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Environment and Communications References Committee
Oil and gas exploration and production in the Beetaloo Basin

UNDERWOOD, Mr Alex, Managing Director, Empire Energy Group Limited [by video link]

WARBURTON, Professor John, Non-Executive Director, Empire Energy Group Limited [by video link]


CHAIR: I would now like to welcome our last witnesses for today's hearing, representatives from the Empire Energy Group. I understand that information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. Is there anything either of you would like to add about the capacity in which you appear today?

Prof. Warburton : I was the chief executive officer of the 100 per cent-owned subsidiary Imperial Oil & Gas from 2011 to 2014.

CHAIR: Thank you. I now invite you to make a short opening statement, and then we will go to some questions.

Mr Underwood : Senators, thank you for the opportunity to appear today. Let me begin by acknowledging the traditional owners of the many lands from which participants are joining today's hearings. I pay my respects to their elders past, present and emerging. I particularly acknowledge the traditional owners of the lands on which our company conducts its operations. We have developed excellent working relationships with these traditional owners over the last 10 years, built on mutual respect, and we look forward to continuing to work closely in partnership and for mutual benefit. Empire is a majority Australian-owned company. We have held interests in gas exploration in the Beetaloo for over a decade and have at all times exceeded regulatory requirements in relation to obtaining the full and informed consent of traditional owners and in carrying out our operations safely and with minimal environmental impact. I would like to make the following key points.

Empire has an outstanding environmental and safety track record in the Northern Territory and a long and successful history of respectful engagement with traditional owners. We have the full and informed consent of traditional owners for our activities. We continue to consult with traditional owners and Indigenous communities regarding our work programs, in compliance with the law, our agreements and our licence requirements.

The economic and social benefits of safe and sustainable development of the Northern Territory's gas resources will be considerable. Governments around Australia have long provided assistance to encourage exploration and development of their natural resources and accelerate the associated economic and energy benefits, and repeated scientific inquiries—including the recent 15-month, independent Scientific Inquiry into Hydraulic Fracturing of Onshore Unconventional Reservoirs in the Northern Territory, chaired by Justice Rachel Pepper—have found that any risks associated with onshore gas development and hydraulic fracturing can be managed by effective regulation. Developing the gas resources of the Beetaloo could provide a significant boost to energy needs on Australia's east coast, assist the development of a gas-based manufacturing industry in Darwin, and help expand revenue from LNG, already the NT's largest export industry. This development has strong policy support from both the Northern Territory and federal governments.

In everything we do, we place great emphasis on our relationship with traditional owners. This is demonstrated by our long and successful history of respectful engagement with traditional owners, dating back to May 2011. We have held approximately 30 on-country meetings across our project areas, the vast majority of which were attended by Professor Warburton, who joins me here today.

From the outset in those discussions, we have explained to traditional owners what is involved in the unconventional petroleum exploration and development process, including drilling, fracture stimulation and the protection and use of water resources. We have always worked proactively with traditional owners to ensure that sacred sites are protected. For example, in EP 187, where we are currently operating, other sensitive areas where the traditional owners did not consent to exploration were permanently removed from the exploration permit area prior to traditional owners' approval being granted.

Our submission details our extensive and ongoing engagement with traditional owners. I won't repeat that detail here, but I would note that we recently invited traditional owners to be present to inspect the worksite where Carpentaria-1, our first well, was recently drilled. The 12 traditional owners who accepted our invitation saw the limited footprint of our operations, and the environmental protections we have put in place. One traditional owner noted that the well pad was no larger than a stockyard—a poignant insight, given that the areas in which we operate coexist with local pastoral operations with the consent of traditional owners, who benefit from leasing their land for grazing.

Senators, the next phase of our work will assess the scale and timing of any future development. Approvals are being progressed for further drilling, fracture stimulation and flow testing of a horizontal well later this year and additional wells in future years. The scale of the investment that will be required if significant, and so too are the benefits of gas development for landowners, the community and all taxpayers through royalties and other taxes generated. Recognising this, governments around Australia have provided assistance to the industry.

On 14 December last year, resources minister Keith Pitt MP announced the availability of $50 million in government grants to support and accelerate exploration as part of its Beetaloo Strategic Basin Plan. More detail on the grant program was released in March. In April our subsidiary, Imperial, applied for support for the drilling and completion of up to three horizontal appraisal wells and associated activities. Those applications were approved earlier this month.

