Response to ABC's questions SGX Code: TI6 OTCQX Code: LNCGY TO: Mark Willacy, ABC FROM: Linc Energy SUBJECT: Response to questions regarding the DEHP investigation at Chinchilla DATE: 4 August 2015 Background Since the 1x1 km UCG Demonstration Facility was established in 1999 by Linc Energy in joint-venture with CS Energy (a Queensland government-owned energy corporation), Linc Energy has successfully developed and operated five successive UCG gasifiers. A primary focus of our operations has been the successful measurement and mitigation of environmental impacts from the UCG process, whilst developing a world leading commercial technology. • What is Linc Energy's response to the government's allegations of environmental harm? Linc Energy strongly rejects the allegations that its UCG Demonstration Facility has caused serious environmental harm. Linc Energy is firmly of the view that the Department commenced these proceedings without sufficient scientific evidence and, based upon our detailed knowledge of the operations and environment at our Demonstration Facility, that the allegations were taken out of context and/or are simply incorrect. We are also of the view that on-site impacts of gasification were authorised by the relevant environmental licences granted by the Department. • What is Linc Energy's response to the department's investigation? It is Linc Energy's belief that the investigation has been conducted in a misguided manner. Both the Minister and the Director General have refused to meet with Linc Energy despite numerous requests to discuss the perplexing manner in which these proceedings and the investigation more generally, have been conducted. In February of this year, in response to Court orders requiring the Department to deliver the evidence it would seek to rely upon for the prosecution of the charges, the Department commenced a further investigation program to ‘supplement’ the evidence available. Linc Energy fully co-operated with and assisted in the facilitation of this further investigation, including allowing full access to our site and facilities to the Department’s staff and its consultants. Response to ABC's questions SGX Code: TI6 OTCQX Code: LNCGY This further investigation program mainly involved drilling of wells to investigate gas occurrence and fracturing. The Company understands that the discovery of hydrogen gas at anomalous (but not explosive) levels during this drilling campaign, prompted the Department to establish a 340km2 excavation caution zone due to the “risk of explosion” if excavating below 2 metres (based on the advice of its consultants). This then prompted the Department to embark on a wide range of further scientific investigations by its consultants. As a result of the regional surveys, the Department concluded that there is no threat to: a) b) c) d) e) f) public health; air quality; groundwater; surface waters; soils; or agricultural productivity. Despite this, the Department has continued with their proceedings against Linc Energy claiming widespread contamination of soils by the gases hydrogen, carbon monoxide and hydrogen sulfide (despite the fact that minimal analysis for hydrogen sulfide was conducted during this testing). Linc Energy continues to deny these allegations and considers that naturally occurring sub-soil processes are the most likely cause of the gases detected by the Department. To this end, and in parallel with the Department’s further investigations, Linc Energy commissioned an independent study from a third party expert that focussed on potential sources of the regional occurrence of sub-soil hydrogen. This study concluded that due to the regional geology, and consistent with similar findings in other regions of the world, radioactive decay of uranium, thorium and water is the most likely source. The occurrence of irregular concentrations of particular gases in the Department’s data also support this claim. Linc Energy provided this report to the Department and their experts; however they have chosen to dismiss it out of hand. The investigation has also demonstrated the Director-General's monumental mishandling of Queensland's strained financial resources. We understand that more than $5 million of taxpayer’s money has been spent so far, by the Department, on this investigation to confirm there is no risk to public health, air quality or groundwater. Response to ABC's questions SGX Code: TI6 OTCQX Code: LNCGY Linc Energy's own technically competent employees could have told the Director-General this for free, if he had agreed to meet with us. • What is the view of Linc Energy's own experts and scientists regarding the government's/department's claims? Linc Energy has engaged leading experts from across the globe in highly specialised fields, to review the evidence that has been presented by the Department so far. Their informed opinions and conclusions have reaffirmed our view that Linc Energy is not responsible for the alleged serious environmental harm at Chinchilla. Furthermore, we are confident that good science and the following of appropriate legal process will result in the vindication of Linc Energy and validation of the UCG technology. It is the Company's view that naturally occurring sub-soil processes are the most likely cause of the gases detected across the Chinchilla region and that the Department's own data will help to demonstrate this. • What is Linc Energy's response to claims in internal department documents that workers were exposed to syngas? Linc Energy has not been privy to the information contained within the internal departmental documents. However, allegations that Linc Energy intentionally exposed or covered up and ignored health concerns of its employees are incorrect, misleading and offensive. Since 2008, Linc Energy has not received any complaints from employees, past or present, regarding health effects relating from exposure to syngas or its contaminates at our UCG Demonstration Facility. In addition, since 2009, Linc Energy has conducted 4 workplace air surveys utilising approx. 320 air samples. These reports confirm compliance with workplace air standards and the results of the surveys were communicated with employees at the time of the reports being received. The safety of our employees, and the wider Chinchilla community, has and always will be our number one priority and our responsibility to the environment is held in the highest regard. Linc Energy is extremely disappointed by the speculation, particularly regarding allegations ‘leaked’ from within the Department in respect of matters that have never been raised directly with us. Clearly the ‘leak’ was SGX Cutie: Tl6 OTCQX Cutie designed to cause Linc Energy to be subject to unfair and unwarranted media and activist Criticism. Linc Energy remains confident that these matters will be appropriately investigated by tlte Crime and Corruption Commission. It is disappointing that the Department who is obliged to behave as a model litigant has acted in the way that it has done to date and has sought to litigate the case against us through the media, rather than through the appropriate legal process. - What is Linc Energy's response to moves hythe department to increase Financial Assurance? Linc Energy has a financial assurance in place that was calculated using the Department's own approved methodology. Linc Energy believes that the 400% increase proposed by the Department is unreasonable and their approach in this case is both tlawed and outside oiindustry practice. Linc Energy has challenged the increase sought by the Department and is confident that it will be successful in is challenge. . What impacts have all offlle above had on the Company? The investigation by the Department, and the subsequent media attention from the 'leaked' Department reports, has used a significant amount ortime resources. in addition, the costs resulting from continually having to defend ourselves in the media while also getting expert legal and technical advice has had a significant financial impact on Linc Energy 7 although nowhere near as much as the $5 million plus of taxpayer's money the Department has spent on the investigation so far to conclude is no risk to public health, air quality or groundwater. l-lad our starrst management's time and the Linc Energy's financial resources not been spent on defending itselragainst these unsubstantiated allegations by the Department, Linc Energy would have been able to focus on achieving real environmental outcomes by progressing its plans for a research focused decommissi ning and rehabilitation program at Chinchilla consistent with recommendations made to the Government by is own independent Scientific Panel. 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