The $3.6 billion Narrabri Gas Project has been granted a phased approval under strict conditions by New South Wales’ Independent Planning Commission (IPC).
Santos sought development consent for up to 850 gas wells and associated infrastructure across the 95,000ha project area, encompassing the Pilliga State Forest and privately-owned farmland, south-west of Narrabri.
Santos expects the Narrabri Gas Project will create up to 1,300 construction and 200 operational jobs, while shoring up supply for the east coast domestic gas market.
It has the potential to produce up to 200 terajoules a day for at least 20 years, which is up to half of the state’s gas demand.
The NSW Department of Planning, Industry and Environment (DPIE) finalised its whole-of-government assessment of the project in June 2020. It came to the commission for determination after almost 23,000 objections were received during public exhibition.
Commissioners Stephen O’Connor (Panel Chair), John Hann and Professor Snow Barlow were appointed to consider the state-significant development application.
The commissioners met with Santos, the DPIE and its Water Expert Panel, Narrabri Shire Council and other key government agencies, and inspected the site and surrounding areas.
They also held a seven-day electronic public hearing – as directed by the NSW Minister for Planning and Public Spaces – to listen to the community’s views on the project.
Issues raised at the public hearing and in more than 11,000 written submissions to the commission included groundwater impacts; climate change impacts from greenhouse gas emissions; biodiversity impacts; impacts on agriculture; bushfire impacts; employment impacts; health impacts; impacts on Aboriginal cultural heritage; and management of waste (including salt).
After a thorough examination of all the evidence lasting more than 15 weeks, the commission has determined that consent should be granted to the project, subject to 134 conditions.
“Following its detailed deliberations, the commission concludes the project is in the public interest and that any negative impacts can be effectively mitigated with strict conditions,” the commission’s Statement of Reasons for Decision reads.
“The commission has granted a phased approval that is subject to stringent conditions, which means that the applicant must meet specific requirements before the project can progress to the next phase of development.
“The commission notes that the approval does not include consent for the proposed gas-fired power station at Leewood, the Westport workers accommodation or non-safety flaring infrastructure.”
A mixed response from industry
The Federal Government welcomed the approval of Santos’ Narrabri Gas Project, stating that it was “good news for the local Narrabri community, which will benefit from the job opportunities the project will create”.
The project will also generate $3.6 billion in capital investment, much of which the Federal Government says will be spent in the local community.
Minister for Energy and Emissions Reduction, Angus Taylor, said that the Narrabri Gas Project will deliver jobs and more supply to lower gas prices for New South Wales and the east coast market.
“Gas will play an essential role in re-establishing a strong economy,” Mr Taylor said.
“Approval of projects like Narrabri backs both our gas sector and all Australian gas users – creating jobs in New South Wales as we recover from COVID-19.
“This is great news for our local manufacturers, who will benefit from additional supply security and reduced transportation costs.”
Minister for Resources, Water and Northern Australia, Keith Pitt, said that unlocking new resources was key to Australia’s gas-fired recovery.
“The commission’s decision confirms that Narrabri gas is in the public interest and will provide new economic and job opportunities, particularly in the regions,” Mr Pitt said.
“We recognise that the responsible development of gas fields is essential for a sustainable gas industry. We will work constructively with Santos and the NSW Government as the project progresses.”
APPEA Chief Executive, Andrew McConville, echoed these sentiments, and said the project will unlock natural gas reserves to supply NSW homes, small businesses, major industries and electricity generators with up to half the state’s natural gas needs, bringing substantial economic benefits to Narrabri and the region.
“The Narrabri community and surrounding region will directly benefit with up to 1,300 jobs created during construction and 200 local ongoing jobs,” Mr McConville said.
“The project will help build stronger and more vibrant regional communities through significant community investment, including a Regional Community Benefit Fund that will deliver up to $120 million to the region to support major initiatives and infrastructure projects.
“The IPC’s approval of this project is acknowledgement of the already proven track record of the onshore gas industry in Queensland, where thousands of jobs have been created, billions of dollars invested in regional communities, and hundreds of millions of dollars paid to farmers, with no significant environmental impacts and over 66,000GL of water returned to farmers for their beneficial use, or injected back into aquifers.