Any assistance we will receive from government is commensurate with the benefits the activity will deliver to taxpayers, to the broader community and to traditional owners, who will gain employment and exploration payments akin to royalties. Imperial contracts with local businesses wherever practicable. During the recent Carpentaria-1 drilling and flow-testing campaigns, Empire utilised the services of local businesses located in Darwin, Katherine, Daly Waters, Borroloola, Cape Crawford and the Barkly region for activities including civil works, earthmoving, accommodation, catering and fuel supply.

To conclude, exploration and development of new basins is critical to meeting the enduring gas supply challenge Australia faces. The economic, energy and social benefits will be substantial, but development requires a collaborative partnership between gas companies; governments, who own the resources on behalf of their citizens and regulate all activity; traditional owners; native title holders; land users; and local communities. We are committed to playing our part in achieving this ongoing partnership. We would be happy to take any questions that you have.

CHAIR: Thank you, Mr Underwood. I might kick off with some questions. I know my colleagues will have questions as well. First up, just so we are clear, for the three new wells that Imperial has applied for money under this new grants program—is that a total of $21 million?

Mr Underwood : Yes. The funding is for up to 25 per cent of the cost of those wells, which under our applications came to $21 million.

CHAIR: And there are three separate grants because there are three separate wells; is that how it's worked out?

Mr Underwood : Yes, that's right.

CHAIR: Okay, just so that we're clear. Are you proposing to apply for any other money under this grant program?

Mr Underwood : That's not presently our intention, no.

CHAIR: You are the only company that has been given any grant approvals under this program?

Mr Underwood : To our knowledge, yes.

CHAIR: Yes. And have you got the money yet?

Mr Underwood : No. Under the grant program, we've been notified of an approval. We are now working through grant agreements with the Commonwealth government. Our understanding is that there will be various milestones that we have to demonstrate we have achieved before we can get that proportion of the grant funding.

CHAIR: What do those milestones look like? What does this agreement consist of?

Mr Underwood : The agreement has not been finalised yet, but essentially they are operational milestones that demonstrate we are carrying out the operations in accordance with the agreement.

CHAIR: So time frames, for example, and having certain things done by a certain time—are they the types of milestones that you're referring to?

Mr Underwood : They are operational milestones that would be carried out throughout the execution of a work program—for example, preparing a well pad, purchasing long lead items, mobilising a drilling rig to the site and so on and so forth.

CHAIR: Would you be able to table a copy of that draft agreement for us?

Mr Underwood : We have not yet received any draft documents from the government.

CHAIR: So you don't actually know what's going to be in this agreement?

Mr Underwood : There's a framework under which we applied for the grant, and an approval has been given on the basis of that application. That's only happened very recently. We will now be moving into a negotiation phase to agree on those documents.

CHAIR: If you're able to take this on notice, we would be interested in knowing what those draft milestones and key elements of the agreement are. We're going to have the department in front of us on Monday and we'll put the same questions to them, but, just so we're all on the same page, it would be helpful.

I'd like to ask about how you're getting the capital for these projects. Gas projects are very capital intensive. Where is Empire getting its capital from in relation to your current operations and the expansion you're now planning in the Northern Territory?

Mr Underwood : We are a company listed on the Australian Securities Exchange. We are majority Australian owned. To carry out our operations, we have raised money by issuing shares to investors on the Australian Securities Exchange.

CHAIR: So you haven't had to sell any assets in order to raise the capital?

Mr Underwood : We have sold assets previously. That was carried out under an old strategy by former management of the company. It was focused on the US, whereas we are focused on Australia.

CHAIR: So you have previously had to sell some assets. In terms of where you've raised the money—the Australian stock exchange—you say you're majority Australian owned. Can you give us a breakdown of the make-up of the shareholders?

Mr Underwood : I don't have an exact breakdown in front of me, but we have approximately 2,000 to 3,000 shareholders. Obviously, that number changes every day as people buy and sell shares on the market. When we have raised capital as a company in the last couple of years, that has been through share placements and share purchase plans carried out by Australian brokers, sophisticated investors and our existing shareholders.

CHAIR: Could you tell us what types of significant revenues Empire has generated in Australia?

Mr Underwood : Essentially none. We are in the exploration phase, so we are spending money rather than generating revenues.

CHAIR: So you haven't actually pumped anything into the Australian economy yet?

Mr Underwood : I would disagree with that. We are investing heavily in the Australian economy right now. We carried out a seismic program in [inaudible], drilled our first well in 2019 and carried out fracture stimulation and flow testing of that well earlier this year. We will continue to invest, and that is putting capital into Australia's economy.

CHAIR: Can you tell us how much company tax Empire and its subsidiaries have paid in Australia in recent years?

