AFR P34 & 47

Two interesting articles in todays Fin Review.
Page 34 and 47.
I can only post one:

NSW faces a critical shortage of natural
gas within two years, and it needs new
supplies beyond that.
So how is it that the government has
done so little since its election in 2010 to
encourage much-needed investment and
resource development in NSW? Indeed,
why have its actions during the period
retarded development of its gas industry,
discouraged investment and introduced a
degree of sovereign risk that had
previously not existed?
For some time NSW has needed to
prioritise an energy policy that quickly
moves to greater gas production and self-reliance.
NSW has very large coal seam gas
reserves that can now be developed, if we
have the will to do so. Metgasco has also
identified conventional gas potential in the
Northern Rivers area which it is keen to
explore. Gas production would also
provide royalty income, regional
investment and job creation, as is
occurring in Queensland. Despite this,
NSW has repeatedly taken actions to
discourage its gas industry. In contrast,
leadership by governments in Qld and
South Australia have moved to streamline
regulation and facilitate gas production.
NSW has only a few identified gas
resources of scale. Santos, AGL and
Metgasco are natural gas explorer producers
that have identified these, with
Metgasco having identified potentially the
second-largest gas resource, equivalent to
15 years of NSW demand. Resource
development has a long lead time. This
lead time has been increased by strong
headwinds from activists and a
government that isn't doing enough to
explain that NSW needs its own gas
production and that the science and
regulations are sound.
Metgasco is particularly disappointed by
a recent decision by the Office of Coal
Seam Gas (OCSG) to suspend approval for
our conventional exploration well in
Northern Rivers on the spurious basis that
we had failed to conduct an appropriate
community consultation program.
The suspension decision was appalling
and must damage the confidence of any
company considering doing business in
NSW. The decision was made with no
notice - not even a phone call - to a
company that has operated in NSW for
over 10 years and invested $120 million.
It came only days before drilling was to
commence, incurring costs up to
$3 million and a 40 per cent fall in
share price.
Metgasco does not accept the OCSG's
views on our community consultation as
we consider that we complied with the
government's consultation guidelines. We
have made extensive submissions to the
OCSG to demonstrate that it had no lawful
right to suspend, that it did not observe
lawful process and that its decision was
wrong. The OCSG is reconsidering its own
decision and we have initiated court action
if the suspension order is not removed.
How or why the government made its
decision is unclear. The OCSG has stated
publicly that consultation requirements for
a single exploration well are limited, it
acknowledges that the existence of
industry opposition is not a measure of
consultation and it did not respond to the
reports and plans we submitted about our
consultation program.
Is it confused about what consultation
means? Was the government intimidated
by protesters, many of whom do not live in
our exploration licence areas, or by
councillors outside our operating area who
oppose fossil fuels and have no
accountability for development of NSWs
resources or the provision of energy to
homes and industry?
If the suspension decision is upheld, the
hurdles for consultation for resource and
infrastructure projects across the state just
got a lot higher for any kind of activity that
attracts activist attention. Resources
security, investment, employment, regional
development, business confidence,
regulator credibility and government
leadership are all at stake.
The benefits and risks of a gas
production industry need to be put in
perspective. It is highly regulated. There
are no health, safety or environment risks
that cannot be managed. There are more
than 1 million petroleum wells producing
in the US today, with over 1 million wells
fracked in the US in the past 60 years. The
US environmental protection agency has
stated that there is no evidence to link
fracking with water contamination. In Qld,
3000 conventional wells have been drilled
in the past 50 years and about 5000 CSG
wells drilled in the past 20 years. Health,
safety and environmental issues are simply
not evident on any objective basis. Natural
gas produced from CSG wells currently
supplies one-third of the gas demand in
eastern Australia, and most gas supplied to
Sydney from central Australia comes from
wells that have been fracked.
For any industry to succeed, there must
be a stable and sensible regulatory
environment, based on science and fact,
with timely and consistent approvals.
There must also be clear, visible leadership
by government The government is the
owner of the state's resources. The
community is looking to the government
to clearly explain why NSW needs its own
gas production, how its regulations
provide assurance that the industry is safe
and how interfaces with the community
will be managed. No industry will succeed
if the government abdicates this role,
allowing decisions to be made on the basis
of misinformation spread by social media,
protests and self-interest.
The government needs to work
constructively with Metgasco and other
resource industry participants to build
community confidence and acceptance.
A phone call would be a good start.
Len Gill is the chairman of Metgasco.
For any industry to
succeed, there must be
a stable and sensible
regulatory environment,
based on science and fact.


Ken.