“The clearest way to put downward pressure on gas prices for customers, including manufacturers, is to increase supply and competition.
“The Narrabri project does just that. This is an important outcome for energy security and reliability for the state of NSW.”
The Institute for Energy Economics and Financial Analysis (IEEFA), however, argued that Australian gas consumers were likely to see higher, rather than lower, gas prices if Santos’ Narrabri gas fields were approved, due to the distance the gas must travel to reach consumers on infrastructure that will need to be built.
Gas/LNG Financial Analyst, Bruce Robertson, said the proposed Narrabri gas fields were uneconomic in his submission to the IPC.
“Even the gas industry is saying they can’t deliver gas at the government’s desired $4 a gigajoule, which is the only way gas, and therefore electricity prices will drop,” Mr Robertson said.
“Narrabri gas will be high-cost gas to produce at $8.50 a gigajoule, meaning gas consumers are likely to see higher, not lower, gas prices if the fields are approved.
“You can’t produce high-cost gas and lower the cost of gas. It simply doesn’t make sense.”
Mr Robertson argued that Narrabri gas will cost $6.40 a gigajoule at the wellhead, plus $2.10 a gigajoule for transmission to Sydney.
“Consumers will be paying for new pipelines in addition to the cost of production at the fields,” Mr Robertson said.
“This deal is a financial red flag, to both electricity consumers and taxpayers who will wear the cost of expensive gas infrastructure investment under the Federal Government’s planned subsidies to the industry.
“The gas industry has been suffering write-down after write-down, even before the pandemic hit. They are sinking hand over fist yet the government is intent on throwing public money to an industry that itself says it can’t deliver cheap gas to Australian consumers.”
Robertson maintained that Narrabri’s high-cost gas will force up prices for domestic consumers.
“While we pay even more for gas, which forces up the cost of electricity, the government-subsidised gas companies will continue to export our lower cost sources of gas,” Mr Robertson said.
“Australia has plenty of gas to supply its own needs, but gas companies have been sending this overseas since 2014, and since then we have suffered massive increases in our gas and electricity bills, creating hardship for lower-income homeowners and reducing gas demand by 14 per cent for manufacturers because it has been too expensive to operate, with many shutting up shop.
“The economics of the gas industry is broken, and opening Narrabri will mean again, the Australian consumer, manufacturer and taxpayer will wear the cost.
“The government needs to enact a domestic gas reservation to ensure low prices and surety of supply for domestic consumers.”
Mark Ogge, Principal Adviser at The Australia Institute, agreed, stating that the decision to approve the Narrabri gas project would “lock NSW customers into a higher gas process for decades to come”.
“Narrabri gas is more than double the cost of the Cooper Basin gas it will displace, which currently supplies most of NSW’s gas,” Mr Ogge said.
“This decision allows Santos to lock NSW customers into expensive Narrabri gas, allowing them to make windfall gains by diverting low-cost gas from the Cooper Basin for export.
“NSW manufacturers are the big losers from today’s short-sighted decision from the IPC.
“A few big manufacturing players seem to have convinced themselves they can line up a good deal with Santos.
“But if a high-cost gas supply displaces a low-cost gas supply, in the end you pay more. It’s as simple as that.
“The IPC has taken the flawed analysis of the NSW DPIE at face value, assuming that Narrabri would add to the overall NSW gas supply.
“This ignores the obvious fact that even if Narrabri gas is used in NSW, Santos can simply export an equivalent amount of gas from the Cooper Basin.”
The development phases
The four phases of development for the project are:
The commission specifically addressed in its Statement of Reasons key issues of community concern, including:
“The commission is satisfied that the potential groundwater impacts of the project, as assessed with the assistance of the independent Water Expert Panel, can be effectively managed under the conditions of consent,” the Commission stated.
“The applicant’s groundwater impact modelling was considered fit for purpose for this approval. The commission imposed conditions requiring further information to improve the groundwater impact modelling before the project proceeds to Phase 2 to reduce the level of uncertainty with respect to potential groundwater impacts.
