NSW Premier Gladys Berejiklian has defied pressure from Prime Minister Malcolm Turnbull to embrace controversial gas exploration, saying her state is "not budging" on the politically charged issue.
Speaking after a Council of Australian Government meeting in Canberra on Thursday, the Prime Minister stepped up pressure on his Coalition counterpart to approve the much-disputed $3.6 billion Narrabri Gas Project project by energy giant Santos, saying it would go a long way to helping meet a predicted east coast gas shortfall.
"[The project] is currently going through the planning process. What we would look forward to is that planning process being completed," Mr Turnbull said.
"The extra ... 58 petajoules [of gas produced per year] would make a very significant difference in supply and ... price is a function of supply and demand."
Speaking earlier in the day, Ms Berejiklian said NSW was "not budging" on its gas stance, a position she re-iterated following the leaders meeting.
"We've identified in NSW those parts of the state which are not appropriate for gas exploration and identified those parts of the state which are," she said.
"We've worked hard to get that balance right... I think it's important for us to have a holistic national approach to energy issues."
Farmers and regional communities hold grave fears about gas development contaminating air and water supplies. Coal seam gas was a defining issue of the 2015 NSW election campaign and a backlash against the gas mining cost the Nationals a seat to the Greens as well as generating large negative swings in the north of the state.
Mr Turnbull's insistence NSW should approve the Narrabri Gas Project comes despite advice from the government's own Independent Expert Scientific Committee, which found the plan potentially underestimates effects on groundwater-dependent ecosystems.
A report in June, co-commisisoned by the federal Department of the Environment and Energy, found "knowledge gaps, uncertainties and data limitations" in the environmental impact statement supporting the 850-well project.
The experts had "low confidence in the water balance modelling" provided by Santos.
It said monitoring and management plans for surface water, groundwater and waste management were "inadequate".
Lock the Gate Alliance spokeswoman Georgina Woods said Mr Turnbull had been "hoodwinked by Santos".
"[The Prime Minister is] pushing for quick and dirty approval for a high risk and expensive coal seam gasfield despite serious risks and gaps being highlighted by the government's own Independent Expert Scientific Committee," she said.
A Santos spokeswoman said it was working through the approvals process with the NSW government.
"Santos welcomes the review of the Narrabri Gas Project EIS by the Independent Expert Scientific Committee and we recognise the important role this part of the assessment process will play in ensuring a robust and thorough assessment," she said, adding Santos would address the concerns of the committee.
Speaking ahead of the COAG meeting, Victorian Premier Daniel Andrews also rejected calls from Mr Turnbull to lift a gas moratorium in his state.
"There is sufficient supply, the problem we've got is that Australian gas is not being used for Australian households and Australian businesses first," he said.
"You can buy Australian gas in Tokyo cheaper than you can buy it in Melbourne."