The federal government of Australia announced on Tuesday that coal seam gas (CSG) projects and large coal mine ventures would require federal approval because of the potential cumulative impact of these resources projects on water supply.

Environment Minister Tony Burke said that the resources sector and state governments would want more details of the planned legislation before they assess the impact of the planned new regulation.

However, the New South Wales Minerals Council pointed out that getting a mine approval was already a difficult undertaking which would be compounded by another level of rules, regulations and approval at the federal level, but with no apparent positive impact on the environment.

"Rather than drowning Australian industries in regulation, we should be focusing on reducing costly project delays, which are harming Australia's reputation as an investment destination," The Sydney Morning Herald quoted Greg Sullivan, the deputy chief executive of the council.

To strengthen their argument against federal oversight, the council cited study made by consultancy firm Port Jackson Partners which estimated cost of delays in approval of large open-cut mines at $10 million a month. However, the government doubts the lack of bias in the report since a director of the consultancy, Angus Taylor, is the pre-selected Liberal candidate for Hume.

Under the proposed regulation, the water ruling would affect 53 per cent of Australia. These are tracts of land classified as CSG or coal exploration zones. Supporting the planned legislation is the Nature Conservation Council of NSW.

"If the minister is serious about protecting water resources from harmful mining and gas developments, he must examine the water impacts of major projects that have not yet received the full final approval," said Pepe Clarke, chief executive of the conservation council.

The Coalition opposed the additional powers for the Gillard government. Ian Macfarlane, the spokesman of the Coalition for energy and resources, said Mr Burke is already involved in project approvals and there is no need to expand federal powers. He added the expansion could be unconstitutional.

But independent MP Tony Windsor defended the plan and debunked the Opposition's claim that the planned move is against the charter. He insisted the planned legislation would be a win for water and for farming sectors that rely heavily on water.

Ahead of the planned law, Metgasco, a CSG company, placed on hold its operations in the NSW northern rivers region and blamed the uncertainty created by the state government for the move. The company owns exploration licenses in regions around Lismore, Grafton, Casino and Murwillumbah in the Clarence-Moreton basin and encountered community protests against its drilling activities.

Peter Henderson, Metgasco managing director, complained the CSG industry in NSW has suffered for 18 months of closure during the state government review which led to the establishment of regulations considered the toughest in Australia and the world. But after five months, the NSW government announced new rules without consulting stakeholders.

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