Santos disingenuous on coal seam gas royalties

MEDIA RELEASE – 5 January 2012

The Greens NSW spokesperson on mining Jeremy Buckingham has hit back at Santos’ claims on coal seam gas royalties saying Santos spokesperson Matthew Doman claims where either disingenuous or highlights a lack of understanding of the financial contribution resources projects make to governments and communities, after he told Sky Business yesterday that Santos would start paying royalties once they entered the production phase.  

In NSW there is a royalty holiday for the first 5 years of production.  In the 6th year a royalty rate of 6% applies, rising 1% per year to 10% from the 10th year onwards.

Mr Dorman told Sky News “That’s right, you pay royalties once you enter the production phase”, omitting the very important fact that there is a five year royalty holiday for petroleum products in NSW where the Pilliga project is located.

“Santos are trying to spin their way out of the fact that NSW taxpayers will be ripped off in terms of the return they’ll get for the exploitation of this gas resource.  Yet it is the community that will bear the risks to water, agriculture and the environment,” said Greens MP Jeremy Buckingham.

“For the first five years of each coal seam gas well, when production of gas is likely to be highest, Santos will not pay one red cent in royalties.

“Barry O’Farrell and Mike Baird need to answer why coal seam gas operators pay nothing in NSW for the first five years, yet Queenslanders get 10% in royalties from day one.  The Queensland royalty rate certainly hasn’t slowed the industry up there.

“In 2010 the only producing coal seam gas field in NSW, AGL’s Camden project with around 80-90 producing wells paid only $462,093 in royalties in 2009-2010.   How many wells is Santos planning in NSW to deliver their promised $150 million a year in royalties?”

Contact: Max Phillips – 9230 2202  or  0419 444 916


Minerals Royalty revenue in NSW 2005 – 2010: http://bit.ly/z3TgGu

Petroleum (Onshore) Regulation 2007

Current version for 2 September 2011 to date (accessed 5 January 2012 at 12:21)

Part 7Clause 23

23 Rate of royalty: section 85

(1)  For the purposes of section 85 (2) of the Act, the prescribed annual rate of royalty is as follows:

(a)  for the first 5 years from the first commercial production date—nil,

(b)  for the 6th, 7th, 8th and 9th years from the first commercial production date—6%, 7%, 8% and 9%, respectively, of the value at the well-head of the petroleum,

(c)  for the 10th and subsequent years from the first commercial production date—10% of the value at the well-head of the petroleum.

(2)  For the purposes of this clause:

(a)  the first commercial production date is the date on which commercial production of petroleum first began on the land to which the petroleum title relates, and

(b)  a period of time referred to in subclause (1) is to be calculated inclusive of the first commercial production date, and

(c)  the prescribed annual rate of royalty is to be determined only by reference to the first commercial production date and not by reference to the date or dates on which commercial production of petroleum began in relation to each well on the land to which the petroleum title relates.

 

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