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Australia's New South Wales State Sets New Limits on Coal-Seam Gas Drilling

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PERTH, Oct 3 (Reuters) - Australia's New South Wales has implemented new regulations that would keep some areas of the state off limits to new coal-seam gas drilling, potentially affecting the plans of gas developers such as AGL Energy.

The fast-growing coal-seam gas industry in Australia has drawn criticism from farmers and environmentalists over concerns that drilling techniques could pose a risk to groundwater supplies.

Opponents of the industry say that hydraulic fracturing, or 'fracking' - a technique used to extract gas and oil trapped in rock formations with high-pressure water, sand and chemicals - could contaminate water.

New South Wales' new regulations come on the heels of Australian gas and electricity company AGL Energy's request earlier this week to frack existing wells in the state as part of its Gloucester gas project.

Under the new rules, the state will require a two-kilometre buffer between new coal-seam gas activities and existing residential zones.

"We have put in place the toughest coal-seam gas controls in Australia," the state's Minister for Planning and Infrastructure, Brad Hazzard, said in a statement on Thursday.

The new regulations, which were proposed earlier this year, would mean that 95 percent of homes in the state would fall into the area off limits to coal seam gas.

AGL and Australian oil and gas producer Santos Ltd, which both have significant plans for gas drilling in the state, had different reactions to the new rules.

"AGL is still awaiting the detail behind the New South Wales government's announcement to fully assess the impact of the policy on AGL's natural gas projects," the company said in an emailed statement.

"On face value, the government's announcement will only add upward pressure on gas prices in New South Wales and exacerbate the gas supply issues facing the state," AGL said.

Santos said it did not believe its activities would be affected.

"We are glad that this process has been concluded...the industry needs certainty as to the regulatory environment that it is working in before it can proceed with any certainty," the company said in a statement.

(Reporting by Rebekah Kebede; Editing by Muralikumar Anantharaman)

Copyright 2015 Thomson Reuters. Click for Restrictions.


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