Some authorities have accused Australian gas companies of cooking up a domestic gas crisis to pressure governments for more approvals.

The Australia Institute says it has repeatedly shown the lack of crises in Australian gas, and that the reaction to new CSG restrictions this week shows gas suppliers are digging out their favourite argument.

The comments come as the New South Wales Government announces over 5 million hectares of residential and agricultural land will be protected from new coal seam gas extraction activities.

The details come from the unveiling of NSW’s new planning and protection scheme, which is set to provide a two-kilometre buffer zone around residential areas and exclude nominated horse-breeding and wine-making land from CSG activity.

New South Wales has been working on its new policy for nearly a year, and is still waiting on input from Chief Scientist Professor Mary O'Kane before compiling its final report on human health and environmental impacts of CSG.

Companies engaged in the sometimes controversial method of resource extraction will not be thrilled at being locked out of large tracts of land, but that does not mean NSW or any other state is running low, the Australia Institute’s Matt Grudnoff says.

“They know that they'll get a higher gas price overseas,” he said.

“We live in a market economy and it's completely reasonable for the gas industry to decide it wants to sell overseas.

“But what's not reasonable is then making up a gas crisis in order to put pressure on Australians, in order to allow them to use what is a potentially dangerous extraction process to get more gas so they can make larger profits.”

“The reason that there is even the potential for a gas shortage is because right now under construction in Gladstone is a very large liquification plant that is basically designed to export gas overseas.”

“So the challenge for the New South Wales Government, and the disappointing aspect of this from [the petroleum industry’s] perspective, is that they're overlooking the need to encourage exploration, the need to be finding new fields, and to developing its own reserves in New South Wales to secure energy for the future of the New South Wales people.”

The Australian Petroleum Producing Exploration Association (APPEA) is strongly opposed to the idea of putting aside reserves for domestic use.