QGC is working with water service provider SunWater, using the plant to test the latest water filtration processes, using by-water from the wells being prepared for gas production.

If the trials are successful, QGC will build a full-scale reverse osmosis plant that could be commissioned by April and supplying water by November next year.

Coal seams in the ground are generally filled with water and the coalbed methane (CBM) – is released when pressure on the coal seam is reduced, usually once water has been removed from the seam.

The water is contaminated by salts and other constituents, making it unsuitable for many uses. The poor quality of the produced water makes its management one of the major concerns associated with CBM development.

But the bulk of Australia’s CBM developments are in dry parts of Australia and CBM producers such as QGC are looking for ways to use their water constructively rather than leaving it to evaporate in storage ponds.

The water could be used for town water supplies, industrial facilities, feedlots and high-value horticultural development in the Darling Downs and Maranoa areas of inland south Queensland, according to SunWater.

QGC has reached in-principle agreement to supply 1000 megalitres a year of town water to the Chinchilla Shire for 20 to 30 years, according to QGC managing director Richard Cottee said.

"If our funding application under the National Water Initiative is successful and the normal State Government water transportation support is available, the supply of 'drought-proofing' water to Chinchilla should commence in the fourth quarter next year," he said.

Agricultural trials are being undertaken to assess opportunities to apply the by-water to irrigated crops. About 20 hectares will be planted with various crops on QGC's Windibri property. The trials will test the effects of the water with and without treatment by reverse osmosis.