Mr Underwood : Certainly. We've never generated profits in Australia, so there's no tax to pay, because we've only ever generated losses. Obviously we pay taxes associated with the payrolls and so on and so forth for the people we employ in this country, but we have not ever generated a profit that would have tax paid on it.

CHAIR: So you haven't paid any company tax as yet. How many people do you employ?

Mr Underwood : In terms of direct full-time employees in Australia, it's around eight. And then when we carry out work programs obviously they are not people directly employed by our company, but that can grow to 30 to 50 people at a time. We also provide a lot of work for Australian small businesses, including consultants, which would be roughly double that eight-person full-time workforce.

CHAIR: What sort of money have you been spending in terms of your contracts to the 30 to 40 people who come onto a project, in terms of how much this contract is costing the company?

Mr Underwood : The day-to-day management of our business is probably around $5 million a year, and then in terms of work programs themselves there are a range of contracts. For example, we carry out baseline environmental studies, which involves hiring ecologists and so on and so forth, and then when we carry out the work programs themselves—the seismic program was a couple of million dollars, the drilling program was about $11 million and the recent fracture stimulation and flow testing was around $5 million; it's in that order.

CHAIR: You mentioned that you've had to raise capital from the stock exchange in relation to these projects. How much have you raised?

Mr Underwood : Under my leadership of the company, I would say it is around $50 million to $60 million, to date.

CHAIR: Mr Espie is the chair of Empire Energy. Is that correct?

Mr Underwood : Yes.

CHAIR: Since 2018?

Mr Underwood : Yes, that sounds right.

CHAIR: What skills does he bring to the company, to be the chairperson of Empire?

Mr Underwood : Well, Mr Espie is a highly regarded Australian business leader and resources leader. He has been a senior banker, focused on the resources sector. He has invested capital in the resources sector through a private equity fund. And he has been the chair of a number of companies focused on resources and infrastructure.

CHAIR: And he's got good connections with the Liberal Party?

Mr Underwood : We do not make any secret of the fact that Mr Espie is the chair of the Menzies Research Centre, and we've made that clear in our public disclosures.

CHAIR: Do you think his connections were helpful in order for Empire to get the only three grants so far handed out under this government program?

Mr Underwood : No, I do not, and they played no role whatsoever in our applications for these grants. We follow due and proper process at all times, and we applied for these grants in accordance with their terms.

CHAIR: Did your chairperson have any role in making the decision to apply? Were there any conversations that he may have had?

Mr Underwood : To my knowledge, absolutely not. Obviously we sought the approval of our board before we made the grant applications, and he is one of a number of members of our board who made the decision to apply for the grant.

CHAIR: Do you know what his relationship is with the energy minister, Angus Taylor?

Mr Underwood : I'm aware that they know each other. It's also well known that Minister Taylor attended our drilling site last year. Again, we make no secret of that fact.

CHAIR: When Angus Taylor came to the drilling site did you lobby him for some sort of grant that would allow you to expand the operations?

Mr Underwood : No, we did not.

CHAIR: So what was the purpose of Mr Taylor attending?

Mr Underwood : We wanted to show him the activities we were carrying out in the Beetaloo. Again, it's on public record that the government is following this gas fired recovery strategy, and we wanted to show that we are working hard to lead the development of this basin.

CHAIR: You didn't suggest that you might need some more money to expand?

Mr Underwood : No.

CHAIR: When did you decide to dig these extra three wells?

Mr Underwood : We became aware of the grant program in December, when Minister Pitt made a press release to that effect. The availability of the grant program clearly turned our minds to whether we should accelerate our activities in the Beetaloo. The management team presented to the board that this grant program provided a strong incentive for us to carry out works to accelerate our programs. The board approved the applications for the grants and we put them in in accordance with their terms. We are now pushing forward on that plan on the basis of the grants.

CHAIR: When did Mr Taylor and Mr Pitt visit you and the site of that well?

Mr Underwood : Minister Pitt did not attend the site. We invited him to the site, but he was occupied at the time. I would have to take on notice the exact date but I believe it was in October last year.

Senator McCARTHY: Mr Underwood, I would firstly like to go to your discussions with traditional owners. When did you first receive approval from traditional owners to explore in the Beetaloo?

Mr Underwood : We applied for EP 187, which is the exploration permit under which we are carrying out activities, in 2011. There was a period of some years of ongoing consultation between the company and traditional owners, facilitated by the land council, which arrived at the approval. I should stress that I was not an employee of the company at that time—I joined the company in 2018—but my colleague Professor Warburton was present.

