Little experience, little money but the gas minnows sure have a lot of land

SMALL CSG firms with little equity hold exploration rights over more than 10,000sq km of prime NSW farmland.

SMALL-TIME coal-seam gas companies with little equity - and some with no previous industry experience - hold exploration rights over more than 10,000sq km of prime NSW farmland.

One company holding CSG exploration licences over 5500sq km of prime land - more than twice the size of the ACT - is a $100 company run by a Queensland lawyer in his spare time.

Another company, which in 2009 was granted approval to drill 16 CSG exploration wells in greater Sydney's drinking water catchment area, has no senior employees with any CSG or mining experience and $12.3 million in accumulated losses.

The revelations come after federal Resources Minister Ian Macfarlane last week called for the fast-tracking of CSG extraction in the state and increased his criticism of CSG opponents, labelling some of them "anarchists".

It can also be revealed that Travers Duncan and Brian Flannery - who appeared before a recent corruption inquiry in relation to disgraced former minister Ian Macdonald and Eddie Obeid - have moved into the sector.

Leichhardt Resources, which is permitted to drill for gas in an area stretching from Wollongong, south to Nowra and west to the Southern Highlands, has one director: Simon Tolhurst, a "dispute resolution" lawyer who works for mid-tier firm HWL Ebsworth.

Company documents lodged with the Australian Securities & Investments Commission list Leichhardt Resources' address as a suburban accountancy office and show the company did not have an ABN when it first applied for exploration licences from the NSW government in 2008.

Mr Tolhurst declined to comment or respond to written questions when asked by The Australian about his experience in the CSG sector and about Leichhardt Resources.

The property of NSW Central Highlands farmer Tim Frost, a retired soldier with the British and Australian armies, is one of the thousands covered by the exploration licences granted to Mr Tolhurst's company.

Mr Frost, a member of the Southern Highlands Coal Action Group, said the issuing of massive exploration permits to small companies was "outrageous" and he was seriously concerned those companies could damage aquifers and not have the funds to make reparations.

"I have been fighting (the NSW government) on this for three years," Mr Frost said.

"I'm a retired colonel and have worn the Queen's uniform for 32 years and this is the dirtiest fight I have been in."

Another local in the area, retired farmer Alan Lindsay, who spent most of his career as a senior resources executive, was also furious with the apparent ease with which exploration licences were granted. "That our government would give exploration rights over almost 6000sq km of prime NSW land to a $100 company with an accountancy premises as its business address is outrageous," Mr Lindsay said.

A spokesman for HWL Ebsworth said Mr Tolhurst's involvement in Leichhardt Resources was "completely separate" from his employment with the firm.

A spokesman for the NSW Department of Trade and Investment said companies obtaining exploration licences must provide evidence of their "financial standing" but it was unclear whether there were any associated minimum equity or asset requirements. The application fee for an exploration licence was $1000 and when licences were granted the holder of the licence was also required to pay a "title fee" of between $1000 and $40,000.

The spokesman said licence holders were required to lodge bonds to cover the cost of rehabilitation work if it was required, but the size of those bonds was unknown.

Licence holders would often enter "farm-in" arrangements with other companies, who would conduct drilling and/or extraction for a fee or cut of the profits.

Research by The Australian shows a number of those companies also have tenuous financial positions.

Leichhardt Resources had contracted small listed company Planet Gas to undertake its drilling work, but Planet Gas pulled out of the deal in May.

The accounts of Planet Gas show it made losses of $2.5 million over the past two years and that it has just $616,000 of equity, having booked $51m of accumulated losses.

Farmers have raised serious concerns over the ability of some CSG operators or explorers to be able to fund potentially significant reparation bills if things go wrong.

After Santos took over rival Eastern Star Gas in 2011 it emerged that a number of contamination spills had occurred at its Pillage Forest site in the state's north. Eastern Star Gas had failed to inform the authorities about the spills, had engaged in unapproved land clearing and had been operating a faulty water treatment plant.

Santos has to date spent $17m - with total expenditure of $20m earmarked - to decontaminate the site and bring the operations "up to the standards of Santos".

Eastern Star, which at the time of the takeover was chaired by former deputy prime minister John Anderson, was not a small company, holding $267m in equity.

Company records show Apex Energy, which was granted the right to drill 16 exploration wells in the bushland area between Wollongong and Sydney by the previous NSW Labor government, has just $835,000 in equity against $12.3m in accumulated losses. The company has failed to lodge its annual accounts on time with the corporate regulator for each of the past five years.

The NSW government recently postponed extending Apex Energy's licence to drill those wells until a review by the NSW Chief Scientist and Engineer was completed.

Apex Energy corporate development manager Chris Lawrence confirmed none of the company's present directors or senior managers had prior CSG or mining experience. He said the group employed contractors to undertake work when necessary.

According to NSW government records, in 2009, under the previous NSW Labor government, Mr Duncan and Mr Flannery were granted CSG exploration permits over about 5000sq km of land near Armidale, in northern NSW.

The permits were granted to a $10 company called Drequilin, of which they are sole directors. Drequilin has no listed telephone number, no internet presence and lists its address with the corporate regulator as that of Mr Duncan's home address, in the affluent Sydney suburb of Mosman.

According to the NSW Department of Water and Energy, Drequilin's CSG exploration rights expired in September last year, but the company had lodged renewal applications. "They will be considered accordingly," a department spokesman said.

Mr Duncan and Mr Travers did not return calls when contacted for comment.