The Minister made the announcement today along with a renewal of AGL’s Gloucester Petroleum Exploration Licence (PEL) 285 for six years.

Last September AGL applied to frack four existing wells, known as the Waukivory Pilot Project, within PEL 285.

Mr Roberts said the Office of Coal Seam Gas (OCSG) granted an activity approval for the project and had approved AGL’s Fracture Stimulation Management Plan.

AGL’s managing director and chief executive officer Michael Fraser said the Waukivory Pilot was an important step in the development of the Gloucester Gas Project.

“We welcome these approvals from the NSW government. At present NSW produces less than five per cent of its own gas and imports the rest from interstate. However if the Gloucester Gas Project proceeds, we have the potential to bolster that locally produced gas figure to around 20 percent,” he said.

“Stage one (of the Gloucester Gas Project) has already been through a full environmental assessment and received approval from the independent NSW Planning Assessment Commission. That approval was upheld by the Land and Environment Court. Stage one is also the subject of Commonwealth approval.

“All of the natural gas produced from the Gloucester Gas Project is for NSW customers and will not be exported.”

The OCSG obtained advice from the Environment Protection Authority (EPA), the Office of Environment and Heritage, the NSW Office of Water, the Department of Primary Industries and an independent expert in making its decision.

It also considered submissions from the Gloucester Groundswell community group, which is opposed to the AGL operations.

"The NSW government has treated the Gloucester community and Manning Valley communities with utter contempt," Groundswell Gloucester chair Julie Lyford said.

"The complicit and underhanded approval of the Waukivory Pilot fracking program and the immediate ability of AGL to start the fracking process of four CSG wells close to homes and dairy farms is an outrage.

"The State government changed the planning rules to allow this, with no community input, in what has been a shocking abuse of community democracy

"No one voted for the Office of Coal Seam Gas but it seems they wield the power after Minister Robert's declares this decision is at 'arms length to the government and OCSG and EPA are the deciding authorities' ... collusion with resource extraction companies will be exposed as will the secrecy and unwillingness of the NSW State government to allow proper transparent process."

Groundswell has been highly critical of the NSW government and the OCSG during the decision-making process.

It was scathing of the decision to alter the State Environment Planning Policy (SEPP) allowing AGL to conduct fracking without completing a full environmental impact study (EIS).

After taking submissions on the amendment, the government gazetted the change to the SEPP within nine days.

Groundswell’s John Watts said the change had been designed specifically to enable AGL to fast-track its fracking and minimise public scrutiny.

“There has been a complete lack of openness and transparency in relation to the whole AGL CSG project and these changes are just one more disturbing example,” he said.

“It seems that the government and AGL are working hand in glove and ignoring the interests of the Gloucester community.”

Earlier today (Wednesday), before Minister Roberts' announcement, Groundswell posted this on its website: ‘it seems like it is going to be a busy time here in Gloucester. We have heard that the NSW government (Office of Coal Seam Gas) is about to give AGL approval to frack the four CSG wells in the Waukivory pilot program. Not only that, it appears that AGL is going to be given 48 hours notice before the decision is made known to the public. We presume this is to give AGL time to get organised before any protesters-activists arrive’.

AGL’s application to frack included a Review of Environmental Factors, an Agricultural Impact Statement and a Fracture Stimulation Management Plan.

A Groundwater Modelling and Monitoring Plan as well as a Produced Water Management Plan must still be completed, Mr Roberts said.

“AGL must comply with the NSW government’s Code of Practice for Coal Seam Gas Fracture Stimulation Activities and Code of Practice for Coal Seam Gas Well Integrity,” he said.

“The NSW Chief Scientist and Engineer Professor Mary O’Kane provided independent comment and recommendations on the draft codes, based on advice from the expert reviewers.”

The Greens spokesman on mining Jeremy Buckingham said the decision was a major blow for Gloucester residents.

“Coal seam gas activity is banned within 2km of urban areas, however, AGL has been given permission to frack within a few hundred metres of houses at the outskirts of town,” he said.

“This is a clear signal that the Liberal and National parties are pro-fracking and pro-coal seam gas.

“This is a dark day for NSW with the Baird government giving the green light to fracking once again, including near people’s homes.

“It’s outrageous that the people of Gloucester will have fracking within a few hundred metres of their homes, while people in Western Suburbs enjoy a 2km buffer.

“The community is overwhelmingly opposed, the scientists have warned of contamination of groundwater and the Manning River and there is no clear plan to dispose of waste products.

“The local community will blockade fracking in the Gloucester Valley, just as they resisted at Bentley in the Northern Rivers and elsewhere.”

Groundswell Gloucester chair Julie Lyford has called on opponents of AGL's project to rise up against the decision.

"We call on the Baird Liberal government to halt the fracking of the beautiful Gloucester valley and await the reports from the NSW Chief Scientist, the Independent Expert Scientific Committee and other significant reports," she said.

"The fact that they are ignoring very serious, professional and highly credited scientific voices across Australia and disregarding all of the major findings around the world about the dangers of CSG extraction is breathtaking. 

"Culpability will be uppermost in the minds of communities when inevitably things go irreparably wrong.

"But it will be too late for our ecosystem, water and the future of this fantastic valley.

"If the people of NSW accept this type of behaviour from their government then it is a sad indictment of the state of democracy. 

"330 fracked coal seam gas wells will criss cross the landscape and destroy this productive farmland and iconic valley. There will be no dairy industry as around the world no one wants to drink milk from a polluted irrigated fodder source.

"We call on the people of NSW to join us in Gloucester to peacefully show that we will not be bullied by industry and government and allow their greed and arrogance to destroy our water resources, our land, air and health."

Mr Roberts said the renewal of AGL’s exploration licence for six years had also been based on a rigorous assessment by the Office of Coal Seam Gas (OCSG).

“The OCSG recommended the renewal of PEL 285 due to AGL’s performance in relation to compliance, environmental performance, safety, its financial and technical capacity and its high level of community consultation,” he said.

“As part of the renewal, AGL will relinquish 25 per cent of its PEL area.

“AGL must meet the NSW government’s strict licence conditions in relation to community consultation, groundwater monitoring and modelling, produced water management, well integrity and fracture stimulation.”

The OCSG commissioned an independent expert assessment of the design component of the Fracture Stimulation Management Plan that declared AGL had met the mandatory requirements of the Code of Practice and that the design components were competent.

“Fracture stimulation fluid is made up almost entirely of water and sand, 99 per cent on average. Water not only creates small fractures in coal to release natural gas, it also delivers sand, which keeps the newly created fractures open so that gas can flow from a coal seam into the well,” Mr Roberts said.

“The small amount of material that remains in the fracture is an additive to control the growth of bacteria in the well.

“In NSW, all chemicals involved in the fracture stimulation process must be identified, including the volumes and concentrations to be used, as part of the Fracture Stimulation Management Plan.

“The 10 chemicals to be used in this fracture stimulation are also used in most households, such as in food additives, soaps, detergents, hair products, cosmetics, medications and preservatives.”

Mr Roberts said that if AGL failed to comply with the conditions of approval it could result in a fine of up to $1.1 million.