AGL has proposed the $300million plant on land off Old Punt Road and has lodged an application with the Department of Planning.

The project includes a processing plant, storage tank for up to 30,000tonnes of liquid natural gas, a receiving station at Hexham to link the project into the state gas network and a pipeline from Hexham to the plant.

In a submission to the project this month, Hunter Water said the development fell within the south-western section of an area that protected the Tomago Aquifer drinking water source. The aquifer supplied 20 to 25per cent of the Lower Hunter’s drinking water.

‘‘ ... new information provided by the applicant indicates that the direction of groundwater flow in the vicinity of this development is directly towards one of the drinking water borelines in the Tomago Aquifer,’’ Hunter Water said in its submission.

The proposed project site was only 500metres upstream.

For that reason, the water authority wanted conditions placed on any project approval including a requirement for a peer-reviewed stormwater management plan, a groundwater monitoring strategy, and a deed of agreement between Hunter Water and the company.

The agreement would relate to the ongoing management of the drinking water aquifer beneath the proposed development.

‘‘Hunter Water considers it a matter of inter-generational equity that should this development proceed it is undertaken with the greatest care and consideration for the groundwater resource and water quality for the region,’’ it said.

The submission also said AGL had acknowledged Hunter Water’s concerns and taken them seriously, proposing a number of design changes to help address the issues.

Some Fullerton Cove residents have raised concerns about potential impacts on the sandbeds, but from Dart Energy’s proposed coal seam gas pilot well project nearby.

Hunter Water has so far said it has no concerns with Dart’s proposal.