The company has applied to the NSW Department of Planning, seeking permission to use the gas from pilot wells to its fuel Wilga Park power station.

But Santos says it is applying to use coal seam gas for something productive, rather than just wasting it by flaring it off.

The company already uses coal seam gas from two of its pilot wells to supply the power station and recent legislation means that can be expanded.

Lock the Gate has urged the government to reject the “sleight of hand” application.

The organisation’s NSW coordinator, Georgina Woods, said exploration projects were not meant to be used for commercial operations.

“Santos is exploiting a loophole that allows the commercial exploitation of CSG whilst calling it exploration,” Ms Woods said.

“This is CSG production by stealth and will allow Santos to get away without paying royalties or preparing any environmental assessment.

“With these regulations, you can set up as many pilot wells as you can get approved, then apply to use them for commercial purposes, all without submitting an EIS or proper scrutiny.

“There could be a full functioning gas field in the Pilliga forest, producing commercial quantities of gas before we know it.”

Santos said using the gas to fuel its power station, rather than flaring it off, had environmental benefits.

However, Ms Woods said there was “little to no information” about how much gas Santos plans to burn, or if it would all otherwise be flared or released.

“On paper it looks better, but we don’t know what the emissions from the wells are versus the emissions from the power plant,” she said.

“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.”

Santos said the Wilga Park power station generated 12 megawatts of power into the electricity network for the local energy grid, which was enough to supply the daily power demands of Narrabri.

A spokesman for NSW Resource Minister Anthony Roberts said petroleum prospecting operators were able to capture and use gas that would otherwise have to be flared or released into the atmosphere for “beneficial use”.

“To establish beneficial use, prospecting operators must now obtain an appropriate approval from the Division of Resources and Energy and can only undertake this activity for 1,000 days, per well, in total,” the spokesman said.

“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.

“The Division of Resources and Energy also conducts an environmental assessment.”