The Queensland state government has permanently shut down Cougar Energy's underground coal gasification pilot plant at Kingaroy in eastern Australia.
The Department of Environment and Resource Management said it had advised Cougar that only "rehabilitation and monitoring" could be conducted at the project. "No further underground coal gasification will be permitted at the site," the DERM added.
The Kingaroy underground coal gasification pilot plant was ordered closed in July 2010 after water quality tests found two isolated readings of 2 parts per billion of benzene in a nearby groundwater monitoring bore.
According to Cougar, the bore subsequently recorded levels below the detection limit for more than six months. The company has also subsequently tested more than 300 water samples from bores inside and outside the pilot plant area, none of which have shown any detections exceeding Australian drinking water guidelines.
Cougar was planning to use gas produced at its Queensland project to fire a 400 MW power station.
"Ultimately Cougar has not been able to satisfy the department that it could recommence its operations without an unacceptable risk of causing environmental harm," the DERM said.
Under the order, Cougar must treat and dispose of any contaminated water in surface storages and clean up groundwater at the project site.
"Cougar is required to continue groundwater sampling until the department is satisfied that rehabilitation has been completed," said DERM Acting Director General Terry Wall. "The department will also continue to regularly conduct its own sampling to ensure Cougar complies with requirements."
The DERM last week charged Cougar with breaking the conditions of its environmental approval when the contaminants were released into groundwater last year.
Cougar has the right to have the decision reviewed and appealed. In a statement, the company said it was receiving legal advice in relation to the recent actions of DERM and the shutdown of the Kingaroy project.
"Cougar Energy maintains that the Kingaroy project has not caused any environmental harm to the operating site, surrounding landowner properties nor the Kingaroy township," the company said. "This is supported by DERM acknowledgment that 'contaminants have not been detected outside the Cougar Energy site'."
