The NSW Environmental Defenders Office has started legal proceedings on behalf of People for the Plains to challenge the gas producer's approval to build a water treatment facility at Leewood, a property on the Newell Highway 24km south of Narrabri that Santos owns with its joint venture partner, privately owned utility EnergyAustralia.

The two double-lined 300 megalitre storage ponds, built as part of the first phase of work at Leewood, now hold most of the water extracted during Santos' exploration and appraisal program, as well as legacy brine from previous operations.

Funnily enough, the Santos team received a Highly Commended award at the 2015 Northern Inland Innovation Awards held in Glen Innes last month for its "state of the art" water holding ponds.

Santos' general manager of energy NSW, Peter Mitchley, said the Leewood ponds were designed and constructed to "the highest standard".

"We have employed state of the art engineering practices in building our water holding ponds at Leewood," he said.

"This award is a strong reflection of the high standard of all of our facilities.

"I am incredibly proud of the team for the work they have put in to ensure the Leewood ponds are first class, but I am also incredibly proud of the way in which they go about our activities each and every day as we work to develop the Narrabri gas project."

Santos' Leewood Phase 2 involves construction of a water treatment facility, including a reverse osmosis plant and brine concentrate, associated pipework to transfer water and brine around the facility, treated water storage and a treated water irrigation system - all to be completed in 12 months.

NSW's Office for Coal Seam Gas - the state's "one stop shop"- approved Phase 2, which is the exploration and appraisal program, in August.

However, People for the Plains says the reverse osmosis plant, which would be used for irrigation supplies, should not have been approved through the Mining Act, but under the Planning Act, claiming that it has nothing to do with CSG operations.

Santos argues that the water actually comes from a CSG field, and that the plant is the best solution to the problem of salty water.

With CSG such a contentious issue in NSW, Santos is making the case to the court that it had gone through a more rigorous approvals process, when it would have been much easier to go through the Planning Act.

Instead, Santos went through the processes offered by the OCSG, under which the Office canvassed all relevant government departments including planning, environment and water for their input.

Mitchley told Energy News yesterday that Leewood Phase 2 was approved following a "rigorous and detailed assessment process which was carried out in accordance with the relevant regulatory guidelines".

"We have worked through a number of government departments," he said.

"All of the different government departments were satisfied with the sustainability and safety of the plant.

"They are completely satisfied with the requirements, they are satisfied that it is petroleum activity, it's integral to the extraction of the gas.

"We have applied — like all of our previous activities — through the state for approval, and the different government departments then assess the application on its merits."

Santos says the proposed activity is of low environmental risk, but EDO principal solicitor Sue Higginson said the exemption under NSW planning laws for some CSG exploration works from requiring development consent should not apply to Leewood Phase 2.

"The process that's been applied to this development required a less onerous environmental assessment," she said.

"It also didn't provide for the full public participation that, had it gone through the full and rigorous legal assessment and procedures, we say ought have been applied."

She said the project should have had a "rigorous environmental assessment" through an environmental impact statement with the full public participation rights that go along with it.

"That means the development application should have gone on public exhibition for a minimum of 30 days, and members of the community from all over ought to have been provided the opportunity to make a submission about that development," Higginson said.