The Southern Highlands Coal Action Group has welcomed the state government's decision to demand coal seam gas company Leichhardt Resources "show cause" as to why its petroleum exploration licences should not be revoked.
Leichhardt Energy owns the exploration rights to PEL469, which covers the region west of Nowra.
On Wednesday, NSW Resources and Energy Minister Anthony Roberts issued a statement saying the company would be given 21 days to respond as part of an audit of existing PELs throughout the state.
Southern Highlands Coal Action Group technical adviser Alan Lindsay said if Leichhardt Resources couldn't show cause in time, it was unlikely the licence would be snapped up by another company.
"I really think the Southern Highlands is probably free of CSG following recent government regulations," Mr Lindsay said.
On Wednesday, the NSW government also announced a freeze on the processing of new petroleum exploration licence applications.
The move adds scrutiny to existing coal seam gas legislation, which includes the requirement for a two-kilometre exclusion zone around residential and village areas.
"If you look at the Southern Highlands ... on one side we have national park and on the other side we have a water catchment and a two-kilometre buffer zone," Mr Lindsay said.
The Illawarra Mercury contacted Leichhardt Energy director Simon Tolhurst, however he did not respond before the paper's deadline.