Mr Barnett said he believed it could still be economic to build an LNG plant on the mainland and nominated the undeveloped Maitland Estate, south of the Burrup Peninsula, as a possible option.

"It's large, it's flat, there are no heritage issues, it's ideal for shared infrastructure and Gorgon is big enough to justify its development," he told The West Australian newspaper.

Mr Barnett said he had every confidence in project developer ChevronTexaco's ability to manage a processing development on Barrow Island but said it would be in the longer-term interest of Western Australia if the processing facility was sited on the mainland.

The location of the processing plant remains a central sticking point for the Gorgon project go-ahead given the release of two highly critical environmental reports this week.

The reports by the State Environmental Protection Authority and the Conservation Commission flatly reject the use of Barrow Island - the site being nominated by ChevronTexaco as "the only commercially viable development option".

The way the Gorgon Joint Venture made its cost assessments and hence put forward the Barrow Island option is worth exploring further.

There were three major factors influencing the relative costs:

1. The distance from the collection point on the gas field to the location where the gas will be processed.

2. The distance from the processing site to the re-injection point for the CO2, and

3. The distance from the processing plant to the loading point for LNG ships together with the costs associated with providing safe navigation.

Overlaid on top of this would have been a rate of return index. Each partner, depending on its size, balance sheet and corporate direction, would have crunched the relative returns of the potential development sites factoring in a variety of discount risks (i.e. technical difficulty) and weighed against any upside fillips.

The calculus would then be cross-matrixed against a variety of gas price assumptions (remembering the plant isn't scheduled to be started until the second half of 2008) so that hurdle rate of return could be worked out.

Of the three cost factors the real killer is the distance from the field to the plant. It is a point highlighted by The Allen Consulting Group in its report prepared for the WA Department of Industry and Resources:

The other curly one is CO2 disposal given Gorgan's high CO2 content.

After all the factors were put into the mix, three options aside from Barrow Island were put up for serious consideration: the Montebello Islands, Thevenard Island and the Burrup Peninsula.

The Montebello Islands, while attractive due to their location in relation to the field, were crossed out due the region being used for atomic weapons testing in the 1950s.

Thevenard Island, whilst getting a tick on environmental grounds, was crossed out due to its distance from Gorgon. The estimates cost was "several" hundreds of millions more than Barrow Island.

And finally, the Burrup Peninsula option. According to the GJV the cost was estimated to be $1 billion more than Barrow making it uncommercial.

For a while the Burrup option had appeal because it was thought the GJV could strike an infrastructure sharing deal with the North West Shelf Joint Venture. It was believed some of the additional cost could be soaked-up by commercial synergies. Certainly that was something aired by Shell (a member of both JVs) when it was courting a merger with Woodside last year.

But since then Shell has backed away from the integration approach and the GJV and NSWJV partners have put the idea in the too hard basket mumbling something about the benefit outcomes not being symmetrical.

So where does that leave the push by the GJV to use Barrow Island as its processing base? Well as from late yesterday, possibly not too badly, if a report broken by the ABC is to be believed.

Late yesterday both ABC radio and television carried stories saying the Gallop Government would knock back plans by developers to build a resort and marina complex next to Ningaloo Reef in the State's north-west. If it is true it could defuse one of WA's most controversial environmental issues.

The question then is: Will this be an environmental trade off so that the Barrow Island plan can be given the go-ahead?

The Barrow Island proposal is currently out for public comment.