Senator McCARTHY: I note that, at page 3 of your submission, you say Professor Warburton attended 27 meetings and approximately 27 on-country meetings.

Prof. Warburton : Yes, that's right. I believe our first on-country meeting was in March 2011.

Senator McCARTHY: When would the final decision and approval have been given from the start of 2011?

Mr Underwood : I believe it was in late 2013—and there was a process thereafter. There is an approval from the traditional owners and it then moves into a documentation phase where the land council acts on behalf of the traditional owners to negotiate the agreement. I also understand that the sign off of the federal Indigenous affairs minister was required. Our tenement is somewhat unique compared to others in the Beetaloo. It is on Aboriginal land, so it is governed by the Aboriginal Land Rights Act.

Senator McCARTHY: I will get to that in a moment. Could I first get a sense of your understanding of the word 'consent'. This is an important point that is coming through in the inquiry so far. It would be good to understand your definition and understanding of consent in terms of traditional owners.

Mr Underwood : Certainly. I will speak to the process first. Professor Warburton may be able to provide further colour, as he was present at most of those meetings. Under the Aboriginal Land Rights Act, no activity can take place without the full and informed consent of traditional owners. Furthermore, the land council—in this case, the Northern Land Council—acts on behalf of the traditional owners in relation to their lands. The consultation process—as I have witnessed it and as I understand has always been the case with our company—involves regional offices of the land council, project officers, lawyers and anthropologists. The purpose of that is to ensure that the proposal put forward by the company is properly delivered and people are giving full and informed consent. In our experience, while we are given the opportunity at these meetings to present our work programs, we are specifically excluded from most of the proceedings of those meetings so that the issues can be discussed without our undue influence on the process. John, do you want to add to that?

Senator McCARTHY: Thanks, Mr Underwood. I will go to you, Professor Warburton, given that you were present at 27 meetings. What was the outcome in terms of the number of TOs who consented?

Prof. Warburton : There was quite a lot of discussion at those traditional owner meetings. In fact, there are three phases in those meetings. The first phase is that the land council are responsible for ensuring that the traditional owners understand the implications of what they're hearing; the first meeting is between the land council and the traditional owners. The second phase is an opportunity for the company to present their proposal to the traditional owners and also seek independent questions, and also seek questions from the land council in terms of clarification. And then the third part of it doesn't involve the company; it involves the land council speaking with every one of the traditional owner representatives at that meeting to establish whether they consent to the activities they're hearing about. The company has no influence in that process and we don't participate in that. All we understand is whether, at the end of that meeting, the traditional owners collectively have given their consent or have not consented to our activity.

Senator McCARTHY: From 2011 to 2013, when you got the final approval process and consent completed, according to your description of it—are you given a list of the names of the traditional owners or are you just told that this has been consented to?

Mr Underwood : We are not given lists of attendees.

Senator McCARTHY: That's not what I'm asking. Are you given a list of who among the traditional owners have consented?

Mr Underwood : My apologies, Senator; I misunderstood you. We are not given any such list.

Senator McCARTHY: So what you're provided with then is more documentation from the land council confirming that consent has been provided?

Mr Underwood : We are notified that consent is provided and then we enter into a legally binding [inaudible] agreement between our company and the land council acting on behalf of the traditional owners.

Senator McCARTHY: Thank you for that clarification. I think it's really important for the committee to understand what this process is because the issue of consent is coming up quite a lot. We need to examine quite clearly and closely just which traditional owner groups are acknowledged. If you don't know who they are and you're just given a general yes, how do you know then who to continue to work with post that consent?

Mr Underwood : That is a function that is carried out by the land council. Under the agreement we also have an obligation to continue to consult with traditional owners periodically, and we have honoured that commitment. Every time those [inaudible] meetings are carried out, it is organised by the land council—it is independent of us. I understand that anthropological processes are carried out to ensure that the right people are speaking for country.

If I may add one further point that I believe is critically important in relation to consent, I note that an on country meeting was conducted in 2013 at which consent was given by traditional owners for us to carry it forward and that on the very next day in Borroloola another on country meeting was conducted at which we sought the consent of the traditional owners for an area adjacent to and to the north of EP187, which is EP188. We understand that that had some overlapping traditional ownership, but not the same [inaudible]. Indeed, at that meeting the very next day consent was not granted for the awarding of an exploration permit. I think it's important to demonstrate that informed consent can be given and also that informed nonconsent can be given.

