Barnaby Joyce agrees with the LDP.

Cartoon: By Nicholson.

The coal seam gas issue has been highly divisive in this country as has most mineral exploration and extraction on private property. Essentially if a mining company wants access to your property here, you have very limited options as the deposits they are seeking are the property of the state.

Recently David Leyonhjelm, the LDP Treasurer wrote an article, published in the Business Spectator on the issue, making the point that the issue could be resolved in part by allowing landholders to profit from the resources contained on their properties:

Despite what the law says, a system in which land owners are automatically entitled to a share of anything extracted would be a step in the right direction. In the US, landowners are able to weigh returns from farming against the potential of mining. There is simply no need to seek to quarantine highly productive land – it would not be worth sacrificing for mineral extraction unless it generated more in royalties.

If lifestyle considerations were more important to the landowner than economics, extraction that was compatible with continued farming, such as coal seam gas, might generate lower expectations of royalties than an open cut mine.

It is no accident that the US has half of all the world’s oil wells, and that its coal seam gas industry is considerably more advanced than ours. A key difference is that landowners have skin in the game – ownership of mineral rights is a primary motivator for exploration and extraction.

For governments, the solution is to create an environment in which a market based approach can emerge. It was government actions preventing such an approach that created the current problem. More government tweaking will not help. …

Now LNP Senator Barnaby Joyce has seen the light and come up with the same idea. Barnaby is one of those rare politicians who has worked in the private sector and established his own business and therefore has knowledge of how things work in the real world:

Australia, in contrast, has variant forms of ownership between the land title and the mineral rights. Over the past 100 years, there has been the convenient moralising, prior to excising the property rights from the landowner, often without compensation.

The Petroleum Act of 1915 was the mechanism by which the Queensland Labor government removed the petrol and gas rights from farmers. The reading of this act puts the fallacy to the argument that farmers never owned these rights. The rights were taken away because of World War I, but last time I checked the war is over.

Coal seam gas, with the appropriate environmental checks and a fair return delivered to the landowner, has the capacity, just in Queensland, to deliver the energy equivalent of almost five billion barrels of oil. Managed properly this could be a new resource boom. Badly managed it could tick every box of a social and environmental disaster.

In America private landowners retain the rights to the shale gas on their property. In Louisiana, gas companies recently paid a local church $27 million just for the rights to drill on parish land. Real estate agent Mike Smith was paid $1.3 million for the right to drill on his 121ha, and a 25 per cent royalty.

There are around one million private owners of mineral rights in America, accruing $21.5 billion in royalty payments each year. Compare that to Australia. On evidence received by a Senate inquiry, landowners receive about 75c for every thousand dollars of coal seam gas produced. Mike in Louisiana gets over 300 times that level of compensation. …

Australians are people of vision and want to see our natural wealth invested in a visionary way. Private individuals, who live in an area, will do that and we should be vastly more dubious about the platitudes of those in the political house to deliver an outcome more than a stone's throw away from the demands of the political franchise.