CSG mining in forest under review: Santos

Mining giant Santos says it is reviewing coal seam gas (CSG) mining plans for the Pilliga State Forest, including the proposal to drill 1100 wells.

It has also hit back at criticisms that taxpayers were getting little out of the deal, saying mining royalties would earn the government millions.

It was revealed on Tuesday that the former Labor state government signed an agreement with Eastern Star Gas in February 2011 - which gave permission for the mining company to access the forest in NSW northwest until 2040.

When Santos bought Eastern Star Gas in November it inherited the agreement.

The deal came under attack from the NSW Greens, after they discovered Santos would pay $2500 per year to the state government for every active CSG well in the forest.

"This revelation shows how little NSW taxpayers are getting for the massive amount of damage this industry is doing to the Pilliga Forest and potentially our waterways and aquifers," NSW Greens MP Jeremy Buckingham said in a statement on Tuesday.

"Santos stand to make billions by pock-marking the Pilliga forest with gas wells if its proposal for 1100 coal seam gas wells is approved."

But Santos said the $2500 was simply a land access fee and would be dwarfed by the millions in royalties it would be expected to pay.

"If we develop our NSW CSG business successfully, Santos estimates these royalties will exceed $150 million a year over more than 20 years," Santos said in a statement.

Santos said it was reviewing all aspects of Eastern Star operations in the forest, including the number of proposed CSG wells.

The company, which is currently at the exploratory phase in the area, will need to submit a successful application to the NSW Department of Trade and Investment before it can mine.

CSG mining has come under fire due to fracking - the controversial process in which water, sand and chemicals are injected into the ground at high pressures to create fractures in the rock and draw out gas.

On Monday it denied reports that a leak from that site was killing local trees.