Senator McCARTHY: I'll put some further questions on notice around that issue, but I want to take you through the chronology you provided in your response to issues raised by other submissions. You say that in October 2020 Minister Angus Taylor visited drilling operations in the Beetaloo Basin. Was that visit paid for by Empire Energy?

Mr Underwood : We paid for a charter flight to the worksite and back. That charter flight was attended by a number of people, including shareholders, employees and other stakeholders of the company. We also paid for a dinner that we hosted for a number of people that night. We did not pay for the minister's flights to Darwin or accommodation.

Senator McCARTHY: All right, so your invitation to the minister stated that you understood that Minister Taylor's office was involved in organising a CLP fundraising dinner in Darwin that night. Is that correct?

Mr Underwood : I would need to take that on notice.

Senator McCARTHY: If you can. It's not a trick question, Mr Underwood. My understanding is it was on the actual invitation. If you can check that and provide that for the Senate inquiry, that would be good. Did representatives from Empire Energy meet with Minister Taylor on 10 March in Sydney?

Mr Underwood : Yes, we did.

Senator McCARTHY: This meeting was just prior to the grants guidelines being announced and the program opening for applications on 18 March. Is that correct?

Mr Underwood : I would need to check the exact dates. I do note that the grant program itself was public knowledge at that time, but I believe it may have predated the formal application and eligibility criteria being released.

Senator McCARTHY: Mr Underwood, what was discussed at that meeting on 10 March?

Mr Underwood : I was present at that meeting. We discussed with the minister the work programs that we were carrying out at the time and also some issues that we face operating in the Northern Territory around regulatory efficiency.

Senator McCARTHY: What were the work programs you were carrying out at the time?

Mr Underwood : At the time, this was in relation to the vertical fracture stimulation and flow testing of the Carpentaria-1 well, which we have recently carried out.

Senator McCARTHY: Can I ask why you haven't disclosed this meeting in any of your submissions to our inquiry.

Mr Underwood : I wasn't aware that I was required to, but I'm certainly not hiding it from anyone. As I'm telling you now, I acknowledge that the meeting occurred.

Senator McCARTHY: On 7 July, Minister Pitt announced the first grants of $21 million to Empire Energy, but the three drilling operations subsidised by these grants do not yet have environmental approval from the Northern Territory government, do they?

Mr Underwood : That is correct. We are in the late stages of seeking approvals. The approvals process under the environmental regulations in the Northern Territory is extensive, and we absolutely acknowledge that's appropriate, that strong regulation should be carried out in the Northern Territory, but I can confirm that we will not be carrying out any work program activities until those environmental approvals are in place.

Senator McCARTHY: Why did you apply for the funning to subsidise operations that aren't yet approved?

Mr Underwood : We have to plan well in advance for our work program, and there was no condition in that grant program that environmental approvals were required prior to applying, and the processes are running in parallel.

Senator McCARTHY: At any point in your meeting with Minister Taylor did you discuss the grant program at all?

Mr Underwood : From memory, I may have told the minister that I believed it was a good policy and that it may incentivise an acceleration of activity, but I can assure you there was no mention of seeking any kind of influence over the process.

Senator McCARTHY: So you discussed the grant guidelines before the grant guidelines were publicly released.

Mr Underwood : No. Sorry, what I said was I told the minister that I thought the program itself was a good idea. There was no discussion of guidelines. We had no knowledge of the guidelines.

Senator McCARTHY: But you had a discussion about your particular area and your needs in that particular region.

Mr Underwood : No. I said I made a general statement that I believe the grant program was a good policy to accelerate the development of the basin.

Senator McCARTHY: Just two more questions, Chair, if that is Okay. Mr Underwood, I notice in your submission that you have photographs of people from the Borroloola region here. I'm looking at page 15 of your submission. Was permission provided from the people in these photos to be included in this submission?

Mr Underwood : When the photographs were taken we did ask those people whether we could take their photograph, but I concede that we did not seek their permission specifically to put them in the submission. If that has caused offence, it was inadvertent and I apologise.

Senator McCARTHY: Okay. Thank you, Chair.

CHAIR: Thank you. Apologies for dropping out before. Thanks for jumping in there, Senator McCarthy, and asking questions. Mr Underwood, I want to follow up on one element that you've just given to Senator McCarthy. You mentioned the charter flight and the visit with the minister. You mentioned that shareholders were on the charter flight. Which shareholders are you referring to?

Mr Underwood : There were representatives of stockbroking firms such as equity analysts, some of whom own shares, and there were other shareholders. I believe there were representatives of Macquarie Bank and members of the board present.

CHAIR: Was Mr Espie on the charter flight?

