Coal seam gas drilling has been ruled out of Sydney's drinking water catchment for the time being, after the state's planning assessment commission killed off an ambitious plan to extract billions of dollars of gas.
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The potential impacts of drilling in the pristine bushland area between Sydney and Wollongong were too uncertain, the commission said.
Apex Energy NL had already been granted a license to drill 15 exploratory bores in the catchment area in 2009, but no work had yet been done.
The new ruling effectively kills off the Apex proposal in its current form. The company declined to comment when contacted by Fairfax Media today.
The initial drilling proposal was designed as a precursor to massive commercial gas developments in the water catchment.
The planning assessment considered evidence from Apex, the Sydney Catchment Authority and the NSW government.
It concluded that the drilling proposal contained too many uncertainties to be allowed to go ahead.
"The commission has found that it would not be appropriate to approve the proposed coal seam gas activities in Sydney's drinking water catchment special areas", the commission's report said.
"There are still uncertainties surrounding the risks and potential impacts of coal seam gas activities; and policies relating to coal seam gas activities are currently evolving."
It would be best to wait for a review being conducted by the NSW Chief Scientist and Engineer to be completed, and government policy to be finalised, before approvals were granted, the report said.
The report addressed the question of why Apex's plans should be refused now, when its initial drilling proposal had been approved in 2009. Part of the drilling area had since been declared a national park - Dharawal National Park - it said.
"Public awareness and concern regarding the risks associated with coal seam gas activities has also grown over the period. Adding to this, further scientific work conducted since 2009, both interstate and internationally, has identified some anomalies potentially linked to coal seam gas activities," the commission's report said.
Leaked documents showed that, back in 2010, Apex had concocted a plan to extract billions of dollars worth of gas, and split the proceeds with some giant coal mining companies, including Peabody Resources and Rio Tinto.
The documents quoted Apex saying Peabody was "very sensitive" about being associated with the plan, and had asked their names to be kept out of public statements about the project.
The documents said Peabody "'would rather not be directly involved with any surface problems which may be brought to the attention of the Sydney Catchment Authority or other landowners, and that any public attention not be to the detriment of their underground coalmining activities".
The news was welcomed by anti-coal seam gas campaigners, including the Stop CSG Illawarra group.
“We have been planning to blockade – to protect the drinking water of over 4.5 million people from CSG development – but this decision means drilling cannot happen at this time," the group said in a statement.
“Today is a win ... But we are celebrating winning a battle, not the war. CSG licences still cover the Illawarra."
