THE NSW government will investigate the rational behind its recent decision to grant Santos 1000 days to extract gas from more than a dozen wells near Narrabri, without paying royalties.
The company will use the gas from its exploration wells to power its Wilga Park power station.
NSW Resource Minister Don Harwin has asked the Department of Planning and Environment to look in to the matter, following a lengthy letter from the Greens.
Greens resources and energy spokesperson Jeremy Buckingham has “serious concerns”, which he outlined in the letter to Mr Harwin with more than 20 questions about the decision.
Mr Buckingham asked why the company needed to continue extracting gas from its exploration wells, given it had submitted a detailed plan for an 850-well gas field in the area, which “asserts that it was ready for commercial production”.
“On the information provided by Santos in their Environmental Assessment the use of this gas cannot credibly be classed as ‘beneficial use’,” Mr Buckingham wrote.
“It is clearly coal seam gas production by stealth and about Santos generating income from gas production before they have received proper approval for their Narrabri gas field and avoiding millions in royalty payments.”
A Santos spokeswoman said the company welcomed the audit to assess its systems to accurately report the gas recovered and its beneficially use from the Narrabri wells.
“This will give the community confidence that the government is ensuring the compliance of Santos’ gas operations at Narrabri, and we welcome that,” she said.
Mr Buckingham said in the past four years the same loophole had allowed Santos to avoid paying $3.68 million in royalties on more than 4.25 million gigajoules of gas.
The NSW Department of Planning said gas extracted during exploration does not attract royalties, and also allows exemptions for the use of gas in power plants rather than being vented or flared.