When I first heard that there were plans for a coal seam gas company was planning to drill a short way from where I live in Inner City Newtown, Sydney, I could barely believe it but I found out that it is deadly serious.

This story is about how the same company is planning to drill in Newtown and at the heritage town of Catherine Hill Bay. Many people know about how Catherine Hill Bay residents are fighting Rose Corporation's large residential subdivision development ( Nicole Gooch and I dealt briefly with this in an earlier article on New Matilda) but few know that Dart Energy are planning to drill both at Catherine Hill Bay and St Peters, near Sydney Park.  Read the full article on New Matilda.

How were coal seam gas exploration licences granted for urban areas without any consultation? Wendy Bacon and Nicole Gooch investigate the forces behind drilling in the inner city.

New Matilda reported today on planning decisions made under Labor in the state seat of Heffron which will ramify well beyond tomorrow's election. Residents are concerned about high rise apartments in Sydney Park — and about the lack of public consultation and environmental assessment on coal seam gas exploration.

When environmental activists first started campaigning about coal seam gas (CSG) drilling in St Peters last year, some residents were rather sceptical, thinking it was a beat-up, even a joke. Some were aware of CSG developments in rural NSW and Queensland but while high rise is no surprise they were not expecting their electorate to become a mining site. But with 70 per cent of the state under CSG exploration licences without any consultation, residents of NSW are discovering that this is an issue that rural and city voters share in common.

To find out who is behind the CSG drilling in St Peters (see correction below), the best place to start is at the village of Catherine Hill Bay on the NSW Central Coast. The community there has made headlines with its campaign to stop Rose Group's large scale residential development near the headland on an unspoiled beach nestled in between the Wallarah National Park and the Munmorah State Conservation Area.

Rose Group's previous development application was quashed in court in 2009 on the basis that it amounted to a "landbribe" — only for Planning Minister Tony Kelly to override restrictions on coastal zoning the following year, which allowed Rose to submit another big residential development application in December 2010.

Less well known is that minority interests in the Catherine Hill Bay development are held by coal executives Andrew Plummer and Tony Heggarty, who was prominent in last year's anti-mining tax campaign, and by ex-federal National Party minister Doug Anthony. Back in 2005, Rose Group director Stuart Rose teamed up with one of the Hunter's biggest developers, Duncan Hardie, to form Macquarie Energy, which was later taken over by Apollo Gas.

Like Rose Group's development in Catherine Hill Bay, Hardie's Huntlee New Town, the largest residential development in NSW struck problems with a landbribe ruling in 2009. Hardie withdrew from Huntlee after this and focused on his energy businesses. Hilton Grugeon of Hunter Land developments also became involved in Macquarie Energy and Apollo Gas.

According to Democracy4sale, Hardie and Hunter Land have been big donors to the political parties over recent years. Between 2001 and 2008, Hardie Holdings donated $374,400 to Labor NSW (including a direct donation to Keneally) and $66,000 to the Liberal and Nationals in NSW. Since 1998, Hunter Land donated $331,000 to Labor and $221,028 to NSW Liberals.

In a friendly takeover in February this year, Dart Energy, which has interests in China, India, Vietnam, Indonesia, India, Poland and the UK, absorbed Apollo Gas. Dart inherited Apollo's portfolio of seven Petroleum Exploration Licences (PELS) and two Geothermal Licences covering 24,000 square kilometres of NSW.

These PELs include Newcastle, the Upper Hunter, Gunnedah, the Western Hunter and Sydney. The Sydney licence covers 3285 square kilometres — most of greater Sydney — from Kurnell to Gosford and west to Eastern Creek.

Apollo started drilling for gas on the Catherine Hill Bay headland in March last year (PEL 461). In response to proposed amendments to zoning and planning controls over land, including Rose Group's, at Catherine Hill Bay, the Mineral Resources Division of the NSW Department of Industry and Investment wrote in August 2010 "with a number of concerns" to the Department of Planning. Among its worries, it registered fears that "mineral and petroleum development would be sterilised" by controls over development.

The Department noted that "preliminary results of the [gas] exploration programme are encouraging and the company plan to undertake additional drilling to test the gas saturation of the coals." It warned that an application may be made to renew the exploration licence or convert the title to a Petroleum Production Lease.

According to Dart Energy NSW Country Manager, Robbert de Weijer, Catherine Hill Bay CSG drilling results are positive, although it will take more drilling and another two or three years to assess whether coal seam gas production is viable.

There is no public planning process for CSG exploration — although the Department of Industry and Investment does consult with the Department of Planning. Apollo cannot drill near houses or gardens without consent of owners. The company commissioned a study from engineering firm CH2MHill which is also consulting in the CSG industry in Queensland.

The 2010 Review of Environmental Factors (pdf) for PEL 463, the Sydney Basin, found that "the proposed drill hole location is located within the footprint of the Botany Sands Aquifer which lies beneath the surface". The report goes onto argue that the aquifer is "highly vulnerable to contamination". Water from the aquifer seeps through the sands, silts and clay lying beneath the ground surface and flows towards Botany Bay.

Macquarie Energy, however, promises in its report to minimise impact with a number of measures, including casing the drill hole "to minimise any potential effect on other users of the groundwater and the environment" and "any contaminated waters will be contained in appropriately sized and lined sumps".

Dart Energy's de Weijer told New Matilda he can understand the concerns of people and that he strongly prefers early engagement. He says "there are lessons to be learned from Queensland" and it would be "better if [the coal seam gas industry] had not flown under the radar". He believes that CSG "can be a sustainable" and "would not be part of the company" if he did not.

He also believes the company can give something back to the community by "using local companies or building a road" for example. The company will be drilling this year at St Peters and will do more drills at Catherine Hill Bay. They are also drilling at Putty in the Hawkesbury where residents are already protesting.

Last week, Kristina Keneally visited the Hunter and promised tighter regulation of the coal seam gas industry but she made no mention of drilling back in Sydney.

Climate Action Newtown (CAN) and Sydney Residents Against Coal Seam Gas organised an election forum on energy last week but Deputy Premier Carmel Tebbutt did not show up. New Matilda attempted to confirm with her that she had made no public statements about either Ashmore or St Peters coal drilling and to establish why she had not attended the forum but failed to get any response from the Deputy Premier's office by our deadline.

Recently, CAN conducted a survey in the area and found that 77 per cent thought there should be a ban on CSG until proper environmental assessment had been carried out although 42 per cent of people did not know drilling was happening in their area.

The Liberals have promised tougher regulations for the CSG industry although more rigorous assessments will only apply to new exploration licences.

Upper house Greens spokesperson Cate Faehrmann is calling for a moratorium on CSG, and if not, a Special Commission of Inquiry (which would have the powers of a Royal Commission). It might take this to unravel how and why CSG licences were given over 70 per cent of the state without any serious environmental assessment or public consultation.

CORRECTION: It was originally reported that the proposed site was in Tempe. In fact it is in the neighbouring suburb of St Peters.