects of the Pilliga site were in breach of environmental regulations and clearly this is not representative of CSG operations,” said Chris Ward, the association’s spokesman. He added that the industry takes very seriously its responsibility to “the environment and the communities in which we operate”.

In a press release announcing its intention to renew Santos’s licence in the Pilliga, the state government warned that, “failure to comply with title conditions can result in enforcement action against the holder, including prosecution and title cancelation”. A spokeswoman for Hartcher did not respond directly to questions about why the works had taken so long, but pointed out that the investigation into the Pilliga is ongoing.

Locals are incredulous.

“It makes me very angry,” says Quince. “There’s a litany of breaches out there. The government knows about it. They’re treating us like idiots.”

Quince has been lobbying state government officials for the past few months, demanding action to fix the Pilliga. His property, which is a 90-minute drive from the Pilliga, is also subject to a CSG-exploration licence, for which neither the government nor the company needed his approval.

Quince acknowledges that Santos has finally started to take action. But he says that if the government plans to renew Santos’s licence in the Pilliga, he has little confidence in officials’ ability and willingness to enforce environmental rules, given all the past documented problems.

“[The ponds have] been sitting here for 12 months since Santos took over,” he says. “It’s unbelievable.”