"If a fence was built around NSW tomorrow, Macfarlane would be correct. However, NSW will not literally run out of gas by 2016 if coal seam gas areas are not explored."
Macfarlane says NSW will run out of gas by 2016 without CSG
Half-True
Coal Seam Gas exploration in NSW is a prickly issue. While local communities and other opponents of CSG have been vocal about the risks, others make the case for the increasingly urgent need to explore CSG areas.
NSW is more reliant than other Australian states on bringing in gas from across the border. Proponents of CSG argue the lack of local production might leave NSW high and dry in the case of a supply shortage on the east coast.
In an interview with Alexandra Kirk on ABC Radio earlier this year, Macfarlane made the case for using Queensland’s regulations as a template for moving past the conflict around CSG projects.
"In terms of the co-existence between the [agriculture and energy] industries, Queensland is probably well in front of New South Wales.
"We need to get New South Wales to that position, because the bottom line in this, Alex, is that New South Wales will run out of gas - literally, run out of gas - by 2016 if they don't get some of their coal seam areas developed."
We went straight to the source. Kylie Barron, from Ian Macfarlane’s office, said the statement came from Ian’s consultations with industry sources, but no direct evidence could be provided.
Macfarlane is right to say Queensland is well advanced of NSW in its CSG projects. And with good reason. NSW gas reserves are about a tenth of those in Queensland.
Industry groups were supportive of Macfarlane’s statement. AGL, for example, sent us industry presentations which said domestic gas supply contracts for major retailers will fall around 2017. But you would expect the industry to encourage the call for coal seam gas development, so we went to the authorities for a second opinion.
Who better than a body called the Independent Expert Scientific Committee on CSG? Its website referred us to the Department of Sustainability, Environment, Water, Population and Communities but its media team told us our questions weren’t best addressed by their department. We can’t quite figure that one out. They referred us back to industry or the NSW government.
Alan Randall, Professor of Agricultural and Resource Economics at the University of Sydney, said assessing the issue was complicated because it depends on the way the statement is interpreted.
NSW has contracts for supply of gas that will expire around 2016. Currently, NSW relies on importing gas, so should we debating whether it can be self-sufficient at all?
"If we put a fence around the state, without it would be hard to imagine where we would get it from," says Randall. "[But the statement] is not really true unless you build a fence around the state."
Randall says MacFarlane is trying to "ramp up" the sense of emergency. "Development will take place in NSW but perhaps not at the pace people want".
Program Director for Energy at the non-partisan, centrist Grattan Institute, Tony Wood, spoke to us about their newly released report, Getting Gas Right.
The report says companies and government agencies are concerned about the possible shortage between 2015 and 2017.
"There is no shortage of gas in the ground, but there are concerns about that ability to get it to the NSW market on a peak day for gas demand. "Unless we do something there could be a shortage of gas," says Wood.
But the report outlines several options, one of which is coal seam gas exploration.
Aside from CSG projects, the potential NSW gas shortage could be relieved by increasing production in the Cooper Basin as Santos has made moves to do, increasing production in Queensland CSG fields, increasing the pipeline capacity from Victoria, utilising gas storage, and the possibility that demand could fall if prices rise.
The Grattan report says "with such options available, producers have suggested that concerns about a shortfall are commercial posturing".
Nevertheless, CSG development is an attractive solution supply option. The report says if developed, "it would make a material difference to NSW supply security".
Regardless, the impasse in CSG development in NSW must be resolved. Wood says until industry knows the extent to which CSG exploration in NSW will be possible, no other options are likely to be explored.
NSW Trade & Investment referred us to a number of links and reports, which were not substantively different from what we already found.
Our ruling
Ian Macfarlane has said NSW will literally run out of gas by 2016 if coal seam areas are not developed.
NSW is in short supply of conventional gas, and is dependent on a complex east coast domestic market.
If a fence was built around NSW tomorrow, Macfarlane would be correct.
However, NSW will not literally run out of gas by 2016 if coal seam gas areas are not explored.
As the Grattan Institute report suggests, there are various other ways forward for NSW gas supply.
