Coal seam gas drilling has been ruled out in the Illawarra escarpment and water catchment areas - at least in the short term - after Apex Energy's bid for a time extension on its CSG exploration was rejected.
The NSW Planning Assessment Commission (PAC) knocked back the company's controversial request for a three-year drilling approval extension on Wednesday, citing a need for more conclusive findings on the impact of CSG activities on drinking water.
The commission found it would be inappropriate to approve the request until the completion of a review by the NSW Chief Scientist and Engineer, Mary O'Kane, on the effects of drilling in water catchment areas.
It also said the NSW government needed to finalise its CSG policies before approval could go ahead.
Apex Energy was given the green light to drill 16 boreholes around Darkes Forest and Maddens Plains by the then NSW Labor government in September 2009.
The consent carried a three-year time-limit.
Apex lodged a request with NSW Planning for a three-year extension of the expiry date in August last year.
This triggered widespread public concern that gas mining in sensitive water catchment areas could affect the region's drinking water, with most of the 237 public submissions objecting to the proposal.
NSW Planning recommended PAC approve the extension, despite the community objections.
But the commission opted to take a "cautious approach", noting the need for the government to consider the current investigations.
It also considered a letter from the Sydney Catchment Authority (SCA), indicating it was strongly against CSG activities in water catchment "special areas", which are immediately adjacent to water storage.
The SCA noted there was significant public debate about CSG but that its position was based on facts, rather than public opinion.
Seven of Apex's proposed boreholes were within the Metropolitan and Woronora Dam special areas, while another was planned for the boundary of Woronora Dam. Another six had been, or were soon to be, prohibited under new, more stringent state laws.
The NSW government announced earlier this year it would ban CSG drilling within two kilometres of residential land, which would have prohibited four of the proposed boreholes.
Another two boreholes were ruled out when some areas of the project site were declared as CSG-free national park.
While the commission accepted exploration had been approved in the past, it noted the significance of the SCA's special areas.
"The CSG extraction is relatively new to NSW. The commission acknowledges that the coalmining industry has used CSG extraction techniques for some time ... nevertheless, stand-alone CSG activities only occur at a handful of sites in NSW at present," the determination report said.
"The impacts of CSG activities are being questioned in a range of studies in NSW, Australia and internationally.
"It appears the potential risks of CSG activities are still being established and there is some uncertainty regarding the potential impacts of the suite of CSG extraction techniques ..."
Apex Energy could not comment on the comission's findings yesterday.