Explorers free to sit and play the long game on fracking

Waivers are being given on relinquishing vast unused acreage, writes Paddy Manning.

Waivers are being given on relinquishing vast unused acreage, writes Paddy Manning.

The boom in fracking has blanketed vast tracts of the country in oil and gas exploration permits, creating uncertainty for landholders who often do not know if or when their property will be subject to drilling.

Titles for petroleum exploration and production, plus applications and release areas, cover 408 million hectares or roughly 53 per cent of Australia, according to figures released this week by activist group Lock the Gate.

Much of that onshore exploration "acreage" has been awarded in the past decade as Australia has sought to replicate the American unconventional energy boom - extracting previously unrecoverable shale oil and gas, and coal seam gas, using directional drilling and hydraulic fracturing (fracking) technology. Until 1998, petroleum titles (excluding applications and release areas) covered only 12 million hectares. In the past 15 years that has risen tenfold, with 153 million hectares awarded since 1998, according to Lock the Gate's figures.

Of the eastern states, Queensland has petroleum titles covering 41 million hectares and NSW has 19 million hectares. Victorian titles cover just 817,131 hectares as exploration gets under way by juniors including the Gina Rinehart-backed Lakes Oil and the Exxon Mobil-backed Ignite Energy.

To encourage timely exploration and development, and stop under-resourced companies sitting indefinitely on acreage, state governments oblige explorers to relinquish a proportion of their permit area when they seek to renew it.

But in NSW, as Fairfax Media reported on Friday, documents obtained by Lock the Gate under freedom-of-information laws show the relinquishment requirements were often waived, as renewal of 22 CSG petroleum exploration licences was announced last September, when the government announced its new regulatory framework for the industry after an 18-month delay including a moratorium on fracking.

Lock the Gate sought the application and renewal documents for 10 NSW PELs. It found half a dozen cases where the licence holder had sought a waiver of the relinquishment requirements under section 30 of the Petroleum (Onshore) Act - which requires the handing back of 25 per cent of the permit area on renewal - often citing an inability to explore due to community opposition.

Metgasco, targeting the northern rivers region of NSW, which takes in Casino, Lismore and Byron, has faced strong opposition, with police called in to investigate a bomb threat against the company. Since spiking above 28¢ in September, on hopes the new state policy would pave the way for speedier development, Metgasco's shares have fallen two-thirds. They were at 9¢ on Friday.

Last May, officials reviewing Metgasco's renewal application in PEL13 noted: "The proposed work program ... is light but in the recent past Metgasco had experienced severe delays due to opposition, blockade and access problems which renders a bigger work program rather meaningless if they cannot fulfil them."

Metgasco says its exploration rights were effectively suspended for almost 18 months during the NSW regulatory hiatus. "[We] provided a range of arguments to minimise the amount of blocks that were relinquished [which were] accepted by the NSW government," chief executive Peter Henderson said.

Of Santos' renewal applications, relinquishment requirements were waived in PEL 238 - its prime title round Narrabri, where it proposes to spend $18 million on exploration - and in PEL12, which covers an area south-west of Gunnedah. Santos said results from eight wells drilled in PEL12 were disappointing, but applied for a six-year renewal to unravel the "sweet spot" by seismic survey and drilling core holes. The department decided four rather than six years was fair, "considering the delays and efforts of Santos in securing landholder permission and access for any of the contemplated operations".

Relinquishment waivers were also given to Apex Energy in PEL444 in the Illawarra - an area part-covering Sydney's drinking water catchment - and Dart Energy in PEL458, north of Newcastle.

The mandatory relinquishment provision was never enforced by the previous state government, according to a spokeswoman for NSW Resources Minister Chris Hartcher, who said title holders could seek special circumstances renewal, and extreme difficulty in obtaining access to land within the licence area could be taken into account as an extenuating factor.

But Lock the Gate spokeswoman Carmel Flint said the use of the "special circumstances" excuse was "an abuse of process" which fell outside the government's guidelines.

Peter Martin, former chief executive of Rothschild Asset Management, is convenor of Southern Highlands Coal Action Group, affiliated with Lock the Gate. Martin owns a 44-hectare truffiere at Sutton Forest which is covered by both PEL469 for coal seam gas exploration, held by Leichhardt Resources and listed junior Planet Gas, and an exploration authority held by Hume Coal.

Leichhardt and Planet got renewals without relinquishment at PEL469 and PEL470, around Bellata in the state's north-west - both formally gazetted this week - and is expecting a full renewal at PEL468 around Bylong in the Hunter Valley.

Martin says Planet Gas has done no exploration work for three years at PEL469, which covers 3172 square kilometres, and says the relinquishment waivers constitute maladministration. "It's a joke," he says. "We're just stunned the government didn't take the opportunity to pull some of these licences. It's happening all over NSW. The departments have not enforced their own regulations."

Martin says there is plenty of anecdotal evidence from local real estate agents of the effect on property values once exploration permits are granted over an area. Prospective buyers tend to run from properties likely to face drilling. "The politicians are taking value off the land and effectively giving it to the miners," Martin says.

Shares in Planet Gas, 20 per cent owned by New Hope Corporation, are trading at 2.2¢ on the ASX and the company had just $441,000 cash at the end of last year.

Managing director Anthony McLure says Planet Gas can raise capital to fund exploration but is focused on targets in South Australia's Cooper Basin.

The problem for Planet Gas in NSW, he says, has been an inability to get access to land for exploration. In PEL469, he says, that has been partly due to a CSG ban imposed by Wingecarribee Shire Council - although McLure says local government has "no jurisdiction".

"It's about talking to individual landholders and coming to an arrangement," he says. "It's a process of education. If the facts are out there, people are going to realise this is a sustainable business. That will eventually happen."

408 million

The number of hectares in Australia covered by titles for petroleum exploration and production, plus applications and release areas, which is roughly equal to

53%

of the country.

Source: Lock the Gate