Deputy Prime Minister Barnaby Joyce has started dismantling Australia's sweeping ban on coal seam gas drilling, arguing a new scheme to divert a share of government royalties to farmers will overcome furious opposition in the bush.
Mr Joyce on Friday embraced a South Australian government plan to pay farmers 10 per cent of royalties in exchange for allowing gas wells on their land, saying the scheme should be rolled out nationally, with an exclusion of prime agricultural land.
The Agriculture Minister said lifting moratoriums and giving landholders a fair price in exchange for access would equate to "a substantial turnaround in attitude and that is a very good outcome".
"I can't see people who start making hundreds of thousands or possibly millions of dollars a year having a backlash," Mr Joyce told Fairfax Media.
"I think you'll probably find them onside."
Mr Joyce's comments could cause political problems in regional Australia and will be opposed by some MPs in the Coalition party room, where views about the environmental, social and electoral impacts of CSG remain mixed.
The CSG debate has largely been driven by farmers, who started the Lock The Gate movement when mining companies used laws to explore land regardless of the landholder's desires. The backlash prompted state and federal Nationals MPs to push for moratoriums on exploration to protect their constituents' land, and their own vote.
Mr Joyce's comments mark a shift in the regional party's policy and coincide with a national debate on the future of the Australian energy market. The Turnbull government has started applying pressure to state governments, particularly Victoria, to lift their moratoriums and improve the reliability of electricity grid. The then Victorian Liberal government instigated a gas moratorium in 2012, and in 2015 supported a Labor decision to extend the ban until 2020. NSW does not have an official ban, but projects have struggled to get the green light.
National Farmers Federation president Fiona Simson said moratoriums were "blunt instruments" but still needed "because of the lack of confidence the community, including the farming community, have in the way governments have regulated the gas industry in the past".
"Until we have absolute confidence these concerns have been addressed, then moratoriums will be part of the response," she said.
But Joyce said excluding prime agricultural land and productive aquifers from exploration would address most concerns.
"We must protect prime agricultural land and we must protect productive aquifers. Where these caveats are abided by in relation to gas extraction, then a strong return back to the landholder means a strong return to the town and the whole local economy; and it means a vastly better chance of a co-operative environment with landholders" he said.
A scheme to pay farmers 10 per cent of royalties from any underground gas taken from their property was part of a $550 million energy plan announced by the South Australian government on Tuesday.
The concept is similar to a United States scheme that benefited farmers sitting on oil reserves, with an estimated $20 billion in annual royalty payments paid during the oil peak.
Ms Simson said the National Farmers Federation welcomed the South Australian plan to "adequately compensate" farmers, but said "it's never been just about the money".
"The two things we can't and won't compromise on is the secure access to water and land," she said.
NSW Resources Minister Don Harwin said the state gas plan "makes clear that landholders and communities will share in the benefits of gas development, and the government has already made legislative changes to deliver on this commitment."
Since July 2016 companies have been able to apply to establish a Community Benefits Fund from which individuals and organisations can apply for grants for community initiatives.
NSW landowners are also entitled to compensation under a land access agreement struck with a company wishing to drill on their land.
"Further compensation may be payable to landowners if there is any loss or damage resulting from exploration or production," Mr Harwin said.
But opponents say this is insufficient as landowners still have no right to refuse access.
NSW Greens MP Jeremy Buckingham said of Mr Joyce's statement: "Barnaby hasn't got the message that farmers won't be bribed. Rural community know coal seam gas destroys land values".
NSW has banned the use of so-called BTEX chemicals in hydraulic fracturing, or fracking, method of coal seam gas extraction.
There are bans of coal seam gas exploration inside and within two kilometres of residential areas and within key areas that have been assessed as important for horse breeding and viticulture.
Coal seam gas activity on high-quality agricultural land, known as Biophysical Strategic Agricultural Land, must first be approved by an independent panel.
The NSW Coalition government also embarked on a buy-back of most of the CSG licences issued under the previous Labor government.
In February, Santos lodged a long-awaited application for its controversial Narrabri coal seam gas project.
The NSW Labor opposition has pledged to introduce a state-wide moratorium on CSG until the industry is proven to be safe, if it wins government in 2019.