Mr Underwood : Yes, I believe so.

CHAIR: You told me earlier that Mr Espie hasn't spent any time talking to Mr Taylor.

Mr Underwood : Sorry, I don't recall saying that.

CHAIR: I asked you about whether Mr Espie has spoken to Mr Taylor about your operations. Okay, let's go on. Was your larger shareholder, Dale Elphinstone, there?

Mr Underwood : No, he was not.

CHAIR: Could we have a list of all the people who were on that plane?

Mr Underwood : I would take that on notice. I imagine I would need to ask their consent to—

CHAIR: Just to be clear, this is a Senate hearing. We seek evidence. We ask people for documents. If you were to withhold that information you'd have to come up with a pretty good excuse and that's not just because someone doesn't want their name revealed. There is a public disclosure process. I'm asking you to give us that evidence. If you want to withhold it then we will have to have a debate about why.

Mr Underwood : Thank you, Senator, I will.

CHAIR: Could I ask about the second-largest shareholder, Global Energy and Resources Development. First of all is it correct that they are your second largest shareholder?

Mr Underwood : I would need to check that. I know that they are a large shareholder. We have had some material movements in our overall register recently due to capital raisings and so on, but that may be correct—second- or third-largest potentially.

CHAIR: What is Mr Michael Tang's connection to that shareholder?

Mr Underwood : We understand that he is a beneficial owner of that company.

CHAIR: Do you know much about Mr Tang?

Mr Underwood : The only relationship that I've ever had with Mr Tang, and indeed Global Energy, has frankly not been great. When I joined the company I put forward to shareholders a new strategy involved in reducing debt and focusing our efforts on the Northern Territory. They disagreed with that strategy and sought to remove the board, which was an unsuccessful attempt. I would say that since then we have had a reasonable attempt at trying to have a good relationship, but I would certainly not consider it a close relationship, and I note that they have no board representation.

CHAIR: Global Energy and Resources Development is a large shareholder, though. Are they registered in the Caribbean?

Mr Underwood : I believe so.

CHAIR: Are you aware of the allegations in relation to Mr Tang and facing charges in Hong Kong for insider trading?

Mr Underwood : Yes, I am. When that entity sought to remove our board we made public disclosures to that effect.

CHAIR: But they still happen to be, if not your second-largest shareholder, one of your larger shareholders?

Mr Underwood : Yes, that is the case, but I have no control over whether or not that company chooses to continue to hold shares in our company. We're a listed company and that is a matter for them.

CHAIR: Yes, although the Senate does have control as to whether we think public money should be going to a company like this. That's what we're discussing today. Thankfully there is somebody who is able to have a look at it. How much of the $21 million from Australian taxpayers might make its way to Mr Tang?

Mr Underwood : None, directly. The funds are going to be—

CHAIR: I don't think these fellows ever work with directness, Mr Underwood. I think that is precisely the issue.

Mr Underwood : The funding that has been approved by the government will be invested alongside our own shareholders' funds into the Northern Territory to progress our work programs. We are not intending to do anything else with the money other than invest it in the Northern Territory, which is in accordance with the terms of the grant.

CHAIR: Could you tell us a little bit more about your largest shareholder, the Tasmanian billionaire. What connection does he have with the project, aside from just being an investor?

Mr Underwood : His connection with the project and the company is as a shareholder of our company.

CHAIR: He hasn't been involved in any of these conversations with the government in relation to this grant?

Mr Underwood : To my knowledge, none whatsoever.

CHAIR: Has he been to any of the events you talked about? You talked about charter flights, meetings, dinners. Has he been to any of those things? Has he been at any of these events or activities?

Mr Underwood : No, he has not. One of his employees joined us at a more recent site visit, where we were carrying out the flow-testing operations of the Carpentaria-1 well.

CHAIR: Who would that be?

Mr Underwood : His name is—sorry, I'm having a mental blank. Can I take that on notice, please?

CHAIR: Yes, you can take that on notice. Thank you.

Mr Underwood : Sorry.

CHAIR: No, that's fine. I appreciate that. Senator Sterle, do you have any questions?

Senator STERLE: I do. Thank you, Chair. Thanks very much. I'm always keen on these projects. Could you help me out here, Mr Underwood. If this project goes ahead, what will the training and employment benefits be for local communities and local people?

