Groundswell Gloucester says the lack of any capital for the project and no firm commitment from AGL that the factory would even be built locally were concerning.

The group also said despite the obvious benefits the project would bring to Gloucester, there were also risks.

“Drying the milk near where it is produced means that transport costs are lowered and the locals benefit from the value added to the product,” Groundswell spokesman David Hare-Scott said.

“Combine these positives with the possibility of earning export dollars and ready access to energy and at first glance you seem to have a complete package of benefits. 

“However, quite a few more boxes need to be ticked before anyone gets too excited.”

Mr Hare-Scott said there were many steps still to take before the agreement signed by AGL and Dairy Connect led to the construction of any commercial enterprise locally.

“The reality is the AGL board has not made any final decision to proceed with gas production in Gloucester. We understand that this is unlikely until at least early 2015,” he said.

“Financing the project is likely to be a major problem in the current climate and Dairy Connect has no capital. There is certainly no guarantee that if it was built such a factory would be built in Gloucester. AGL has made that clear. 

“Aside to this, AGL never wants to address that regardless of any possible benefits from their proposed gas field there are risks. Should the milk factory go ahead if it means pastures, aquifers and human health are also put at risk?”

AGL’s chief executive Michael Fraser said the agreement signed with Dairy Connect further strengthened the company’s partnerships with key agricultural groups and had the potential to secure the future of the dairy industry in the valley for years to come.

 “The agreement has the potential to create jobs, help farmers better manage production costs and in doing so, open up new overseas markets,” he said.

 “Natural gas not only operates side by side agriculture but can also be a powerful contributor to its success.

 “We’re serious about bringing lasting benefits to individual farmers and rural and regional communities.”

But Mr Hare-Scott said the agreement seemed to be little more than a publicity stunt.

“At the moment all we have is an agreement by two organisations to work together,” he said.

“AGL is desperately looking for ways to promote their Gloucester Gas Project. The other partner, Dairy Connect, is just a lobby group for the dairy industry with a limited track record having only been established in 2012. It is not a commercial enterprise.”