Santos will immediately start preparations for its $3.6 billion Narrabri gas project in northern NSW after controversially winning state environmental approval, but will still have to battle opponents that are vowing to prevent it ever going ahead.
The ruling from the NSW Independent Planning Commission, which dictates a strictly phased development under 134 conditions, sits neatly with the federal government’s push for a gas-led national economic recovery.
But analysts say gas may only be produced in about 2025 even if Santos can negotiate through opposition from shareholder activists, farmers, scientists, protesters and even NSW energy and environment minister Matt Kean, who said on the eve of the ruling that renewable energy is “the future” for the state, not gas.
Santos promptly accepted the conditions proposed by the IPC, which added only half a dozen requirements to those already recommended by the NSW planning department.
Chief executive Kevin Gallagher said the outcome “confirms that we have relied upon the best science” to ensure the gas can be developed safely and sustainably. It flagged a potential final go-ahead for construction from 2022.
While federal environmental approval is still needed, it is expected within weeks. Energy Minister Angus Taylor said the decision was great news for local manufacturers who will benefit additional supply security and lower transportation costs.
Mr Kean declined to follow up his anti-gas comments from late Tuesday after the IPC’s ruling. But NSW Planning Minister Rob Stokes welcomed the decision, noting it followed extensive consultation and expert analysis both by the NSW Department of Planning, Industry and Environment and the IPC.
Narrabri will help deliver much-needed supply and energy security to the east coast.
— Alberto Calderon, Orica chief executive
Still, activist shareholder group the Australasian Centre for Corporate Responsibility urged investors in Santos to intervene to halt the plan. Farmers are also up in arms, with NSW Farmers president James Jackson saying the project poses an unacceptable risk to water resources, soil and air quality and harms farmers’ ability to insure against public liability.
The NSW Greens and anti-gas group Lock the Gate Alliance described the decision as disastrous, while traditional owners, environmental groups, doctors and others promised to fight on against the project.
Lining up on the other side are manufacturers, other energy users, gas producers and transmitters, and the Australian Workers’ Union.
“Narrabri will help deliver much-needed supply and energy security to the east coast,” said Orica chief executive Alberto Calderon, while adding that the increase in supply needs to translate into “sustainable” pricing.
“The fact remains that Australia is the only major gas producing country which doesn’t ensure adequate supply at competitive prices for its own domestic market,” Mr Calderon said.
The environmental impact assessment for the project drew a record 23,000-plus objections but the IPC noted that the number alone “is not in and of itself the sole measure of the public interest”. It said it had to limit its deliberations to set criteria and couldn’t consider broader policy issues.
Under the IPC ruling, the project must follow four consecutive phases, with set requirements to be met before each can start. It set extra conditions around the modelling and monitoring of groundwater impact and the reporting of fugitive emissions, and biodiversity, offsets, waste treatment and consultation on Aboriginal cultural heritage. All greenhouse emissions beyond those predicted have to be fully offset.
The additional criteria threaten to further increase the cost and delay the timing of development, with Credit Suisse analyst Saul Kavonic only anticipating a final decision on whether to go ahead in about 2024. Analysts and Santos itself are agreed that gas will in any case be more expensive than the $4-$6 a gigajoule demanded by manufacturers.
Former president of BP Australasia Greg Bourne, now at the Climate Council, said the IPC decision doesn’t make the project a “done deal”, pointing out the coal seam gas project still needs to clear federal environmental hurdles and attract finance.
Still, the Australian Workers’ Union described the decision as “a huge win for workers” and national secretary Daniel Walton called on politicians at state and federal level to ensure the opportunity isn’t wasted.
“If Narrabri goes ahead the federal government must institute export controls to ensure that extra gas stays here and helps Australians,” Mr Walton said, also urging NSW to enact laws to ensure the gas doesn’t leave the state.
Santos’ Mr Gallagher again on Wednesday committed to selling all the gas from the project to the domestic market. Brickworks and gas wholesaler Weston Energy are among signed-up customers for the project, on which Santos is estimated to have already spent close to $2 billion but has written off to zero.
The ruling effectively dictates whether NSW can develop its own plentiful coal seam gas resources or whether it will rely on imports from Queensland, South Australia and overseas.
Two separate LNG import terminals are proposed for NSW, at Port Kembla and Newcastle, both of which could be in operation before Narrabri gas is developed, a date expected to be too late in any case to head off potential shortages starting in 2023 or 2024.
The IPC did not approve a proposed gas-fired power station at Leewood, workers accommodation or flaring infrastructure, while a pipeline to transport the gas also still has to be approved and built. APA Group, the backer of one of two potential pipelines for the gas, said it would now progress development its proposed $500 million Western Slopes line, which managing director Rob Wheals said does not need any subsidy.
A party opposing the IPC’s ruling has three months to make an appeal but this is limited to a judicial review.