The exclusion zone will cover future residential areas in Sydney’s northwest and southwest growth areas, and sensitive industries such as wineries and horse studs. It will not be retroactive.

The state’s chief scientist and engineer Mary O’Kane will also undertake a review of CSG activities, with an initial report due to be handed down by July.

In new rules agreed to by the NSW cabinet, the industry will now be regulated by the Environmental Protection Agency, which will have the power to revoke licenses should companies not adhere to environmental conditions.

The move comes amid growing concern about CSG drilling since the NSW government moved to unfreeze a ban on hydraulic fracturing last year.

More recently, AGL Energy’s plan to drill under Campbelltown in Sydney’s west drew the ire of state and federal politicians, leading the company to suspend its plans for the Camden Gas Project.

CSG has also been the subject of greater political debate federally, with independent NSW MP Tony Windsor pressuring the government to put greater controls on the industry.

Federal environment minister Tony Burke responded by criticising the NSW government for not signing up to a national plan on CSG, which involves states taking advice on CSG projects from the Independent Expert Scientific Committee on Coal Seam Gas and Mining, which was set up in the wake of demands from Windsor.

The stoush between the NSW government and Burke reached a crescendo earlier this month when he moved to approve AGL Energy’s 110-well Gloucester project, but cutting the state out of negotiations on conditions to be imposed on the activity.

It is worth noting that Queensland instituted an exclusion zone similar to the one being proposed by the NSW government in 2011.

“We need further details”

In response to the latest NSW government move, AGL Energy said in a statement that the ban would only exacerbate the gas crisis in the wings for the state.

“This proposal will add to the gas supply crisis that New South Wales is facing as existing supply contracts roll off between 2014 and 2017,” it said.

“The absence of multiple new sources of supply in NSW will add to substantial upward pressure on gas and electricity prices in the state.”

Both AGL and junior explorer Metgasco have requested immediate meetings with the NSW government to ascertain just how big the impact to its operations could be.

Metgasco in particular has flagged the possibility of the latest changes having a “significant impact” on its Northern Rivers activities.

It also noted there was reportedly a one-month consultation period before the changes were set in stone.

Santos will also be seeking clarification from the NSW government, telling EnergyNews that while it was still not totally sure of the impact of the latest changes, they could potentially spell bad news, but not commenting specifically on its CSG plans for the Gunnedah Basin.

“We need further details around the proposed measures, to better understand the potential implications,” a spokesman said.

“Santos believes the new proposal by the State Government will add unnecessary red tape to the already rigorous approvals regime for the New South Wales coal seam gas industry.

“This announcement doesn’t change the fact that NSW needs new supplies of natural gas and Santos remains committed to developing resources in order to meet the State’s energy needs. These new proposals could put at risk new sources of energy for the people of NSW.”

“Closed for business”

Industry peak body the Australian Petroleum Production and Exploration Association slammed the lack of consultation involved in the move.

“The NSW government keeps shifting the goal posts through a red-tape laden decision-making process that ignores science and the commendable environmental record of an industry that has been operating in Australian for more than 40 years,” APPEA eastern chief Rick Wilkinson said in a statement.

“The fact that NSW’s primary source of natural gas has safely operated in western Sydney for more than a decade has somehow been lost in recent days.

“This latest decision appears to be arbitrary and sends a clear signal that NSW is closed for business.”

It said that if the NSW government wished to “protect the values” of certain areas, then it should communicate that to industry so that it could come up with solutions about how to drill while maintaining said values.

“Piecemeal measures”

The Lock The Gate Alliance said this morning that the measures did “not go anywhere near calming public concern about the issue”

It said that while it noted that O’Kane would be undertaking a review, it would not stop blockading CSG sites in the meantime.

“There has been an appalling level of government irresponsibility in the granting of mining approvals in New South Wales and this has allowed a tsunami of destruction to threaten many areas of the state,” president Drew Hutton said.

“The O’Farrell government must accept the community’s strong desire to have this challenge addressed with fundamental changes to the regulation of mining not just piecemeal measures.”

Meanwhile, anti-CSG farmers in the northwest of the state have queried why communities of under 1000 people would not be treated the same as communities of more than 1000 people.

"Barry O'Farrell said that families in residential areas should not have to worry about their quality of life being affected by noise and visual impacts - but what about our families? Why should we be treated differently?" spokesperson for Bellata Gurley Action Group Against Gas Penny Blatchford said.

"If coal seam gas is unsafe in Campbelltown, then it is unsafe everywhere; if coal seam gas is a risk to wine-growing and horse-breeding areas in the Hunter Valley, then it is a risk to our food and fibre producing areas in the north-west.”

EnergyNews is seeking more information from the NSW government at the time of publishing.