Questions about the Narrabri Gas Project

The Narrabri Gas Project was recently approved by the Independent Planning Commission under NSW’s new, accelerated timetable of 90 days. The project was strongly contested, with an unprecedented 23,000 submissions, 98% of which objected to the project.

As Bruce Robertson, Energy, Finance Analyst for the Institute for Energy Economics and Financial Analysis (IEEFA) says “The very last thing the world needs is more gas.”

“Far from seeing the “gas powered recovery” our politicians desire, we are seeing a gas fired depression around the globe. In the U.S., the number of operating drill rigs has fallen 73% in the last 12 months.”

It seems very unfortunate that decisions that will inevitably involve large sums of taxpayer funds are rushed, and little regard is given to risk, or the needs of the community.

It is time to ask serious questions about this project, and why the government is supporting “a failing and loss-making gas industry.”
As Robertson says, “The future is clear. Investment is flooding into renewable energy whilst the gas industry is contracting and bleeding red ink.”

Question 1: What is the Narrabri Gas Project?

At $3.6 billion dollars, the Narrabri Gas project would constitute 850 wells, and their connecting pipes, roads, storage areas and dumps – 1000 hectares in 85,000 hectares of forest and grazing lands. The wells dive over one km deep, Santos pitching the project as “more affordable, secure, cleaner energy” supplying up to half of the energy needs in New South Wales.

“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.”

A recent Sydney Morning Herald editorial suggested that the Independent Planning Commission (IPC) “was under political pressure to green light this project from the Morrison government, which has put the project at the heart of its plans for a “gas-fuelled” recovery.”

Question 2: Who supports the Narrabri Gas?

Santos: “more affordable, secure, cleaner energy”

Morrison: One of the 15 projects of national significance, accelerated assessment.

NSW: Department of Planning says it is critical for energy security in the state

Industry: Manufacturers, major energy users and The Australian Worker’s Union support the project.

“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 Independent Planning Commission, 30 September, 2020

Richard Denniss, chief economist at The Australia Institute, told Climate Home that plans for a gas-driven recovery are driven by “the government’s political need to simultaneously signal that it is moving away from coal but not moving away from the extractive industries more generally”.

Adam Morton reports that a former New South Wales judge, Paul Stein QC, now a committee member of the Centre for Public Integrity, said he was “deeply concerned” that the NSW Independent Planning Commission had been “diminished by changes introduced by the government in March following complaints by mining and resources interests”.

The planning minister, Rob Stokes, is allowed to impose tight timeframes and appoint new members to the commission. Paul Stein QC, “has called for ‘independent’ to be dropped from the name of the state’s planning commission”, saying that he believed the process had been compromised. “It is very hard for a tribunal or commission to withstand such intense political pressure.”

Question 3: Who opposes Narrabri gas?

Gomeroi: Traditional Owner JudyKaye Knox asked why Santos “continues with business plans to destroy culture and heritage.”

Farmers: Threat to the great artesian basin with permanent agricultural water loss

Community: According to surveys, 97% of people oppose the project in the five shires that span Narrabri and will “stop at nothing to stop this project dead in its tracks”

IPC’s verdict that approves Santos’ controversial Narrabri gas project may be a straightforward win reports Angela MacDonald-Smith and Elouise Fowler for The Australian Financial Review. “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.”

Opponents also include activist shareholder group the Australasian Centre for Corporate Responsibility, and NSW Farmers, with 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.”

“Far from seeing the ‘gas powered recovery’ our politicians desire, we are seeing a gas fired depression around the globe.”

– Bruce Robertson, IEEFA

“The number of US operating drill rigs has fallen 73% in the last 12 months,” reports Bruce Robertson, IEEFA

“US LNG exports have more than halved so far in 2020.”

Deloitte estimates that “almost a third of US shale producers are technically insolvent at current oil prices.”

Santos, the proponent of the Narrabri gas project, “wrote off a further $950m from its failed Coal Seam Gas to Liquefied natural investments in Australia. Their total write-downs since 2014 are close to $8bn!”

Globally, “renewables continue to overwhelm new fossil fuel and nuclear power station builds. Investors are fleeing the gas industry and investment is flooding into renewables.”

The very last thing the world needs is more gas.

China’s recent commitment to achieve zero emissions by 2060 brings will accelerate the global transition to clean energy systems and will impact Australia’s exports.

