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It's not bad so long as you insulate it (i.e. brake nipple caps). I have a somewhat similar issue but it's 3/8" from the engine block but to date, no arcing has ever occurred while "driving" the car, but when it comes time to "service" it for whatever reason, it's best to have your kill key handy and cut off the battery BEFORE you work on it. Ask me how I know this!!!!!
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