COAL seam gas controversy is flaring up again after a fresh debate over royalty payments was ignited last week by the South Australian Premier Jay Weatherill’s plan to give landholders a slice of the economic action.
Nationals Leader Barnaby Joyce welcomed the initiative and eyed potential for roll out in other states and the gas industry offered qualified support. But questions remain.
Following a string of widespread blackouts, Mr Weatherill last week announced new policy to tackle to the state’s energy woes, committing to pay 10 per cent of gas royalties from private land to the property owner.
State gas royalties are calculated on wellhead value, which is the price a buyer is willing to pay minus the cost of production, certain asset depreciation, and land rehabilitation costs. That means landholders would receive 1pc of the companies wellhead value.
Queensland community action group Basin Sustainability Alliance chairman Lee McNicholl cautioned against signing up to a royalty scheme which he claimed could be manipulated to reduce payouts.
“Landholders will end up with five-eighths of the proverbial if they are dumb enough to get sucked into a royalty deal. They are an unknown quantity,” Mr McNicholl said.
“Companies can use transfer pricing and manipulate interest payments to reduce their royalties. Don't fall for the percentage trick.”
Mr McNicholl said it was a “disgrace” for Mr Joyce to encourage a royalty scheme to entice farmers into hosting gas production, due to potential community divisions that would open up given many landholders would not “take one dollar from the unsustainable gas industry”.
Australian Petroleum Production and Exploration Association chief executive Malcolm Roberts welcomed the royalty scheme as “another incentive for private land owners who host gas developments” but pointed out SA’s royalty scheme will pay landholders out of the state’s pocket without added cost to industry.
“It’s a royalty sharing arrangement, not a royalty increase,” Mr Roberts said.
Under current arrangements in Queensland landholders do not receive royalties but may negotiate access arrangements. Mr Roberts said of the more than 5000 agreements landholders had received $250 million in the industry’s fifty years of operation.
Landholder and former mayor of Queensland gasfield local government Robert Loughlin welcomed a royalty scheme, as long as royalty payments weren’t substituted for existing compensation obligations.
“It would take long time to change legislation like that… but any way to grow farmers’ returns from gas will help agriculture,” Mr Loghlin said.
The issue is set to create controversy in NSW, where Santos has lodged plans with state government to develop 850 wells in and around the Pilliga state forest.
But the company has wound back its development plans from its initial proposal, which would have seen wells drilled in more fertile cropping and cattle country around Gunnedah, were farmers remain broadly opposed to gas development.
Lock the Gate president and founder Drew Hutton, who established the landholder group in his home state of Queensland as the gas industry begun its rapid expansion, said while some landholders on marginal country could be attracted to a royalty scheme, most regional communities would not support a royalty scheme.
“This is the last attempt by the gas industry to get government behind it with a phoney argument about running out of gas to force land owners into signing an agreement with the gas companies. Landholders won’t be tricked into this, and it is a trick. Rural communities are a bit more sophisticated than they’re being given credit for.”
Mr Hutton said while some landholders welcome development, others would remain opposed, pitting “neighbour against neighbour”.
“People just stop to talking to other people in this scenario and communities will recognise it’s far better to make a collective decision on the industry. Gas companies have to persuade people to gain access and if they lock their gates there’s nothing they can do.”
He cited the community opposition to gas at Cecil Plains in Queensland, Northern NSW and the Limestone Coast of South Australia as examples.
Northern Territory Cattlemen’s Association represents landholders members facing a potential explosion gas explosion exploration, said it would weigh the royalty issue before taking a position.
Gas producers Santos, Origin Energy and QGC were approached for comment.