Mr Underwood : Right now we are in an early stage of our work programs, where we are carrying out ad hoc, periodic work programs; however, I note that we are already providing employment for local people. Indigenous people, and for that matter traditional owners, play a very important role in a lot of the work that needs to be done prior to the commencement of petroleum operations, such as cultural heritage clearances and archaeological clearances, and that's because they are the people who know that land the best. We go to great lengths to ensure that we respect that and avoid sacred sites and culturally sensitive sites. As I mentioned, we have already been making material investments in local businesses. We foresee that, if we have further technical success and move into commercial production in the future, there will be great employment opportunities for local people, including Indigenous people. That's a really core part of our business strategy.

Senator STERLE: Mr Underwood, in my experience around the west here, going back to the eighties the local Indigenous employment was appalling. Around the early 2000s a lot of companies in the industry talked it up—good—but now they are actually delivering. That's why we're keen to see how far advanced you are. Are you talking about Indigenous enterprises as well? There's a lot of entry-level work, particularly around land clearing and construction. Is it too early at this stage to talk about Indigenous enterprises?

Mr Underwood : I wouldn't say too early necessarily. We are very keen to work with the local communities. Apart from being the right thing to do, to offer emerging generations of people an opportunity for jobs, it makes good business sense. We want to minimise fly-in-fly-out-type operations and employ local people as much as possible, Indigenous and non-Indigenous. As I said, it's currently in a relatively embryonic stage, but we want to grow that over time.

Senator STERLE: Okay. Alright. Thanks for that. Mr Underwood, earlier, in your opening statement, you talked about pastoralists and that there is a bit of activity around the area where one day you will hopefully have an operation. What other uses of the land are there in the area where you will be drilling and hopefully producing?

Mr Underwood : As I mentioned earlier, the exploration permit we are operating on—EP197—is on Aboriginal land, and I understand that it was actually the first exploration permit ever awarded on Aboriginal land. I have witnessed shared use [inaudible] for traditional owners' use of their land but also us co-existing with a pastoral operation that has cattle on that area. Indeed, we work quite closely with the young and, I must say, incredibly hardworking couple who live out there, because they can help us. As an example: when our sites are non-operational, they carry out site inspections for us and get remunerated for that. So it's a good co-existence.

Senator STERLE: You're not inventing the wheel; we've seen this around the nation, particularly in my great state over here, although it's been a long, hard slog. But it's done and it's easy to replicate, so—finger's crossed—it'll happen.

You talk about long-term investments in the Territory. What are the factors that you see driving long-term gas demand?

Mr Underwood : I think I should stress that this industry is at a relatively early stage. Before we can move into large-scale development, we as an industry need to determine whether or not the appraisal programs that are now ongoing will be able to achieve sufficiently high gas flow rates to make this economic. Having said that, if we can make it economic, it'd be a great opportunity for the local areas, for the Northern Territory, for Australia and, frankly, for the entire region. It's well known that we're going through an energy transition at this time, and the penetration of renewables into our electricity sector is growing all the time. Gas plays an important role as a complement to renewables because renewables presently face intermittency and battery technology, while it's advancing, is not quite there yet.

But I think it's also important to really stress that only around 20 to 25 per cent of gas demand globally is for electricity. Gas is a critical feedstock for everything we use in our modern daily lives, and I believe that the Beetaloo can play an important role in that. The Northern Territory is very keen to see value added to these gas molecules in the territory, which creates a lot more jobs than just exporting it, and we are supportive of that. We're supportive of getting more gas into Australia's east coast, which has recently seen very high spot gas prices, and that hurts consumers, particularly those from a lower socioeconomic background. So we need more supply.

As Asia goes through the energy transition in the years ahead, LNG demand is forecast to increase substantially, and I think that LNG should be coming from Australia, where we are very well regulated and where we can see those tax dollars stay in Australia.

CHAIR: I am going to have to go to Senator McMahon because we are running out of time. One more, Senator Sterle.

Senator STERLE: I wanted to know what Empire Energy's stance is on climate change and net zero by 2050.

CHAIR: It's a worthwhile question.

Mr Underwood : We are a small company that is just getting started on its journey of developing its assets in the Beetaloo, but we are very mindful of the challenges that global warming present. We have been discussing at length around our boardroom table how we look to tackle this challenge. In the last year, we have established a sustainability road map in which I as the CEO am required to report to the board at every board meeting how we are progressing in terms of some of these initiatives. We are currently working on an ESG policy which will encompass, obviously, emissions. I note in particular that in ESG we often focus on the E, but for us the social and governance factors are critically important at this stage, and then the emissions factors will become more important over time as our operations grow. I note that the Beetaloo Basin's gas has very low in situ CO2 compared to many other gas fields around the world, so I think it can play a very important role in the transition, because if you have less CO2 in the reservoir there's a relatively lower emissions offset challenge.

