Last month the NSW Government announced a new regime for regulating coal seam gas activities in NSW. Not all the details of the NSW Gas Plan have been released, but the changes are big and already proving controversial. We take a look at the Gas Plan’s key policies and developments.

CSG applications

All of the 16 pending licence applications (covering 60% of the state) are being cancelled. Instead, the NSW Government will release specific areas covering approximately 15% of the state for CSG exploration and require operators to tender for petroleum licences. Under this new framework, operators must submit a plan to develop a licence area. If the operator fails to commit to these proposed investments, it will risk losing its licence.

Landholder compensation

A compensation regime will be introduced for landholders whose properties are subject to CSG exploration activities. Compensation will be determined by the Independent Pricing and Regulatory Tribunal, while landholders will also be entitled to a share of the royalties received by the state from any CSG extracted on their property.

Community fund

The NSW Government will establish a Community Benefits Fund for the benefit of local communities affected by CSG activities. Operators will be given the option to make payments into the fund that will be matched by the Government at a ratio of 2:1. Although payments are ultimately voluntary, we think the Fund will be pretty successful – CSG operators will gladly contribute in order to create goodwill towards local communities and appear to be socially responsible entities.

Safety standards

A government review wouldn’t be complete without the application of more safety standards. Reviews of current safety standards (including the Codes of Practice for Fracture Stimulation Activities and Well Integrity) are currently underway and the NSW Government’s findings should be available in early 2015.

It is unlikely that the proposed changes to NSW’s CSG regulatory regime are going to quell rampant mistrust of operators in the state, let alone garner any support for the industry in general. But at least the NSW Government is on the path to developing a coherent policy approach.