A group of shareholders in Metgasco are seeking to use people power to put together a block large enough to reject the proposed sale of the company's core assets, three licences in the Northern Rivers region of New South Wales, saying they are holding out for compensation that reflects the full market value of the permits.

Vaughan, a Northern Rivers local, told Energy News that the group believed it was within striking distance of achieving a simple majority in the vote, to tell the NSW government to renegotiate.

The group says that if the NSW government wants to acquire Metgasco's licences to suit its political agenda then it will need to pay up.

Vaughan says the current management have "no real skin in the game", and are not looking out for the hundreds of small shareholders who have already lost out.

"The board can probably press on and play junior miner if they like, they tried that with the Elk (Petroleum) deal that no one wanted, but that will see shareholders who will lose out, and many will have been with Metgasco for 10 years."

But he hopes shareholders will reject the deal, force the board out, and give Metgasco a clean slate to renegotiate with the government, or pursue development of the permits.

As far as Vaughan is concerned, the government's basic offer should be refunding the $120 million spent to date finding the significant Northern Rivers gas and conventional resource.

It then would like to see compensation for the loss.

"At its peak the field was worth $400-$500 million just for the CSG resource, without even the conventional gas," he said.

The No group believes there should be some recognition for that.

At each stage over the past decade, everything Metgasco has done has been legal, open and above board, whereas the government has refused to renew permits or sign off on granted production licences for years.

Metgasco's leases contain the largest gas resources defined in NSW, and the rebel shareholders says the $25 million offer price is little more than cash backing for the company.

The group says the company's 4500-odd shareholders have taken all of the financial and commercial risks to discover strategic energy resources that they believe will eventually be developed, so they should have fair compensation: refunding all Metgasco's expenditure to date plus the cost of capital foregone and offering the company a first right of refusal in perpetuity to repurchase these PELs at the same price that Metgasco is forced to sell them.

If, in that future day Metgasco is unable to or elects not to take up these PEL rights, the registered shareholders should be granted an overriding royalty of 10% of gross revenue from gas and petroleum sales from these PEL's in perpetuity.

"By effectively expropriating Metgasco's assets, the NSW Government intends to deprive shareholders of the future value of their investment. When these gas assets are developed the shareholders who invested their own risk capital in this enterprise should benefit," the group said.

"We did not invest expecting to encounter sovereign risk as experienced in Gabon. We invested in New South Wales where we believed the rule of law had some weight and the sanctity of investment and contract rights were honoured."

At last count, some 685 shareholders control 81.22% of Metgasco, with the top 20 in control of 36.01%.

The two largest shareholders are ERM Power (12.87%) and Queensland CSG pioneer Paul Fudge (3.45%).

So far the no group has not had discussions with Fudge or ERM, but Vaughan said he could not fathom why the ERM would accept the deal.

"It would be tantamount to negligence. They will have spent a significant amount of funds from their own shareholders in Metgasco, and they will just waste it," he said.

ERM has averaged a purchase around 45cps, and stands to lose around 75% of the value of its investment, however it has previously walked away from its own NSW resources, including the Kangaroo Creek gas project.

Shareholders will meet in Sydney on December 12 in what is likely to be one of the most fractious junior company meetings in recent times, with shareholders split, and people power expected outside telling Metgasco that, in the wake of the Bentley blockade, the company has no social licence to operate in the region around Casino and no popular support.

Metgasco's woes started in May 2014 when, in the back of the blockade of the Rosella-1 well site, the government cancelled its drilling approvals.

While Metgasco had been successful in the Supreme Court in having the drilling approval lifted, the government has offered it just $25 million for the licences, 10 times as much as any other licence in the state's CSG buybacks.

Metgasco CEO Peter Henderson admits the cash is a fraction of what the company has spent, but the board had determined that accepting the offer is the best option as the settlement figure is considered to be higher than the company is likely to achieve if it retains the licences and pursues court action for damages.

Metgasco says the regulatory environment is so uncertain, particularly with local MPs and the NSW Labor party pledging to make the region gas field free, any work would likely face deep protests.

The company would also need a large cash injection if it fights on.

If shareholders back the deal, Metgasco will emerge with no debt and $32 million in cash, or around $0.073/share cash backing.

If the transaction proposal is rejected the Metgasco board says it expects that the company's rights under its exploration licences will be respected and that the NSW Government will ensure that law and order is upheld and that Metgasco can proceed with its lawful activities.

Vaughan said that sovereign risk in NSW had been ramped up, and any potential purchaser of the state's poles and wires electricity business should be very cautious.

"How safe will any investment in NSW be given what they have done to Metgasco?" he asked.