THE NSW government has announced a ban on all coal seam gas activity within two kilometres of residential areas and industry clusters across the state.
The decision was endorsed by state cabinet on Monday night, Fairfax reports.
The state government has also announced that chief scientist and engineer Mary O'Kane will review all coal seam gas activity in NSW and report on any risks by July.
It comes after energy company AGL suspended plans to expand its southwestern coal seam gas project due to increasing community anger.
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 and the decision in effect ends AGL's plans.
Premier Barry O'Farrell said suburbs, country towns and other urban areas would become "no-go zones for CSG activities".
He said Ms O'Kane would also consider how to manage the impact of coal seam gas activity on residential properties in non-urban areas.
A new Office of Coal Seam Gas Regulation would also be established, the government said.
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