Compo / no appeal

NSW government set to pay Metgasco millions...

The Baird Government has resigned itself to paying gas company Metgasco millions of dollars in compensation by deciding not to appeal a judgment by the Supreme Court.

The decision is yet to be announced, but senior government sources confirmed it to AFR Weekend on Friday evening.

It is good news for long suffering shareholders in the gas minnow. The company and government will now engage over the compensation sum.

Metgasco chief executive Peter Henderson has said it would take more than $100 million for the company to exit its operations in the state's north.

Metgasco won the unenviable title of the business most damaged by state politics during the last NSW parliament as an extraordinary swell of protesters and community anxiety over CSG concentrated in the north of the state. Soon after Mike Baird became premier and amid a swell of protest at a drill site near Lismore in northern NSW, the state government suspended Metgasco's drilling licence for not properly engaging with the community.

The troubled gas minor's share price has plunged as community anxiety swelled. It traded at $1.25 in June 2007. On Friday it closed at 0.05 cent, valuing the company at $21 million.

In April the Supreme Court overturned the Baird government's suspension.

The Baird government worried a challenge of the Supreme Court's decision would create a perception of sovereign risk in NSW. The government is keen to spruce its business friendly credentials in contrast to the Labor governments in Victoria and Queensland.

Metgasco operates in the north of NSW and has spent more than $120 million over the last 10 years to develop gas projects.

Energy Minister Anthony Roberts this week extended to June 30 a scheme to buy back exploration licensees from operators that were causing community concern. While Metgasco is now legally allowed to resume drilling, ongoing community opposition means the future of its program remains uncertain.

Mr Roberts is leading the Baird government's efforts to build a workable regime for coal seam gas.

Metgasco was drilling for conventional gas at its Rosella well near Lismore in northern NSW. The area also has significant coal-seam gas potential.

The NSW Labor opposition said during the recent state election campaign that if elected it would cancel Metgasco and other CSG firms' licences without compensation.

"If we have to legislate in government, we will," Labor leader Luke Foley said.