A recent deal conferring NSW farmers with the right to refuse coal seam gas exploitation has cast doubt over the potential for the fossil fuel to "reboot the mining and energy boom."

While trade minister Andrew Robb recently told foreign investors and members of the international mining sector in Hong Kong that coal seam gas has the potential to transform Australia into the world’s biggest LNG exporter, the fossil fuel’s economic potential in NSW could be severely stymied by a deal which gives farmers in the state a veto over drilling.

Santos and AGL Energy have signed a pledge with NSW Farmers, Cotton Australia and the NSW Irrigators Council to refrain from undertaking drilling activities on private land without first obtaining the voluntary consent of the landholder.

Farmers have expressed strong concern over the impact on the environment and their own businesses of coal seam gas exploitation, joining greenies last month to stage protests against a $2 billion CSG project near Narrabri in NSW.

Response to the deal from members of the mining and resources sector has been mixed, with even the Minerals Council of Australia divided in its assessment of the Santos and AGL deal.

 Brendan Pearson

Brendan Pearson

MCA chief executive Brendan Pearson has pilloried the deal as leaving “the development of Australia’s natural resources hostage to the noisy few at the expense of the collective interest of the many,” as well as setting a dangerous precedent for other local governments.

“It would be a significant concern if state governments began to embrace an alternative approach that surrendered their control over their natural resource endowment,” Pearson said.

Martin Ferguson, former Federal Resources Minister and current chair of the advisory board for the Australian Petroleum Production and Exploration Association (APPEA), also said the arrangement sets an unsettling precedent which is inimical to the national interest, with the potential to adversely impact land use by other industries.

However Steve Galilee, chief executive of the NSW Minerals Council, an affiliate of Minerals Council of Australia, said that such concerns were overblown, and the deal is unlikely to affect other resource projects in the state.

Galilee said the NSW council does not expect the government or industry to heed calls from “more zealous anti-mining activists” for the agreement to be extended to other mining developments.

Should the concerns of the certain members of the mining industry prove correct, the extension of farming rights could severely dampen hopes for a revival of the mining boom on the back of LNG exploitation as touted abroad by Robb.

Addressing the Credit Suisse Asian Investment Conference in Hong Kong last week, Robb said coal seam gas and shale exploitation could help to “reboot the mining and energy boom” in Australia, enabling it to overtake Qatar as the world’s largest LNG exporter by 2018.