“China’s use of coal, oil and gas must be slashed, and its industrial production stripped of emissions.” writes Hao Tan for The Conversation

Coal is currently used to generate about 60% of China’s electricity. “Coal must be phased out for China to meet its climate target, unless technologies such as carbon-capture and storage become commercially viable.”

“Natural gas is increasingly used in China for heating and transport, as an alternative to coal and petrol. To achieve carbon neutrality, China must dramatically reduce its gas use.”

Question 4: Do we need Narrabri Gas?

“This idea that we’re going to somehow magically have cheap gas when you have a market structure that is artificially fixing the price at a higher level – it’s not attacking the problem,” says Bruce Robertson in a recent IEEFA podcast. “The problem is the market structure. We don’t have a market for gas on the east coast of Australia.”

“They’re saying supply is the problem. Supply can’t be the problem because supply has tripled since 2014. We’ve had so much gas come on stream and yet prices have gone up. The whole thing doesn’t make sense. The only way it makes sense is they’re fixing the price and it’s a few companies that are doing it.”

Gas is still needed for a few forms of manufacturing, “like making bricks and in fertilizers where you use gas as the feedstock. But it’s a small usage and if we look at Australian’s consumption of gas, we can easily get that by getting the domestic consumer off gas.”

“We are not seeing a slowdown in demand or even a recession in the global gas industry; we are witnessing a depression in the global gas industry.”

“The U.S. fracking industry has imploded.”

 – IEEFA Narrabri Gas Project Submission

IEEFA’s Submission to the Independent Planning Commission clearly points out that there is no need for more gas production given the global supply glut, where rising prices are linked to gas exports in a failed market.

“The Narrabri gas project will not bring down the cost of gas for the domestic consumer as Santos claims. And despite claims to the contrary by the Department of Planning, further supply and high production costs will affect the domestic market. The Narrabri gas project will embed high cost gas into the system, forcing up the price of gas for the domestic consumer.”

Question 5: Will Narrabri Gas be cheaper?

The Australia Institute found that Santos’ last minute claim that its proposed coal seam gas development at Narrabri would lower gas prices “misrepresents the evidence” – the AEMO assessment “did not examine the likely price of gas production at Narrabri. Instead, it used an estimate provided by Santos”.

Santos’ updated evidence suggested gas could be produced at Narrabri for $6.40 a gigajoule, less than previous estimates of between $7.28 and $9.36 a gigajoule.

The Institute contrasted AEMO’s use of Santos’ price to data from a separate independent AEMO analysis in February “that suggested Narrabri gas could be more expensive than that from the Cooper Basin in Queensland, which currently provides more than 50% of NSW’s supply”.

The IPC’s timeline was extended for Santos, but the IPC refused to allow a community group to submit two weeks before the deadline, Lisa Cox and Adam Morton report for the Guardian.

“Lock the Gate tried to submit fresh evidence about what it said was the cumulative effects of multiple mining projects on groundwater a little over two weeks before a decision was due, and their submission was not accepted.

Lock the Gate’s new evidence showed that “Santos had used outdated models in assessing effects on groundwater levels.”
The latest models showed the cumulative impact of the developments would be “far greater” than Santos or the NSW planning department contended.

“This is not last-minute stuff. This is an impact assessment that Whitehaven submitted last year. It’s not like Santos and the department didn’t have time to include this in their impact assessment,” Woods said.

IEEFA reports that the ACCC has linked gas export prices to higher electricity prices, linking $11/MWh electricity price rises for every $1/GJ rise in gas prices. From 2014, the market went from ‘domestic only gas’ to exporting over 70%.

This export market has been a “financial failure with nearly $8bn written off” including a $976m write-off in July 2020 shortly after Santos’ evidence to the IPC.

Narrabri gas will cost “twice the cost of existing fields. It is simply not possible to bring down the cost of a commodity by producing it at a high cost, as Santos will do at Narrabri.”

“Narrabri gas has been pledged to the Sydney consumer by Santos. Santos is planning to supply the domestic market with high cost gas whilst exporting lower cost sources of gas. It will use the high costs at Narrabri to justify pricing the domestic market at a premium.”

Question 6: Will Narrabri Gas be cleaner?

