June 12, 2020 / 3:08 AM / 22 days ago

Australian state recommends approving controversial $2.5 billion Santos gas project

FILE PHOTO: The logo of Australian oil and gas producer Santos Ltd is pictured in Sydney February 15, 2016. REUTERS/Jason Reed/File Photo

MELBOURNE (Reuters) - The Australian state of New South Wales said a controversial coal seam gas project planned by Santos Ltd should be approved as it would be crucial to plugging an expected shortfall in supply from 2024.

The recommendation, following a three-year review, was handed over on Friday to the state’s Independent Planning Commission, which now has 12 weeks to determine whether the A$3.6 billion ($2.5 billion) project should go ahead.

The project is “critical for energy security and reliability in NSW,” the state government said in a letter to the commission.

The project could meet up to half of the state’s gas needs, helping to replace the rapidly depleting Bass Strait gas source that has supplied Australia’s southeastern states for 50 years.

But the Narrabri project has faced fierce opposition from farmers and environmental groups concerned that coal seam fracking will damage the supply of local water and a state forest 520 km (320 miles) northwest of Sydney.

The state’s review found that in addition to providing essential gas supplies, the project would keep a lid on gas prices, support the development of gas-fired power stations to back up wind and solar power and create jobs.

The state recommended imposing strict conditions to ensure the project does not deplete or contaminate water supplies and protects the Pilliga State Forest and the health and safety of the local community.

Santos said on Friday it accepted the conditions and was in a position to ramp up appraisal well drilling as soon as the commission makes a decision.

“Narrabri means more jobs and more investment in New South Wales and the local region, and lower gas and electricity prices for customers in the state,” Chief Executive Kevin Gallagher said in a statement.

Reporting by Sonali Paul; Editing by Edwina Gibbs

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