The peak national advisory body on water issues has warned the coal seam gas industry could have a "significant" impact on surface and groundwater if not managed properly.
National Water Commissioner Chloe Munro on Friday called for improved management of the fledgling industry, which farmers and green groups say should be subject to a moratorium until problems are resolved.
"The commission acknowledges that the coal seam gas industry represents a significant economic opportunity for Australia," Ms Munro said, releasing a position statement on the issue.
"However, we also recognise that if not adequately managed and regulated, the industry risks significant, long-term and adverse impacts on surface and groundwater systems."
She said an "adaptive and precautionary management approach" was needed.
The commissioner said the main risks included: the large volumes of water being extracted; the depressurisation of coal seam aquifers; and the disposal of large volumes of treated wastewater.
She said the commission believed coal seam gas developers should operate under the same rules as other water users.
Every project should clearly spell out the environmental, social and economic risks and a plan to manage these risks, she said.
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