Synthetic gas producer Cougar Energy Ltd (ASX: CXY) announced on Tuesday that a workable deal has been struck with the Queensland state government over the company's shuttered underground coal gasification (UCG) facilities in the state's South Burnett region.

Cougar's UCG plant in Kingaroy was ordered closed a few months back on allegations of water contamination incidents but subsequent government tests have largely established that the project is free from elements of contamination.

However, the state government has maintained its earlier ruling of shutting down the UCG project as it asserted that Cougar has been withholding some significant information necessary for a complete environmental assessment of the project.

On its part, Cougar Energy said that negotiations conducted with state authorities have mostly addressed the contentious issues of the project as company managing director Dr Len Walker added that they had proposed the installation of four new monitoring bores "within the pilot plant area and we will be going ahead with those as quickly as we can."

Mr Walker also said that "the department was requesting more information in relation to the installation of the new bores and in particular measures we'd taken of mitigating any risk of the same problem occurring as it occurred with our first production wells."