A spokesman for Mr O'Farrell said coal seam gas activity would be banned within the cluster areas identified in the government's strategic regional land use policy, but a 2km buffer zone would not apply. The premier said city suburbs, country towns and other urban areas would become "no-go zones" for coal seam gas. If strictly applied, this ruling would appear to cover large portions of most of the state's gas fields. The state's chief scientist and engineer, Mary O'Kane, will review all coal seam gas activity in NSW and report on any risks by July, while the Environment Protection Authority will be given responsibility for enforcing compliance. The gas industry body, the Australian Petroleum Production and Exploration Association, said the ban would lead to higher energy prices. “With long-term gas supply contracts due to expire from next year, today's decision creating no-go zones will strangle efforts to safely source natural gas," the group's spokesman, Rick Wilkinson, said in a statement.

"The NSW Government keeps shifting the goal posts through a red tape laden decision-making process that ignores science and the commendable environmental record of an industry that has been operating in Australian for more than 40 years," Mr Wilkinson said. "The fact that NSW's primary source of natural gas has safely operated in western Sydney for more than a decade has somehow been lost in recent days." The ban will apply to any coal seam gas proposal that has yet to be approved under the Environment Protection and Assessment Act or the Petroleum (Onshore) Act. Metgasco, which is proposing major drilling in a gas field in the Northern Rivers region of NSW, said the new regulations could impair its plans for up to 1000 gas wells. The company has spoken in terms of a $2 billion project. "The details of these changes are not yet clear but they could have a significant impact on Metgasco's Northern Rivers CSG operations," the company said in a statement to the Australian Stock Exchange on Tuesday morning.

"Metgasco understands that there will be a one month consultation process before the changes are finalised," it said. "Metgasco has requested an urgent meeting with the NSW Government to better understand the changes and express our concern about the potential impact on Metgasco and NSW's natural gas supply and business environment, including its manufacturing industry." Comment was being sought from Santos, Dart Energy, and other drilling companies that have proposals that could be affected. The NSW Farmers' Association said the ruling went half way towards banning mining and drilling in sensitive areas, but called for an approach that applied those rules consistently across the state. "NSW Farmers has consistently advocated for a measured approach to mining and CSG policy. We believe there are places in this state that are too priceless to put at risk through mining and gas activities," said the association's president, Fiona Simson. "Today, the O'Farrell Government has reached the same conclusion but hasn't extended that to our food and fibre producing lands. We think nothing should be more important."

The new rules caused anger in some rural communities, which have so far seen the worst of the disputes between residents and gas drilling companies. "Barry O'Farrell said that families in residential areas should not have to worry about their quality of life being affected by noise and visual impacts - but what about our families? Why should we be treated differently?" said Penny Blatchford, a spokeswoman for one group, Bellata Gurley Action Group Against Gas, near Narrabri. "If coal seam gas is unsafe in Campbelltown, then it is unsafe everywhere; if coal seam gas is a risk to wine-growing and horse-breeding areas in the Hunter Valley, then it is a risk to our food and fibre producing areas in the north-west," Ms Blatchford said. "What do we have to do to force this government to protect our farms and businesses - plant vines and build stables?" A spokeswoman for the Lock The Gate Alliance, Carmel Flint, said there should be a moratorium on drilling scross the state until risks were quantified.

"There are a number of CSG licences in the north-west that are soon to be renewed by the NSW Government, including controversial licences over Bellata, the Pilliga, Coonamble and the Liverpool Plains," Ms Flint said. The Nature Conservation Council of NSW, representing over a hundred environment groups, said the new regulations were an improvement but still left many issues unresolved. "Given the comprehensive failure of the strategic regional land use process, and the litany of broken promises that accompanied it, the community is entitled to remain sceptical about the government's appetite for further reform," the council's chief executive, Pepe Clarke. The council said it was concerned that drinking water catchments, including Sydney's catchment, were still subject to coal seam gas drilling proposals. Loading

The Greens also endorsed the change but said it should be extended state-wide. "It's just common sense that you don't turn residential areas into gas fields, but the same protection should be implemented for our water catchments, aquifers and farm land," said a NSW Greens MP, Jeremy Buckingham said.