Every fossil fuel project ahs to estimate the resulting emissions, these figures are highly influenced by the use of percentages called “emissions factors” for fugitive emissions. Santos used a very low emissions factor produced by CSIRO’s fossil fuel compromised GISERA, of 0.0058%.

Australia itself uses 0.5% in its reports to the UN. The US EPA uses 1.4%. A recent study in Nature cites 2.3% and concludes that the methane leaks from the gas industry were likely to be 60% higher than the EPA’s estimate.

As well as underestimating fugoitive emissions, Santos uses a low figure of 10% CO2 composition in the Narrabri gas. Dr Andrew Grogan has noted in his expert submission that Narrabri gas has an unusually high percentage of CO2 at 25%.

Using the EPA’s 1.4% would put Narrabri Gas at 88% of coal’s emissions compared to Santos’ stated 55%. If the later 2.3% figure was used, Narrabri Gas would be around 50% dirtier than coal.

Question 7: Will Narrabri Gas increase local supply?

Santos has promised that all of the (more expensive) gas will be destined for Sydney, and that it will lower prices.

Energy and resources expert, Dr Madelaine Taylor, argues that “the only way Santos can make Narrabri commercially viable is by selling gas at a high price, and yet the company claims that it will somehow play a role in lowering electricity prices” and that the introduction of a more expensive option is likely to “drive power prices up long term”.

Dr Taylor notes that there is no mechanism to enforce a NSW destination as Santos is likely to sell to the highest bidder.

Promising an increase to local supply is at the heart of the attraction of the Narrabri Gas Project. Adam Morton reports that Stephen Cartwright, the CEO of Business NSW, said “Without the Narrabri project coming on line, supply will just about disappear, costs will soar and businesses will be forced to close, meaning even more jobs will be lost in NSW.”

Impacted by to the global gas glut and Covid-19 shutdown, Santos wrote down the values of its assets by $1.1bn mid year. Gas usage has steadily declined since the opening of the export market in 2014. Even though supply has tripled, prices have risen, “tripling in some cases”, and once prices rise again post Covid, gas will face even stronger competition from renewables where prices continue to fall at least 16% per year. As Dr Taylor says “a big risk is that the Narrabri project could end up a stranded asset.” The federal government’s support for a gas-led recovery would led to public funds to be invested in gas projects, despite the gas industry’s “massive write-downs due to a global oil and gas glut.”

Domestic gas reservation

Bruce Robertson writes that a domestic gas reservation policy is the only way to “ensure low prices and surety of supply for domestic consumers” “Australia has plenty of gas to supply its own needs, but gas companies have been sending this overseas since 2014, “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 AFR reports that further concerns about the fire risk presented by a gas project in the Pilliga State Forest were raised by former fire chief Greg Mullins, who told the IPC that this project should be scrapped on climate change grounds, but could be rejected on the fire risk alone.

Mr Mullins said that the Narrabri gas project would contribute to climate change, which is making bushfires worse. He said Santos’ estimate of the risk of bushfire from the project to be one fire in 1000 years “appears to have no basis whatsoever.”

“The Pilliga in Northwest NSW is becoming increasingly flammable and subject to extreme fire weather. Gas flares and general mining activities introduce many new potential ignition sources which is irresponsible.” He told the commission he would wouldn’t risk firefighters lives by sending them in to defend the gas field.

“Methane is highly flammable, of course, depending on the concentration, depending whether there’s an ignition source,” he said.

Question Eight: Will Narrabri Gas damage the Environment?

The Narrabri Gas approval was met with “widespread anger by environmental campaigners, who say that it will increase greenhouse gas emissions, destroy biodiversity in the Pilliga forest and damage groundwater supplies” said Climate Change News.

Glen Klatovsky, energy strategist at Climate Action Network Australia, expressed concern about fugitive emissions. “If fugitive emissions are around 3%, then gas becomes as bad as coal,” he said.

Koala habitat at risk

In a joint statement, farmers and the anti-coal-seam gas group Lock the Gate had described the development as “destructive and polluting” reported Adam Morton, concerned that the government had backed Narrabri Gas “despite revelations that landholders affected by the gas industry may not be able to get public liability insurance, that the project may involve the destruction of about 1,000 hectares of koala habitat, doubling of expected contaminated salt waste and unanswered questions about the impact on underground water.

