AUSTRALIAN STATE SETS LIMITS ON COAL SEAM GAS, FRACKING - REUTERS AFRICA

http://af.reuters.com/article/commoditiesNews/idAFL3E7IL4IN20110721

SYDNEY - Australia's New South Wales state has imposed restrictions of the burgeoning coal-seam gas industry and extended a ban on the controversial practice of hydraulic fracturing or 'fracking' until year-end to balance the needs of mining and agriculture.

Fracking, currently not practised in New South Wales, involves drillers blasting pressurised water, chemicals and sand deep underground to break rocks and release the gas, a technique that some farmers fear will contaminate ground water.

The state government would also ban the use of BTEX chemicals (benzene, toluene, ethylbenzene and xylenes) as additives during coal-seam gas drilling and also ban the use of evaporation ponds relating to coal-seam gas, the state's resource minister said late on Thursday.

Australia's coal-seam gas sector is focused mainly on Queensland state but some investors have also been looking at New South Wales' coal regions for gas opportunities.

Energy group Santos Ltd recently agreed to buy New South Wales-focused peer Eastern Star Gas Ltd in a deal valued at A$868 million to boost reserves.

(Reporting by Balazs Koranyi; Editing by Mark Bendeich)

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