It looks like New South Wales is between a rock and a hard place when it comes to gas prices. AGL - our main supplier - is asking for a 20.3% increase in the rate it charges customers and predicts further sharp price hikes in the years ahead.
Of course this is an ambit claim. The price regulator will examine all the reasons given for the claim and may decide to award a lesser increase, but the prospects look grim for consumers. A twenty percent gas increase would cost the average customer an extra $ 132 a year - and that would be bad news for family budgets.
Unfortunately, gas is fast becoming the chosen fuel for world industry because it releases less carbon dioxide than coal when burned to generate electricity. As a result, demand is forcing up prices and much of the gas Australia produces is exported overseas and has become an integral part of our national economy. There is every prospect that the world's appetite for gas will double - and double again - in the decades ahead.
Many people in the gas industry despair because they claim that salvation for the people of New South Wales is right beneath their feet. It is called " Coal Seam Gas " - and that puts a shudder through many who saw a horror film called " Gasland " that depicted what can go wrong when gas wells divert aquifers, contaminate water wells and leak a highly explosive vapour in a land subjected to bushfires.
New South Wales has a potential coal seam gas industry that is attracting bitter opposition. This state produces just five percent of it's gas supply and legislation is in place to restrict access to the almost unlimited amount of gas locked in our sandstone sub-strata and in the areas containing coal. The gas industry claims that this CSG can be tapped with safety - but if they are wrong the outcome would be catastrophic !
Exploratory gas wells are in place and the technology is developing at break neck speed. Angle drilling can reach areas far distant from the actual well and proponents want to harvest gas from under suburbs and farming areas. At present, legislation is in place to restrict the " fracking " that is needed to release the gas.
This is a major headache for the politicians. We can have a huge drop in gas prices if we allow the CSG industry to mine the product beneath our feet, but that comes with risks. The world experience with CSG has been a mixture of success - and failure. It all depends on how the geology below reacts to fracking and that does not become clear until the process begins. Luck plays a big part in the end result.
It seems likely that this state will maintain a cautious approach. Some CSG mining will be allowed but not under city suburbs or under prime farming land. The state will seek to balance that five percent upwards to ease pressure on retail gas prices, but without the risk of uncoordinated expansion that would provoke a public backlash.
We should remember that we intend to live on this planet for a very long time. Like every other natural commodity the world supply of gas is not unlimited and we are burning it at a prodigious rate. Leaving some gas undisturbed under New South Wales will ultimately ensure supply for future generations.
Limiting CSG extraction will balance safety - and extend gas continuity for the years ahead !
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