From the AFR today: Farmers may profit from gas JOANNA MATHER...

From the AFR today:

Farmers may profit from gas
JOANNA MATHER

Senior federal government ministers said the states and industry should give farmers a cut of profits from gas drilling, a move that could change 200 years of landowners not having rights over underground resources.
Industry Minister Ian Macfarlane said if the states offered a generous share of gas royalties to farmers, they might be able to break the impasse that has frozen access to huge gas reserves, mostly in NSW and Victoria.
Mr Macfarlane cited Roma farmer Peter Thompson who agreed to exploration and production on his property for $6 million.
“Part of the way to solve the issue is to incentivise those people who are inconvenienced by it,” he told an economic conference in Canberra on Tuesday.
“It may take the state governments to trade off some of the royalties that they take and give them to the farmers, and that may be the next wave in getting this gas out of the ground.”
In Queensland, farmers and gas project proponents have spent the past decade developing a royalty and access system. Royalties from natural gas and coal seams expected to rise to $550 million in 2014-15.
In April NSW farmers signed an historic agreement with energy companies Santos and AGL Energy, outraging other parts of the industry.
The deal states that landholders must be allowed to say what type of drilling operations can or can’t happen on their land, leading to criticism that the industry had capitulated to economic blackmail. Mr Macfarlane has described the deal as an “inelegant solution to an intractable problem”.
Agriculture Minister Barnaby Joyce said he was constantly surprised by the hostility between farmers and industry over the issue. In Texas, land-holders were simply given 25 per cent of profits.
“If we started acting like commercial people and started to do commercial deals and working out the proper incentive then we might get a lot further a lot quicker,” Mr Joyce said.
Opposition resources spokesman Gary Gray said Mr Joyce’s comments were “imprudent and poorly thought through”.
They showed a misunderstanding of the law because the state owns underground resources not the lease holder, he said.
“In Australia, when I come on to your land to take hydrocarbons I pay the state royalties and pay the farmer compensation for the loss of amenity, for example, equipment on the property,” he said. “In Texas, the payment is to purchase the minerals that are being extracted.”
David Byers, chief executive of the Australian Petroleum Producers and Explorers Association, said the industry agreed that ‘‘having local communities directly benefit from gas resource development makes sense”.
“We also agree that nobody benefits from gas staying in the ground,” he said.
“Ultimately, however, how royalty revenues are distributed is a matter for state governments who collect the royalty payments on behalf of the people.”
There are significant reserves of gas elsewhere along the east coast, but they are buried deep in the ground and sit underneath land used for agriculture.
In NSW and Victoria, farmers and green groups have increasingly clashed with companies about the affect that drilling could have on land and water.
The ministers were speaking at the State of the Nation conference organised by the Council for Economic Development of Australia. They were responding to a question from Transfield Services chairman Diane Smith-Gander, who said she was “really fearful that we will end up with strong political pressures for gas reservation”.
On that issue Mr Macfarlane was unequivocal. “In terms of gas reservation read my lips. Over my dead body,” he said.
But his office later stressed that his comments about incentives for farmers did not indicate the federal government would get involved in what was a state matter.
While the federal government was preparing an Energy White Paper to set broad energy policy, “decisions about potential solutions to advance the onshore gas industry were ultimately a matter for state government”, a spokesman said.
“Minister Macfarlane was simply offering ideas that might be considered to address the impasse in some states and allow the gas industry to proceed to the benefit of both industry and landholders.”
Mr Gray said NSW and Victoria should adopt the same sensible approach as Queensland, where 4500 land holders had agreed to co-exist alongside the gas industry.
He said in Queensland companies wanting to harvest gas need to strike deal with the land lease holder to compensate for the inconvenience or disruption associated with having the operation on their property.
Disputes over the amount could be settled in a land court, Mr Gray added.
Mr Macfarlane, whose seat is in Queensland, acknowledged the difference between Australia and the US.