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Gas

Should farmers get a cut from gas drilling?

Could farmers be compensated for oil drilling on their properties 171 74430 0 14098773 300

The basic economic rules of supply and demand indicate that if there is more energy available to the public, electricity and gas prices will begin to decrease.

At the moment, farmers do not have rights to underground resources, such as gas.

However, some federal ministers are currently considering giving them royalties from gas drilling. 

This means gas suppliers may have access to gas reserves that have until this point been frozen as a result of an impasse with farmers. 

Industry Minister Ian MacFarlane spoke about this issue at an economic conference in Canberra on June 24.

"Part of the way to solve the issue is to incentivise those people who are inconvenienced by it," the Australian Financial Review (AFR) reports him saying on June 25. 

"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".

Agriculture Minister Barnaby Joyce has also expressed his support of this idea. In an interview with Farm Weekly, he compared it to the US model, where farmers own everything under the ground so companies share their profits with them.

In April, NSW farmers signed an agreement with energy companies Santos and AGL Energy, outlining which drilling operations can take place in their land.

However, this led to criticism of the industry, according to the Australian Financial Review, with opponents saying the sector had capitulated to economic blackmail.

However, Mr Joyce said he was surprised by the hostility between farmers and industry players.

"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," he told the AFR on June 25.

However, there are also debates about how safe the drilling process is and Alliance nation co-ordinator Phil Laird spoke to Farm Weekly on June 26 about this issue.

"The issue is not how much money individuals can make, it is about the fact that drilling for coal seam gas and other forms of unconventional gas is simply not safe," he said.

Peter Henderson, managing director of ASX-listed oil and gas exploration company Metgasco says the company had its exploration licence revoked by the government.

"Our problem is that a range of people on the east coast of Australia have an almost religious passion for stopping the fossil fuel industry," he told Farm Weekly.

Victorian Premier Denis Napthine told the newspaper the ban on fracking would stay.

"We are concerned to get the science right," he said.

Posted by Paul Doyle.