The state government's new coal seam gas restrictions have hit projects valued in the billions of dollars, leaving gas industry workers and landholders poring over maps to work out which gas fields are off limits.
The massive western Sydney gas expansion has been scuppered and about a quarter of the Hunter Valley is now excluded from drilling by the new rule preventing coal seam gas activity within two kilometres of homes.
But a major gas field where AGL plans at least 110 wells near Gloucester, north-west of Newcastle, will be allowed to proceed because a conditional approval had already been granted.
''If you have a petroleum exploration licence and a DA approved now, there is nothing we can do about it,'' the Premier, Barry O'Farrell, said. ''But if you have an [exploration licence] and no DA approved, it stops today.''
Mr O'Farrell said details of how the rules would be applied will be put out for public comment in two weeks and should be in place within four to six weeks.
He rejected suggestions the announcement was driven by political concerns following threats by the federal Environment Minister, Tony Burke, to use federal powers to intervene in the state approval process before the September 14 election.
''I've not had a single conversation with a [member of the federal opposition] about these matters in the lead-up to these decisions,'' Mr O'Farrell said.
The Planning Minister, Brad Hazzard, said deciding how to define what is a residential area was ''one of the greatest challenges I have''.
The announcement received a mixed reception in the Coalition joint party room, sources said, and some National MPs questioned why farmland would not be protected in the same manner as urban areas. But the upper house Liberal MP Peter Phelps said he was concerned that the government had ''caved in'' to anti-coal seam gas campaigners.
The ruling appears to cut across dozens of districts that are subject to gas drilling licences, but some will remain largely untouched.
''With 40 per cent of the state under licences granted by the failed former government there are still plenty of areas of NSW well away from strategic lands, from residential zonings and critical clusters that the industry can and should develop,'' Mr O'Farrell said.
AGL said the situation for the industry was ''disastrous'' and the changes appeared to be arbitrary.
''If I look at investments that have been made and the potential future investments that have been potentially taken off the table then you could be talking a couple of billion dollars worth of investment,'' AGL's chief executive, Michael Fraser, said.
Metgasco, which has talked up the possibility of gas drilling worth $2 billion in several sites across northern NSW, told the stock exchange the changes could have a ''significant impact'' on its plans.
Large portions of the company's maps cover areas that are within the two-kilometre buffer zone around houses.
Dart Energy's drilling operation at Fullerton Cove, near Newcastle, is now unlikely to proceed because of the buffer zone.