SANTOS and AGL have signed an historic access policy guaranteeing farmers the right to say no to coal seam gas (CSG).
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Both companies agreed, in principle, not to enforce arbitration over land access for CSG if the landholder opposes operations on their land.
It will be the first such commitment in Australia.
The agreement, called Principles of Land Access, does not extend to essential infrastructure, such as pipelines, which will travel across land from gas field to port across private land.
The move has been met with glowing enthusiasm from the farm lobby.
However, some sections of the resources sector are concerned this agreement will raise community expectations and inhibit their plans to grow.
NSW Farmers, NSW Irrigators, Cotton Australia, NSW Resources and Energy Minister Anthony Roberts and the gas companies negotiated the historic agreement, which was signed at NSW Parliament House on Friday.
Lobby group Lock the Gate welcomed the news, but said the sentiment of the in-principle agreement should be secured in legislation.
"This is a great start, but now is the time for the NSW government to formalise the landholder's right of veto in legislation," said national campaign director Phil Laird.
"Projects get sold on and management changes. The commitment companies are making today may change in the future.
"The only way for landholders to have real confidence is for it to be cemented into legislation."
NSW Farmers resources spokes- man Mitchell Clapham said "this is an historic agreement".
"We give credit to AGL and Santos for showing leadership on this issue (and) we would like to think other CSG companies would do the same," Mr Clapham said.
However, he said access agreements for coal mining remained an issue.
"This agreement only involves two CSG companies. We will continue to lobby for landholders' investment of time into the arbitration process to be acknowledged as a compensable loss in an access agreement."
Santos' NSW general manager, Peter Mitchley believes this policy is a clear signal from industry that it respects the views of landholders.
"We expect that same respect will be shown to those landholders who choose to host our activities," Mr Mitchley said.
AGL managing director Michael Fraser said while the arbitration rights remained in law, "AGL had never exercised these rights and expects it never will."
Former federal Resources and Energy Minister, Martin Ferguson, now chair of Australian Petroleum Production and Exploration Association's advisory board, was scathing of the agreement.
Mr Ferguson slammed Santos, AGL and the NSW government for opting for a "short-term" solution to the pressure exerted by "private-interest lobby groups".
Santos and AGL's lock the gate agreement "is the thin end of the wedge" which could prevent future development of NSW's coal, solar and wind resources, he said.