AGL Energy's Gloucester Gas project has been approved by the federal government, paving the way for a fivefold expansion of the industry in NSW.
The project will see AGL drill up to 110 coal seam gas wells and includes approval for fracking and the construction of a pipeline from Gloucester to Hexham, SMH reported.
The project is subject to 36 strict conditions including a new hydrogeological study.
AGL's head of upstream gas, Mike Moraza, said he was confident the new peer-reviewed numerical hydrogeological model of the project would show the project posed ''negligible if not nil risk to the environment and the water resources of the Gloucester area''.
The Gloucester project is expected to produce about 30PJ a year with probably reserves of 669 petajoules of gas.
Last week AGL withdrew its plans to drill 66 coal seam gas wells in Western Sydney.
The company said it had asked the Department of Planning and Infrastructure to suspend its assessment process, citing ''community concerns'' as the main reason for the backdown.
The company planned to drill 66 wells at a dozen sites between Liverpool and Campbelltown.
Australian Mining reported that AGL publically reversed its position on fracking, putting the drilling technique back on the table as a possible option.