Resource Minister Anthony Roberts has suspended the exploration license of Metgasco Limited (ASX: MEL) for failing to “undertake genuine and effective consultation with the community”. The company has also been referred to the Independent Commission Against Corruption (ICAC). Its shares are in a trading halt.

Back in January, I warned investors that “concern over coal seam gas projects [has] managed to unite farmers and environmentalists,” and it turns out that community opposition has caused a few problems for Metgasco. Shares in the company have returned -84% in five years, compared to a return of +45% for the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO). Here’s what you need to know to save yourself from making a similar mistake:

1) According to its website, “Metgasco has the legal right to explore. Metgasco has a strong degree of support in the areas in which it operates, with 10 years of field activities and more than 300 voluntary landholder agreements.” According to Mr Anthony Roberts, Resource Minister, “The director of the Office of Coal Seam Gas has now suspended the approval to construct the Rosella E01 gas exploration well.” I guess Metgasco wasn’t counting these people:

Bentley Blockaders, largely motivated by altruism. Photo provided by Greenpeace.

2) History will also smile on the decision of Mr Roberts to refer the project to ICAC for investigation. “In accordance with Section 11 of the Independent Commission Against Corruption Act,” he said, “I have referred this to the Commissioner to ensure that any decisions pertaining to PEL 16 have been made entirely properly and without any undue interest or influence.” That detail may be of interest to investors in Whitehaven Coal Limited (ASX: WHC). I’m not saying Whitehaven Coal has done anything wrong, although the original proponents of the controversial Maules Creek expansion (the main problem for the company) have been proven guilty of failing to disclose political donations. 

Whitehaven Mine foundation plaque. Photo Credit: @MarkDoyle00

3) Divestment campaigns are sure to use the story of Metgasco to demonstrate why progressive and public-interest institutions should divest from controversial projects that would destroy the great barrier reef, precious farmland or endangered ecosystems. For example, the Australian National University students, teachers and alumni who forced the uni’s fund manager to divest from Metgasco are now taking the credit for saving the fund a seven figure sum. It’s quite possible that other coal seam gas extractors such as Santos Limited (ASX: STO) and Origin Energy Limited  (ASX: ORG) could face trouble from protestors, although Santos and Origin have avoided massive opposition so far.

A clear loser from the suspension of Rosella E01 is drilling company Titan Energy Services Ltd  (ASX: TTN) who had won the tender for the project. The vow by local councillors to attempt to prevent the truck carrying Titan’s rig from using local roads due to its weight was a clear indication to investors that the company was not welcome. While the company can now deploy its rig elsewhere, the tender was clearly a waste of time.

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Motley Fool contributor Claude Walker (@claudedwalker) does not own shares in any of the companies mentioned in this article.