CSG buy-back could protect Sydney water

The NSW government has earned a pat on the back from conservationists after announcing an extension of its CSG buy-back scheme.

The Baird government announced on Wednesday it will extend its buy-back scheme for Petroleum Exploration Licences (PELs) for a further three months.

This means the state government now has an opportunity to protect Sydney's drinking water supply from coal seam gas (CSG) development once and for all, the Nature Conservation Council says.

Campaigns director Daisy Barham says the government can now purchase and cancel CSG licences such as PEL 2, which covers almost 8000 square kilometres from the Illawarra, through Sydney's water catchment and up to the Central Coast.

"PEL 2 expired in 2011, but the government is actively considering renewing the licence, which is currently held by AGL," Ms Barham said in a statement.

"The Baird government does not have to, and should not, renew this licence because CSG development in Sydney's drinking water catchment is simply too risky."

Ms Barham said the PEL should never have been issued in the first place because of the risks to water security and the public health of Sydney's four million people.