The company has also been granted an environment protection licence from the Environment Protection Authority.

The approvals allow AGL to begin to frac and flow-test four gas wells located in stage 1 of the Gloucester gas project.

“We welcome these approvals from the NSW government,” AGL CEO Michael Fraser said.

“At present NSW produces less than 5% of its own gas and imports the rest from interstate. However if the Gloucester gas project proceeds, we have the potential to bolster that locally produced gas figure to around 20%.

“Stage 1 has already been through a full environmental assessment and received approval from the independent NSW Planning Assessment Commission. That approval was upheld by the Land and Environment Court. Stage 1 is also the subject of Commonwealth approval.

“All of the natural gas produced from the Gloucester gas project is for NSW customers and will not be exported.”

The company will use information gathered from the pilot to comply with the terms of state and federal approvals for the Gloucester project, which it has been consulting with the local community on since 2009.