Coal-seam gas group Metgasco wants compo for lost drilling income

COAL-SEAM gas group Metgasco has called on the NSW government to compensate it for losses of millions of dollars.

COAL-SEAM gas group Metgasco has called on the NSW government to compensate it for losses of millions of dollars after the introduction of new restrictions on drilling, which it says are "killing" the industry in that state.

Metgasco chief executive Peter Henderson also attacked the state Coalition government for failing to identify firmly which specific areas were off-limits to CSG wells in NSW.

"Nine months after the NSW government first came up with these knee-jerk (restrictions), we are still trying to work out where we can and can't drill," he told The Australian. "We have spent a lot of money in good faith and have established very healthy CSG reserves . . . Will the NSW government be compensating us?"

Last month, the NSW government confirmed laws, initially flagged last year, banning CSG wells within 2km of houses in urban areas.

Energy retailer AGL, which holds large exploration licences across Sydney city, and Metgasco were among the hardest hit.

Mr Henderson would not place a figure on losses from the new law but said "20 to 30 per cent" of the company's reserves were now "wasted".

The company had spent $77 million on exploration, suggesting losses from the new 2km buffer zone would be between $15m and $25m for Metgasco.

Metgasco's operations are centred in northern NSW and those reserves now off-limits are below the northern town of Grafton.

Mr Henderson said he was frustrated by a strong anti-CSG movement, from people around Byron Bay, Ballina and Lismore in the state's northeast.

He said Metgasco's operations would not affect these towns, as its CSG wells were to be drilled further west, and protesters lacked unbiased information.

"It's completely different from, say, Texas or Wyoming, where people grew up with an oil well in the back yard and dad worked in the industry," Mr Henderson said.

He said the term CSG had become highly emotive, fed in a large way by the US anti-CSG documentary Gasland.

A spokeswoman for the NSW Department of Resources said the matters raised by Mr Henderson were for the state's Planning Department to consider. The department could not be reached yesterday but the NSW government has previously suggested it would not pay compensation.