The latest proposal to solve the forecast gas shortage, is to build a pipeline from Alice Springs to Moomba to link the east coast gas markets with the west coast gas markets. The cost burden of such a project would be prohibitive both to the taxpayer and the gas consumer. It is simply more profitable to supply export markets at high prices than supply domestic consumers. 

We are told by the gas industry that the shortages will occur in NSW and that the state needs to urgently approve questionable coal seam gas projects.  Industry lobbyists neglect that our constitution guarantees  free trade between states, so why don't we enjoy our nation's wealth without state borders?

In NSW, our gas principally comes from South Australia.  No one has previously worried about this.   Gas was affordable and NSW gets many products from other states. In NSW most of the bananas we get are produced in Queensland.  I do not hear too many politicians stating that we have a shortage of NSW produced bananas.

What has changed is that large export terminals have been built at Gladstone with the capacity to export more than twice as much gas as is currently consumed in Eastern Australia. Our domestic market is now dwarfed by offshore export capacity. Our gas market is now inextricably linked, not to the world price for gas, but to the most expensive subset of the world market, the Asian market.

Wholesale gas prices are widely forecast to triple from $3-4 to $7.50-$10 a gigajoule, making our domestic gas prices among the most expensive in the world. Unfortunately, the domestic gas shortage will not be resolved by increased supply, it will be resolved by plummeting demand as the chill winds of globally uncompetitive gas prices blow.  We have already seen some domestic industries investing offshore in cheaper energy countries.  

At Gloucester, AGL's 110-well project has recently received approval for four wells at Waukivory.  AGL has claimed that all the gas will stay in NSW to supply the domestic market.  The east coast gas market is linked by a network of pipes. Two-thirds of the gas entering the network will go offshore. No amount of domestic production will bring down prices as when the export terminals are nearing capacity more will be built. The price rises are inevitable under current policy settings.  

At Gloucester, the economic justification for the project just does not stand up to scrutiny.  The Gloucester basin is being fracked not for the greater good but for private profit. In and of itself this is not necessarily a bad thing however the risks being taken with fracking Gloucester are just too great.

At Gloucester we have a unique and heavily faulted geology.

The independent hydrogeologist, Professor Philip Pells, has repeatedly warned of the high risks at Gloucester.

He is not alone.  AGL's own hydrogeologist, John Ross,  called the four-well fracking project "the highest risk geology in the basin".

These high risks are compounded by the fact that at Gloucester, AGL will be  fracking at relatively shallow depths. The shallow depths at which the wells are being fracked increase the risks of contamination of aquifers that supply our rivers.

At Gloucester, "high-risk" fracking carries big risks.  It sits at the head of the Manning River, the water supply for 75,000 people.  If the water supply is compromised the cost will fall squarely on the shoulders of the NSW taxpayer. 

The CSG process produces vast quantities of water that is contaminated by toxic salts. To evaluate this problem the NSW chief scientist commissioned Stuart Khan. To dispose of this water is highly problematic and cannot be safely disposed.  Dr Khan has stated: "It is very surprising the complete lack of solutions at the moment for dealing with large quantities of salt. You've got huge amounts of water and salt looking for a home."

It would appear that Dr Khan's independent scientific advice is being flatly ignored by the NSW government. It has approved AGL's four wells at Gloucester without a credible method of salt disposal.   

It is not just the science and the economics of CSG at Gloucester that is questionable. Socially the project is unacceptable, as AGL will be fracking just 300 metres from homes.

At Gloucester, the economic justification is a fallacy, the science is being ignored and compounding risks are being taken.

The social consequences will haunt AGL for decades.

The NSW government has forsaken the people of Gloucester.

Bruce Robertson is a financial analyst who lives on a farm on the mid north coast.

smh.com.au