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10% royalty plan for farmers could equate to only $702 a year per well

Analysis by Lock the Gate Alliance shows that the 10% payment for farmers from gas royalties, being pushed by the federal National Party, is likely to be less than $702 per year per well for landholders.  

This week Barnaby Joyce flagged a push to re-open large areas of Australia to unconventional gas drilling saying that farmers should be provided 10% of royalty payments as compensation.

However, Lock the Gate’s analysis shows Minister Joyce’s claim that farmers could make "possibly millions of dollars a year" from obtaining 10% of royalties, is a furphy.

Queensland grazier, Lee McNicholl said: "“The royalty proposal floated would leave landholders with all the risks of unconventional gas, while offering them a pittance in return.

"It is a proposal that fails to deliver for landholders and will only smooth the way for mining giants who are already harming our land and water.

"The CSG industry in Queensland promised the world when they arrived, but have massively under-delivered – royalties last year were just $36 million in total for the entire Queensland industry, when they had promised $800 million.  There is nothing in it for farmers," he said.

The entire amount of petroleum royalties paid in Queensland in 2015/16 was just $36 million[1], including royalties from both conventional and unconventional gas and including the three major LNG projects.

Latest Queensland Government data[2] shows that in June 2016 there were 5,127 producing CSG wells in Queensland.

Therefore, based on the current royalties being paid in Queensland, 10% would amount to just $3.6m in total, which would be about $702 per year per well in a best case scenario which assumes that all the royalties came from CSG wells.  

In addition, early last year APLNG (Origin Energy and ConocoPhillips) launched legal action in the Queensland Supreme Court challenging the entire Queensland royalty system. 

Carmel Flint, spokesperson for Lock the Gate Alliance said: "The entire petroleum industry only paid $36 million total royalties in Queensland last year, so even if all that was royalties from CSG, it amounts to a measly $702 per CSG well which isn’t going to do anything for farmers.

"In fact, the actual numbers could be far smaller than this, because there is no information available on how much of that total petroleum payment was actually from conventional gas rather than CSG.

"CSG companies have also launched a legal attack on royalties and they are pulling out all stops to minimise royalty payments even further.

"It’s absurd for the Federal Government to even consider using this miniscule amount as some kind of pathetic bribe while they push even harder to weaken state government controls on unconventional gas. The idea has no legs, it’s never going to work," Ms Flint said.

The Federal Government push to weaken state controls, if taken up by state Liberal/National parties, could affect places like:

  1. The Northern Rivers of NSW where the Coalition Government in New South Wales cancelled gas licences and promised to the keep the region CSG free.
  2. The Limestone Coast of South Australia where the Liberal Opposition has committed to a 10-year moratorium on unconventional gas activities.

NB. The CSG industry claims to have more than 4,500 land access agreements with landholders in Queensland.  If royalties were distributed based on land titles, they would equate to approximately $800 per title per year.

[1] See page 49 of the Queensland Government’s Mid Year Fiscal and Economic Review for reported actual royalties in 2015-16.

[2] Queensland Government data – CSG Production, 6 Monthly Statistics

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