Community

The energy sector is vital to our everyday lives and Blue Energy understands and supports community interest and involvement in issues relating to this sector.

In recent years and throughout 2011, the community has shown extensive interest in energy issues, including debate on global energy needs and the role of energy projects in Australian regional communities.

Blue Energy has tenements spread across Queensland. Our operations over this broad area mean that we interact and engage with stakeholders in many towns and communities.

Groups such as landholders, business owners, service providers, traditional owners, community groups and organisations are all affected in some way by the work we do.

Our goal continues to be the building of effective and positive relationships in each of the locations in which we operate and to ensure our operations benefit local communities.

Our industry

During 2011, issues relating to Australia's energy industry, including the coal seam gas sector, have been extensively debated. As in any debate, different points of view have been put forward, along with a great deal of information.

This is an essential process. However, unfortunately, it is also a process that can become confusing for participants who are trying to assess what can at times resemble conflicting information.

Our industry is contributing useful, fact-based discussion on these important issues.

Our Social License to Operate

As a company, we have worked hard to earn our social license to operate. As a result, we have achieved extensive community and stakeholder support for, and approval of, our exploration operations.

We know this is an ongoing process and we are dedicated to ensuring we maintain our social license to operate.

Proud of our record

Blue Energy is proud of our record for fairly and effectively managing stakeholder consultations, negotiations and managing land access.

Our relationships are built on:

• transparent and open communications
• mutual respect
• establishment and maintenance of good relationships
• meeting, and where possible, exceeding expectations.

Our role

Understandably, landowners and others will continue to have questions, and we will take every opportunity to discuss all the issues and to provide factual information about CSG.

In addition to this, we view our role as working with stakeholders in areas such as planning work programs with consideration for landowner businesses and reaching compensation agreements.

Phases of a petroleum opportunity

With all the excitement of major LNG export projects in Queensland, and the associated media coverage, it is important to understand the processes that have developed in the petroleum industry. Finding and developing a petroleum opportunity (this includes conventional reservoirs and unconventional reservoirs such as CSG) is complex, but the evolution process has the same basic principles for all in the industry. Blue Energy describes this evolution in the following five phases, each of which has clear boundaries. Each phase needs to be successfully completed before progressing to the next and some phases may need to be repeated before progress can be made.

Phase 1 is early exploration for the discovery of commercially significant volumes of petroleum. This entails a limited amount of seismic data acquisition, exploration wells, and other possible surveys. Many of Blue Energy's tenements are in this phase.

Phase 2 is for the appraisal and definition of discovered volumes of petroleum. The focus of this phase is demonstrating that the discovered petroleum can be produced at sustained and commercially viable rates. This phase normally consists of more detailed seismic data acquisition, other possible surveys, some additional exploration/appraisal wells, and a pilot testing program for the exploration/appraisal wells. For CSG opportunities, pilot testing may be as long as several years in order to demonstrate commercially viable rates. In ATP814P East Block (Monslatt), Blue Energy is in this phase.

Phase 3 is planning for development and long-term production operations. This phase includes engineering design, environmental impact assessments, community consultation and planning, applying for production licences, as well as other planning issues. This phase ends with a project approval to proceed. While Blue Energy has not entered this phase on any of our tenements, we have completed advanced planning so we can enter and perform this phase smoothly and efficiently.

Phase 4 is development of the opportunity. Several of the large LNG proponents have received all approvals, and they are now performing this very heavy development workload. This phase ends with project start-up and handover to ongoing operations.

Phase 5 is normal production operations over the life of the petroleum field. It ends once the petroleum resource is depleted, and then all facilities, wells and sites are fully and appropriately decommissioned, rehabilitated and returned their pre-existing land use.

Working with stakeholders during Phase 1 and Phase 2 exploration and appraisal

Blue Energy engages in transparent and open community consultation and land access discussions. These are the steps we take:

Step 1: Initially, Blue Energy is an applicant for petroleum exploration licences (a competitive bidding process). To move forward to a final Government grant of petroleum exploration rights, Government must first prepare and issue environmental conditions. In some cases, native title agreements must also be obtained.

Step 2: Once Government grant is received, Blue Energy conducts in-house evaluation of the subsurface geology and its potential so we can frame an exploration work program to obtain better understanding and definition. Early exploration programs can consist of seismic data acquisition and a very limited number of exploration wells. Seismic acquisition is very low impact, and commonly occurs before drilling a well, but not always. Sometimes well locations are selected on data that is already available.

Step 3: Concurrently with Step 2, Blue Energy starts community consultations well in advance of any onsite activities. We inform the community about the processes, the real science, the benefits, the actual risks, and how we mitigate those risks. In general, most issues can be summarised into:

• No negative impact to homes and residences
• No long-term negative impact to agricultural land
• Protection of aquifers and environmentally sensitive areas
• Respect for and fair compensation to landowners.

Step 4: Once Blue Energy has possible locations for seismic or drilling, we start working with landowners at those locations. We access properties only with landowner agreement and negotiate land-access payments and a win-win approach including flexibility in our locations as much as possible. Our compensation package is structured to address the issues of:

• Rental of the impacted land to offset loss of income.
• Activity payment to account for interference to lifestyle and other impacts to the landowner's business
• Landowner management time to compensate for the time spent working with us to develop a workable access agreement
• Fair reimbursement for an external legal review and advice.

Step 5: Blue Energy conducts the drilling and/or seismic activities as per the negotiated landholder access agreements and in accordance with Petroleum and Gas Act regulation and strict adherence to safety and environmental principals. Depending on the results of a work program, we may repeat the process, beginning with Step 2.

Community support

Blue Energy is dedicated to bringing opportunities for economic growth to local communities.

We also assist with support for local organisations and events.

Our recent community sponsorships include:

• Landsborough Flock Ewe Show Society
• Aramac Rodeo
• Aramac Quick Shear
• Aramac School Camp
• Nebo SES
• Nebo Bushman's Carnival Campdraft
• Hervey Bay/Maryborough Hospital