CHAIR: Could we have a copy of your sustainability road map tabled? That would be helpful for the committee.

Mr Underwood : Yes.

Senator McMAHON: I will go to the question of informed consent of the TOs. It's my understanding that the NLC is the statutory body that organises the negotiations, information sessions and meetings with the TOs. Is that correct?

Mr Underwood : Yes.

Senator McMAHON: As the process was explained, the NLC will contact the TOs and organise a meeting. They will speak to them first. Then you will have an opportunity to present and be asked questions. Then they will meet with the TOs again and obtain either their consent or, as in, I believe, over 20 sites on this one lease, their nonconsent. Is that correct?

Mr Underwood : Yes. There is a process of consultation, then consent and then ongoing consultation after that.

Senator McMAHON: And you are legally required to go through the NLC, as the statutory body, to negotiate with the traditional owners. Is that correct?

Mr Underwood : Yes.

Senator McMAHON: There are something like 30 on-country meetings that have occurred over the past 10 years in relation to this lease?

Mr Underwood : Right across our work program areas, from the Beetaloo Basin right up through east Arnhem Land.

Senator McMAHON: We heard earlier from Ms Dank, who in her submission wrote:

At no stage has Empire made any attempts to reach out to our family …

Yet you have provided some evidence, I believe, that details some messages and emails that refute that. Obviously, both positions can't be true. Can you clarify who is presenting the correct version?

Mr Underwood : Can I first say that I watched Ms Dank's testimony, and my heart goes out to Ms Dank about the personal situation she's in. It must be heartbreaking to be stuck on the other side of the world, and I offer my genuine and sincere condolences to Ms Dank in relation to the fact that she's separated from family. In relation to the communications we've had with her, we became aware of concerns that she had in relation to our upcoming drilling proposals, because, under the Northern Territory environmental regulations, there is a community consultation process where the plans are put on public file and anyone from the community is entitled to have their say, and we became aware from the environmental regulator that she had sent a letter expressing concern. So I was able to get Ms Dank's email address and I reached out to her. I think the correspondence that's been tabled with the committee clearly demonstrates that I stressed the importance of that meeting and sought to meet with her. My invitation to Ms Dank remains open. I'd be delighted to have a conversation with her because, in the three years that I've been doing this role, we have gone to great lengths to reach out to people who have expressed concerns about our operations. I think it's really important that we can have those direct consultations and I'd be delighted to do so, if she's willing to take up the invitation.

Senator McMAHON: She raises in her evidence the question of why you hadn't made contact prior to May this year. Was that simply because you weren't aware she had concerns, or was there another reason?

Mr Underwood : That is right: I was not aware. Since Ms Dank made her submission, we have sought for an email to the company in 2018 that she referred to. We were able to find that correspondence, which I'm happy to table with the committee, obviously. It was actually in 2017. She contacted an employee of the company who has not worked for our company for a number of years—she has retired. In that correspondence, Ms Dank sought attendance lists of who had been at meetings, and the former employer of our company quite rightly pointed out that we didn't keep those lists, but the suggestion was that she should contact the NLC. Again, that correspondence that I've read was respectful between both parties.

Senator McMAHON: So it is a legal requirement that the NLC be the one who determines who's invited and keeps records of who's attended.

Mr Underwood : That's correct. That entire process of identifying who are the legitimate traditional owners under the relevant legislation and the keeping of attendance lists is quite deliberately kept entirely separate of our company, as it should be, to ensure that the proper processes are followed.

CHAIR: Senator McMahon, we are well over time.

Senator McMAHON: Yes. I am finished.

CHAIR: Thank you, Mr Underwood, for your evidence. You've taken a number of things on notice. The date for answers to questions is 6 August, so if you could get in contact with the secretariat—the secretariat will get in contact with you anyway—that would be very helpful.

Mr Underwood : Thank you very much for taking the time to speak to us today.

CHAIR: Thank you for coming along. That concludes today's proceedings. I'd like to thank all of the witnesses who have given evidence to the committee, and thank you to everybody for putting up with our various technical issues as we went along—this is the COVID way. We have our next hearing next Monday, and at least some of us will be in Canberra; others will be appearing by videoconference. I look forward to resuming our inquiry then and continuing to collect evidence. We will be hearing from the department. I think there will be lots of bits and pieces we can put to them then. Thanks to the secretariat. We appreciate all your efforts in wrangling us all and getting us all here today, and thanks to Hansard. Thanks, everyone.

Committee adjourned at 14:12