Santos Mine informed a Parliamentary inquiry that it will back out of a planned coal seam gas (CSG) pipeline pipeline project in New South Wales's (NSW) central west.

Santos took over the Mullaley pipeline project from Narrabri to Wellington from a smaller firm, Eastern Star Gas, as of Thursday noon. Santos Vice President for Eastern Australia James Baulderstone said the company is reviewing plans for the project and responding to rejection of residents of the pipeline project.

In the same inquiry, the NSW Farmers' Association (FA) aired their objection to the project because of its perceived negative impact on rural life. The group vowed to block similar attempts or proposals unless they are given the power to reject gas extraction ventures.

The group wrote to the 20 CSG companies in NSW to ask them to request the state to pass legislation that would grant farmers the right to reject drilling on any of their land. Current rules state that if there is no agreement over land access, the parties must go through arbitration but landowners have no legal right to say no to CSG exploration.

"We reject the notion that it's somehow fair to be told your options are 'sign this document, or we'll drag you through arbitration and have the arbitrator sign it for you' - that's essentially negotiating with a gun to your head," The Sydney Morning Herald quoted Fiona Simson, president of the NSW FA.

She stressed farmers do not want assurance from CSG firms; rather they want assurances written into law.

Mr Baulderstone said Santos is committed to show through scientific evidence that it could avoid adverse impact of CSG extraction.

"We believe our operations will be shown to enhance rural communities in general and in particular the productivity of landholders who choose to work with us," Mr Baulderstone said.

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