Australian State Proposes Stricter Scrutiny of Coal-Seam Gas

Coal-seam gas producers planning projects near prime farmland and wineries in New South Wales, Australia’s most populous state, will face stricter regulation under government proposals to protect the environment.

Developments within 2 kilometers (1.2 miles) of “strategic agricultural land” will need to gain approval from an independent panel before they can advance, Brad Hazzard, the state’s planning minister, said today in an e-mailed statement.

“We are delivering the best protection for agricultural land in Australia and extremely tough controls on coal-seam gas,” Hazzard said. The state government’s plan will “ensure prime agricultural land,” and the state’s wine and horse-breeding industries are safeguarded, he said.

AGL Energy Ltd. and Santos Ltd. are among Australian companies with coal-seam gas projects in the state. Companies exploring for the fuel in New South Wales and Queensland face the risk of higher costs and delays because of tighter regulation, Deutsche Bank said in a report yesterday.

Santos, Australia’s third-largest oil and gas producer, will seek urgent talks with the New South Wales state government to understand how the additional regulatory hurdles will work, the company said today in an e-mailed statement.

“We are very concerned about the potential impact of these policies on our continuing ability to deliver new sources of natural gas to New South Wales, as we have done safely and sustainably for nearly four decades,” James Baulderstone, Santos vice president for eastern Australia, said in the statement.

Some environmental groups and politicians are concerned drilling will damage aquifers, contaminate and deplete water supplies, and diminish the capacity of food-producing land. The state identified 1.35 million hectares of “high-quality agricultural land” that will be subject to the tougher review.

Santos shares fell 0.5 percent to close at A$13.51 in Sydney today, while Sydney-based AGL declined 1.9 percent to A$13.67. The benchmark S&P/ASX 200 Index dropped 1.4 percent.