In the latest ploy to try to chase Santos out of New South Wales, where it remains the only advanced CSG concern along with AGL Energy's production at Camden, LTG's contribution to public submissions on Santos' proposal, which closes tomorrow, said the oiler was exploiting a loophole.

Santos would not give a statement to Energy News as the activist group is effectively attacking a NSW government loophole.

However, the Adelaide-based company contends it is only doing what the government has allowed it to do, and in a more green way than the alternative: flaring off the gas.

Santos' overall Narrabri project is still in the exploration phase, and the oiler needs to lodge an application and Environmental Impact Statement with the NSW Department of Planning to apply for production in the Gunnedah Basin.

However, it has approval to send captured gas from its assessment lease for use in its nearby Wilga power station.

Santos has an application with the NSW Department of Planning and Environment to allow for gas from its Petroleum Exploration Licence 238 to be used at the Wilga Power Station, which was originally built by Eastern Star Gas to develop a small conventional gas field nearby.

This is still being assessed by that department.

LTG is right that Santos is exempt from paying royalties, as it already had a development consent from the Department of Planning before NSW removed the royalty exemption clause via legislation in 2012, and from 2013 all companies need to pay royalties unless they have a specific exemption.

Santos' development consent allows it to use gas from PAL2 until next year, or three years from the development of any newly approved well.

Under last December's legislation, petroleum operators are able to capture and use gas that would otherwise have to be flared or released into the atmosphere, known as "beneficial use".

Approval for more exploration wells would need to be granted and would need to be in line with exploration activities and not production activities as being suggested.

A spokesman for NSW Minister for Industry, Resources and Energy Anthony Roberts told Energy News that the cost of developing additional wells and infrastructure and gaining approval for this activity would not be offset by the savings.

"To establish beneficial use, prospecting operators must now obtain an appropriate approval (called an activity approval) from the Division of Resources and Energy, and can only undertake this activity for 1000 days, per well, in total," the spokesman said.

"The use of this gas is subject to the payment of a royalty.

"In assessing applications for activity approvals, DRE considers a range of factors, including whether the activity proposed is genuine exploration that is consistent with the operator's approved work program."

DRE also conducts an environmental assessment.

Other approvals may also be required from the Department of Planning and Environment for pipelines and other infrastructure required in order for the gas to be put to productive use.

"Even if the operator has the correct approvals in place, it may not be economically viable to use the gas at the stage of prospecting," the spokesman added.

"Royalties must be paid on the gas that is used, unless the recovery and use of gas during prospecting is authorised by a relevant development consent."

LTG Alliance NSW coordinator Georgina Woods, who prepared its submission against Santos' proposal, said there was "little to no information" being provided about how Santos was able to jump through the loophole.

"We don't know how much gas they plan to burn, or if it would all otherwise be flared or released," she said.

"We don't know how much clearing they plan to do in the forest to pipe the gas to the power station.

"We don't know whether Santos intend to keep on expanding their ‘exploration' for CSG in this way and bypassing environmental laws and royalty requirements, all with the blessing of the NSW government."

She claimed there was "broad and growing" opposition to CSG in NSW' North West due to fears of environmental risks, and said it was "frankly shocking" that the NSW government had left the "gaping loophole" open.

"This looks like a devious sleight of hand by Santos and the government to bypass broad public opposition to CSG in this region and across the state by allowing widespread CSG production to creep and spread through the Pilliga forest with little to no public scrutiny or environmental assessment," she said.

"This application has exposed a gaping hole in the laws around CSG that needs to be closed right away. Planning Minister Rob Stokes must reject this application and make sure that the Pilliga cannot be industrialised by stealth.

"Let the public see Santos' CSG plans and judge them on their merits."