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Barnaby Joyce's forecast of CSG royalty riches compared to '$100 lamb roast' claim

Posted on 4 April 2017

Source:  Heath Aston

Farmers have cast doubt on Barnaby Joyce's claim that sharing government gas royalties could help deliver landowners "hundreds of thousands or possibly millions of dollars a year".

The Deputy Prime Minister has thrown his weight behind the concept of royalty-sharing agreements with farmers as a way to turn around fierce resistance to the coal-seam gas industry in rural and regional areas.

Under its new energy plan, the South Australian government wants to "incentivise" farmers by sharing 10 per cent of the state's royalty take from unconventional gas and Mr Joyce last week endorsed a national scheme, without nominating a percentage that should go to landowners.

But figures from Queensland - the only state with an established coal-seam gas industry - suggest the prospective riches being dangled in front of farmers do not exist - at least not yet.

The Queensland government received  $36 million in CSG royalties from the industry in 2015-16, according to revenue receipts.

If the SA model, which shares 10 per cent of government royalty revenue with farmers - or 1 per cent of total production revenue - was used in Queensland, the entire pot of money distributed to landowners would have been $3.6 million last year.

There are currently 5127 CSG wells across Queensland, which would make the annual royalty cheque on each well-head worth $702 to a landowner.

According to its mid-year budget update, Queensland expects royalties to rise strongly from $68 million this year to $250 million by 2019-20.

But even at that level of production, a landowner would receive less than $5000 per well, assuming the same number of wells were in production as today.

CSG companies like Santos pay landowners $30,000 a year during exploration and development before offering $25,000 per well in "access agreements".

A spokesman for Mr Joyce said his royalty comments "didn't relate only to the existing CSG production in Queensland or Australia".

"Instead, they related to current and future levels of production and how to develop the industry to its full potential and giving landholders a fair share," he said.

"It doesn't matter if it's just one well or 10,000, the landholder should receive a benefit from that. That's been longstanding Nationals policy. It's about landholders being business partners, not treated by many in the industry as obstacles."

Mr Joyce's office pointed out that current production in Queensland represented just 2 per cent of "proven and probable gas reserves" in the state.

The anti-CSG Lock the Gate group said there was more in the royalty-sharing idea for multinational miners than farmers.

"Saying farmers will get millions out of this is about as fanciful as Barnaby Joyce's claim lamb roasts would be $100 under the carbon price," said Lock the Gate spokeswoman Carmel Flint.

"The proposal put forward last week would leave landholders with all the risks of unconventional gas and remove the few protections that are in place from state governments, while offering them a pittance in return."

Rural peak group, AgForce Queensland, remains unconvinced that the royalty riches currently exist.

Asked whether farmers could make hundreds of thousands or millions a year, AgForce president Grant Maudsley said: "Not at all".

"It won't make anyone wealthy but it can help diversify a farm income," he said.

In response to the royalty-sharing push, the National Farmers Federation said a "lack of confidence" in the industry persisted, with gas moratoriums set to remain in Victoria and NSW until there is certainty over CSG's effect on water.

Gas mining peak body, The Australian Petroleum Production & Exploration Association, welcomed the move by SA and Mr Joyce to "share the benefits of gas development with regional communities".

In Queensland, 5000 access agreements with private landowners have delivered $250 million in payments since CSG was first developed, according to APPEA.

"APPEA supports what the South Australian government is doing. It's another way of ensuring regional communities share the benefits of gas development," said APPEA chief executive Malcolm Roberts.

"It also recognises that we cannot increase taxes on the gas industry without increasing gas prices. It's a royalty sharing arrangement, not a royalty increase."