Morton reports that Nature Conservation Council’s CEO Chris Gambian, said turning the wilderness into an “industrial gas field” would poison groundwater, destroy forest, increase the risk of bushfires and endanger koalas and other threatened species”, and that the farming community were extremely disappointed that the government had nearly totally ignored the recommendations of the NSW Chief Scientist made six years ago “to limit the risk of coal seam gas.”

Counsel Robert White presented the Environment Defenders Office’s evidence to the IPC.

There is a real risk of water depressurisation: “important sources of water for agriculture and domestic use and are important recharge zones for the Great Artesian Basin. The extraction of gas depressurizes gas bearing ecological formations and may cause groundwater levels to decline.”

This is particularly significant because:

• “The unusually poor water quality associated with the Gunnedah Basin coal seams underneath the Project area.
• The unusually high quality of the shallow groundwater and surface water in the Project area, which covers areas of potential recharge for the Pilliga sandstone – one of the main aquifers in the southern Great Artesian Basin, as well as the importance of water in the Namoi Alluvium”.

The produced water has salinity levels that are “significantly higher than typical CSG production water” and also contain “significant level of heavy metals, boron and fluoride, which could make the produced water an environmental and human health hazard, and a major potential source of groundwater and surface water contamination in the area”.

Santos’ proposed “network of water gathering lines and infield balance tanks”, where waste water is transported to water treatment facilities, “means that there will be hundreds of potential sites of contamination”, potentially detrimentally affecting “the surrounding land and shallow ground water in the uppermost unconfined water table aquifers”.

Significant risk of long term harm

Santos has also “failed to demonstrate how it will dispose of waste brine arising from the water treatment process leading to significant uncertainty about the environmental impacts of this disposal process. Independent expert evidence to be adduced by NWA and its members from Dr Stuart Khan show that there is a significant risk of long term environmental harm arising from this waste material.

Based on international experience with unconventional gas, the size of the project and the number of wells and required infrastructure to collect, transport and store the produced water, there is a strong likelihood that leaks and/or spills of produced water will occur throughout the life of the project, risking contamination of shallow aquifers and surface water bodies in the area.”

Question Nine: Will Narrabri Gas damage water?

Santos (and the NSW planning department) put the case that coal seam gas can be extracted safely as the deep coal seams are protected by several rock layers from shallower aquifers, AFR reported. Santos argued that “the extraction technique is unlikely to disturb the major fault lines, and will protect the water from contamination and leakage”.

Missing data on uncertainty

However, two engineers told the IPC Commissioners that key data was missing, including data on permeability, and that the official modelling “failed to assess data on the risk of water contamination from deep drilling” said Dr Kevin Hayley, an engineer from consultancy Groundwater Solutions, and that the uncertainty was therefore not assessed. “The risk of a bad thing happening is within that sort of envelope of possible outcomes and you’re not going to reduce that envelope until you have more data.”

Santos wants approval before submitting more work on water risk

Associate Professor Matthew Currell from the RMIT University supported Dr Hayley. “The risks of groundwater and surface contamination and drawdown are real…failures are really really difficult to eliminate” with large scale projects like Narrabri. “A lot of it’s due to equipment failure or just human error. Sometimes, you know, freak weather events will cause natural conditions that make it really hard to control,” he said.

Dr Currell criticised Santos’ position further work on uncertainties about water impacts could wait until after the project was approved. ”Proper groundwater modelling must first incorporate careful development of correct geological conceptual modelling,” Dr Currell said, saying without “proper field investigations” arguing that decision makers and the public are currently not being presented with a full, realistic range of potential impacts from the project, which makes informed decisions difficult.

Question Ten: Are there alternatives to the gas fired recovery?

Replacing gas peaking with grid scale batteries 

Large Scale Renewables

Dr Madeline Taylor, an energy and resources law expert at the University of Sydney said that it was time to look to solutions that will actually bring down power prices, instead of Narrabri Gas which “cannot be guaranteed to even make a dent in power bills for the average NSW household.”

The NSW government should be building large-scale renewable energy and storage to “secure a lower cost, reliable energy source” which is “cheaper and more sustainable long-term than Narrabri gas”.

“The Narrabri Gas Project is a bad idea for many reasons, and, if it goes ahead, we’re likely to be the ones who will be left footing the bill”

Further images and text on this topic in my Twitter thread here.

Feel free to use any images or text to further scrutinise the Narrabri Gas Project.