The tumbling oil price – against which gas prices are set – was one reason for the project's demise, but so were rising costs after a string of mishaps and a dawning recognition that AGL would have to build a desalination plant to cope with the briny waste water produced from the CSG wells. One of the CSG wells AGL was drilling near Gloucester. Credit:Ryan Osland "At a very late stage AGL began to accept that salt was a problem," said Stuart Khan, an associate professor at the University of NSW specialising in water issues. The initial plan to use the waste water for irrigation "was not sustainable regardless of much you dilute it". Opponents of the Gloucester project has planned three days of protest in the town starting on Friday as AGL's expected decision date of February 16 neared. Those gatherings will now turn into a celebration, Julie Lyford, chair of Groundswell Gloucester, said. "People are ecstatic," Ms Lyford said, adding that the move will inspire anti-CSG protesters to shift their focus to Santos – the only other company with an operating field in NSW – with its proposed Pilliga project near Narrabri.

"The Baird gas plan is dead in the water," she said. "It's clear these companies don't have a social licence to operate." Sixth generation local farmer Neil Kennedy and his wife Anne at a protest at the Santos Leewood CSG waste water treatment plant on Wednesday. Energy Minister Anthony Roberts said it was up to companies such as AGL to decide on the viability of its projects. "The government's role is to provide the policy settings and regulations that give communities and industry certainty when it comes to the development of the state's resources," Mr Roberts said, adding that the industry had the potential to "provide jobs, support local communities and put downward pressure on prices for households and businesses". Malcolm Roberts, chief of industry lobby group APPEA, said that without "gas development soon, NSW will be 100 per cent reliant on other states for supply to households and manufacturers".

"That's a risky proposition in a tightening energy market," he said. AGL, though, said its move would have no impact on commercial or retail activities. It will, though, take a $795 million pre-tax writedown on the exit from gas exploration in NSW and Queensland. In a bid to restore strained community relations, AGL also pledged a $2 million fund "to identify investment options" to aid the local region. "This decision represents a definitive end to the supply of part of our gas portfolio," AGL chief executive Andy Vesey told an analyst briefing.



Santos, for its part, declined to comment on AGL's decision and whether it would now become the magnet for anti-CSG activities in the state. "Santos remains committed to exploring for, producing and supplying gas to East Coast gas customers," a spokeswoman said.

"The Gunnedah Basin, in which the Narrabri Gas Project is based, continues to be an important source of gas resources," she said. "The development of local gas resources will be critical to achieving a supply-demand balance in the future, as the 5 per cent of gas produced in NSW is withdrawn over the coming years." Dan Robins, a campaigner against AGL's Camden operations, said local groups will be pushing for an early exit by the company. "Families are stuck now with leaking gas wells less than 200 metres of their homes," Mr Robins said, referring to the Springfarm field. "People want to see AGL prioritise [the closure] of those wells," he said, noting that other wells were within 75 metres of homes.