It is the first time the current government has cancelled licences due to compliance breaches, and it comes almost a fortnight after the state’s chief scientist handed down an independent review of CSG activities in NSW.

One of the key tenets from Mary O’Kane’s review was maintaining open lines of communication between operator and the community.

Energy and Resources Minister Anthony Roberts informed the company that its three Petroleum Exploration Licences near Nowra, Rylstone and Moree had been cancelled.

Leichardt managing director Simon Tolhurst slammed the decision, labelling the management of the CSG industry by successive NSW governments as “dysfunctional”

“The decision is not an unexpected one,” Tolhurst said.

“Having committed over $3 million towards the development of the resources in NSW, the dysfunctional management of the coal seam gas industry in NSW by successive governments resulted in a decision by Leichhardt Resources to wind back further investment in the state.

“No doubt this decision will further erode investor confidence in the NSW resources and energy industry at a time when further investment is greatly needed to buffer the people and businesses of NSW from escalating gas prices.”

The company had been granted the three licences in April 2009, and in February last year these titles were renewed for five years with set conditions to be met, including a need to engage with the community in relation to the planning and conduct of its prospecting operations.

The company was issued a show cause notice on August 7 this year, following allegations of not complying with the requirement for community engagement in relation to all three licences.

It is part of a new crackdown on target operators who have not met the conditions of their PELs, and Roberts said it was critical that titleholders abide by their work programs to ensure they adequately explore for resources and also provide certainty for the community.

“The government takes compliance with licence conditions seriously,” Roberts said.

“The NSW government, in line with NSW chief scientist and engineer Mary O’Kane’s recommendations, is supportive of a safe, sustainable gas industry that adheres to best practice standards within a regime of strong regulation, compliance and enforcement.”

NSW Farmers president Fiona Simson welcomed Roberts’ decision, labelling it a “sensible step” that had been praised by farmers around the state.

“NSW Farmers has worked extensively on land use conflict issues with coal seam gas companies and continues to advocate on farmers’ behalf to protect them and their livelihoods,” Simson said.

“We congratulate the tireless efforts of local communities, groups and individuals which have kept the pressure on the government to address the issue in these regional communities.

“Some exploration companies have ignored or trivialised the need for community engagement and the decision today proves that they do this at their peril.

“Today’s decision makes it clear that farmers and their communities count and that just holding a licence on its own does not give you the right to explore.”

Simson said the association has welcomed O’Kane’s recommendations for the CSG industry, and she welcomed strong compliance and enforcement from the government.