“The commission also requires the applicant to update and improve their groundwater impact modelling to be generally in accordance with the features of a Class 3 confidence level model, the features of which must be based on advice from the Water Technical Advisory Group regarding appropriate, development-specific modelling objectives and criteria.
“The imposed conditions do not permit the applicant to establish the production field (Phase 2) if the revised groundwater model predicts an exceedance of the water management performance measures identified in the consent.”
Greenhouse gas emissions
“The commission acknowledges the lower greenhouse gas emissions of coal seam gas compared to coal.
“In response to concerns that the emissions advantage of coal seam gas may be jeopardised by an underestimation of fugitive emissions, the commission has imposed a condition to require exceedances of the applicant’s predicted Scope 1 and 2 greenhouse gas emissions to be fully offset.
“The applicant will also be required to consult with an expert advisory group in measuring, minimising and reporting these emissions.”
“The commission is satisfied that the biodiversity impacts of the project have been measured and assessed in line with the relevant guidelines, the biodiversity offsets have been calculated in accordance with the NSW Biodiversity Offsets Policy for Major Projects and the imposed conditions provide for appropriate management, mitigation and monitoring of the potential biodiversity impact risks of the project.
“The commission has also introduced new conditions to strengthen protective measures and
require consultation with biodiversity experts in the preparation of management and field development plans to mitigate impacts on listed flora and fauna, and Ecologically Endangered Communities.”
“The commission considered the main waste streams from the project – being drill cuttings, drilling fluids and 840,000 tonnes of crystallised salt – and is satisfied that waste from the project will be disposed of in accordance with the NSW Waste Hierarchy, with landfill disposal being the last resort.
“The commission has also imposed further conditions to minimise the on-site storage of waste and to require arrangements for beneficial reuse or landfill disposal at an appropriately EPA-licensed facility to be in place prior to Phase 1. The enforceability of these conditions has been confirmed by the EPA, as lead regulator.”
Aboriginal cultural heritage
“The commission is satisfied that the Aboriginal Cultural Heritage Assessment and consultation has been undertaken in accordance with the relevant guidelines; however, in light of concerns raised in the submission process, it is of the view that the consultation requirements for proponents could be improved.
“Conditions are in place to require the establishment of an Aboriginal Cultural Heritage
Advisory Group and Aboriginal Cultural Heritage Management Plan and ensure the applicant has proper regard to areas and items of Aboriginal cultural significance.”
“The commission is satisfied that bushfire risks from the project are manageable and has imposed conditions that reduce fire ignition risks by requiring a safety flare stack height of 50m, and other measures that manage methane gas and facility hazards.
“The commission has not granted approval for the pilot well flares and is satisfied that the risk of an increase in bushfire events from climate change can be adequately managed through the recommended conditions, including well shut-in and automatic fail-safe requirements.”
“The commission considered the likely economic impacts of the project and is satisfied that on balance the project will provide a net economic benefit for the local community, region and state through increased investment and economic activity.
“This includes diversification of local industry through the provision of a local gas supply, employment opportunities, royalties and revenue, and investment in local infrastructure and community projects through the Community Benefit Fund and the Planning Agreement with Narrabri Shire Council.
“The commission is also satisfied that the project has the potential to improve gas security for Australia’s east coast domestic market.”
Social and health impacts
“The commission is satisfied that the project is unlikely to be the source of significant physical health impacts in the local community.
“The commission is satisfied that the imposed conditions identify opportunities to secure and enhance local community services and facilities, and provide a mechanism for the ongoing analysis of potential social risks.
“The commission supports the requirement of a Social Impact Management Plan prepared in consultation with Narrabri Council and the local community.
“The commission has accepted the recommended conditions of consent from the DPIE and imposed additional conditions which will increase the transparency of the project’s operations, improve groundwater modelling and data, increase expert involvement in the management and mitigation of impacts, offset specific impacts of the project and strengthen protective measures for affected stakeholders and the environment.”