NEW South Wales Premier Barry O'Farrell and Deputy Premier Andrew Stoner this week announced new measures to strengthen the regulation of the Coal Seam Gas (CSG) industry in NSW, including the introduction of a two kilometre buffer for CSG activities across existing residential zones and land identified for future residential growth.

"The NSW Government has listened to community concerns about CSG – these new measures build on what are already the toughest controls in the country," Mr O'Farrell said, adding that the establishment of exclusion zones would ensure there is no granting of exploration licenses over residential zones across NSW.

According to the government, under the package endorsed by Cabinet, new CSG rules include:

• The independent Environment Protection Authority (EPA) will be the lead regulator of environmental and health impacts of CSG activities in NSW with responsibility for compliance and enforcement;
• All exploration, assessment and production titles and activities will be required to hold an Environment Protection Licence;
• The Chief Scientist and Engineer will conduct an independent review of all CSG activities in NSW, including the potential impact on water catchments;
• A two kilometre exclusion zone will be imposed around residential zones to prevent new CSG exploration, assessment and production activities (both surface and underground);
• Exclusion zones will apply to identified Critical Industry Clusters - viticulture and the equine industry; and
• An Office of CSG Regulation will be established within the Department of Trade and Investment to enforce other regulations.

The exclusion zones will apply to any CSG activity that has not yet been approved under the Environmental Planning and Assessment Act or the Petroleum (Onshore) Act.

Mr Stoner said that currently, responsibility for approving and regulating CSG activities was spread across a number of agencies leading to confusion and complexity for the community and industry.

"The EPA is a respected and trusted independent watchdog – it will be tasked as the agency responsible for ensuring the compliance of environmental and related health regulations for CSG activities," Mr Stoner said.

The Chief Scientist and Engineer has been tasked with considering appropriate ways to manage the interface with residential properties in non-urban areas. A preliminary report is expected to be delivered to the government in July this year.

"We want a sustainable CSG industry in NSW but it must be developed safely and with the appropriate environmental protections in place," Mr Stoner said.

The Australian Petroleum Production & Exploration Association (APPEA) said the NSW Government's decision to implement exclusion zones was done without any warning or consultation and will lead to higher energy prices.

"The introduction of blanket 'no-go' zones does not reflect an evidence-based, scientifically driven policy approach. If the NSW government wishes to protect the values of certain areas, it should specify the outcomes required so that project proponents can demonstrate how they can achieve those outcomes," APPEA said in a media release.