Santos seeks to drill 850 gas wells and build associated infrastructure across 95,000 hectares, encompassing the Pilliga State Forest and privately-owned farmland, southwest of the town of Narrabri, to produce 70 petajoules of gas per annum. 

The Commission today announced consent should be granted to the project, subject to 134 conditions. 

Santos CEO Kevin Gallagher welcomed the announcement after the company initially went into a trading halt this morning, saying it would accept the Commission's approval conditions. 

"As the economy recovers from COVID-19, game-changing projects like the Narrabri Gas Project are critical to creating jobs, driving investment, turbo-charging regional development and delivering more competitive energy prices," he said. 

Earlier this morning, The Australian Petroleum Production Exploration Association echoed Gallagher's views, saying the project would ensure vital gas supply to the east coast market which is facing a stark lack of supply from 2023.

"The clearest way to put downward pressure on gas prices for customers, including manufacturers, is to increase supply and competition. The Narrabri Project does just that," APPEA said. 

From the outset Santos has touted the project as being a major job winner for the town, claiming it will create 1300 construction jobs, and 200 operational jobs, as well as shoring up the east coast gas market.

Australian Workers Union national secretary Daniel Walton said the gas supplies Narrabri will deliver to market will help support manufacturing jobs. 

"New South Wales should be a thriving global heavy manufacturing hub, and that's exactly what we can become if we better harness our gas wealth. This approval is an excellent step," he said. 

Walton has been a strong supporter of the project from the outset. 

The Commission said the project is in the public interest and that any negative impacts can be effectively mitigated with strict conditions. 

It has granted a phased approval, meaning Santos must meet specific requirements before the project can progress to the next phase of the 4-phase development consisting of appraisal, construction, production, and rehabilitation. 

Despite approving the project, the Commission noted it had received almost 23,000 public objections to the project, including 11,000 written submissions.

Fears were raised relating to the project's greenhouse gas emissions, its waste management - particularly around salt created in the production  process - and impacts on biodiversity, groundwater and indigenous cultural heritage. 

The Commission said it believed Santos's groundwater impact modelling was ‘fit for purpose', potential groundwater impacts could be managed, and biodiversity impacts could be offset with rigorous consultation with experts in preparation of management and field development. 

However the Australasian Centre for Corporate Responsibility director Dan Gocher said Santos has failed to demonstrate it is willing to effectively manage fugitive methane emissions, saying investors were ‘the last line of defence' to stop the project from going ahead.

"Climate-aware investors now have a role to play in ensuring shareholders' money is not spent on activities that go against the interests of local communities and a safe climate," he said  

He noted the strong signal sent to Santos earlier in the year at its AGM, when 43% of its shareholders supported calls for a Paris-aligned emissions targets, saying it was up to investors to ratchet up pressure to stop the project.

He also said Santos' claim it could produce the gas for A$6.40 a gigajoule was inaccurate, pointing to independent estimates putting it in the range of A$7.40/GJ.  

RBC Capital Markets analyst Gordon Ramsay highlighted that Santos had struggled to get the project off the ground for many years due to community opposition, saying the approval was a positive outcome for investors. 

"Santos is one of our preferred picks in the large cap E&P space. We like the defensiveness inherent in its low-cost operating model, which is free cash flow neutral at around US$28/bbl," he wrote. 

The project also has the support of the NSW Chamber of Commerce and Narrabri Mayor Kathy Redding. 

While there is no right of appeal to the decision under NSW planning law, a judicial review can be requested by the proponent or opponents if they believe the commissioners have used their powers incorrectly. 

The final hurdle will be federal environmental approval by environment minister Susan Ley, which is all but guaranteed given prime minister Scott Morrison touted Narrabri as one of 15 projects of national significance. 

If the project does go ahead Walton warned Santos must keep the gas in the domestic market, noting the commitments Santos has made so far are not legally binding. 

"IPC approval is a massive step, but our politicians need to ensure the huge benefit of the Narrabri gas project isn't squandered," he said.