The federal Environment Minister, Tony Burke, is demanding the NSW government reconsider coal seam gas exploration and production licences in western Sydney and has flatly rejected the state's proposed assessment procedure for such projects and big coalmines.
In a letter to the Premier, Barry O'Farrell, sent on Wednesday, Mr Burke said NSW's decision to allow coal seam gas exploration ''in urban areas and close to regional population centres'' was causing ''significant community concern'' and asked NSW to ''urgently reconsider the appropriateness of these developments''.
AGL has plans to drill 66 coal seam gas wells in an area between Liverpool and Campbelltown, with horizontal drilling potentially running under thousands of homes and the possible use of the controversial extraction technique, fracking, for some vertical wells.
Mr Burke accused NSW of basing its decisions on ''limited or incomplete information'', in particular about the cumulative impact of multiple coal seam gas mines in the same area, and said for this reason ''I will not agree to a protocol with your government at this stage''.
The federal rejection means NSW will miss out on a share of $50 million promised to the states to help with scientific assessments and also foreshadows a likely attempt by the federal government to expand its powers to intervene in the planning decisions.
Both the Greens and the independent Tony Windsor are demanding that the Gillard government expand powers under the Environmental Protection and Biodiversity Conservation Act to allow it to intervene, and Mr Burke said on Wednesday he is considering all his constitutional options. But the NSW government accused the federal government, and Mr Windsor, of trying to exploit the issue before election and said it only heard of federal concerns when it read about them in the Herald.
''It's no coincidence that Tony Burke and Tony Windsor have started playing politics on this issue just one week after the PM announced the election date,'' the NSW Resources Minister, Chris Hartcher, said.
''Tony Burke has never raised any concerns with the NSW government despite having plenty of opportunities to do so, and yet the first we hear of any concern is by reading it in the paper.
''In September last year we put in place the toughest regime of CSG regulations in the country and made it very clear that we were keen to work with the federal government.''
According to Mr Hartcher's office, the Department of the Prime Minister, Julia Gillard, recommended in early December that a revised version of the state's proposed procedures be ''progressed and finalised'', and the matter had been on Ms Gillard's desk ever since.
But Mr Windsor insisted the people of NSW ''have no more faith in this proposed process than they did in [former Labor resources minister] Ian Macdonald. They said they would fix it but in fact they have made it worse because they have decorated their policy with nice headlines but there is no substance underneath them.''
The coal seam gas industry also dismissed the need for new regulation. The chief operating officer of the Australian Petroleum Production and Exploration Association, Rick Wilkinson, said the industry in NSW and Queensland ''is arguably the most heavily regulated in Australia and any proposal from Canberra to duplicate strict state-based regulations is wasteful and inefficient''.
Proposed coalmines and coal seam gas projects have raised community concerns in western Sydney, the election's key battleground, in northern NSW, where Labor is defending two seats, in the Hunter and in Mr Windsor's electorate of New England.
The proposed drilling area in western Sydney takes in suburbs within the federal electorates of Werriwa, held by Labor's Laurie Ferguson, and Macarthur, held by the Liberal's Russell Matheson.