The Victorian government has delayed until 2015 at the earliest - well after the next state election - any consideration of the development of unconventional gas reserves in the state, amid concerns over an electoral backlash on the issue.
A report by a taskforce led by former federal minister Peter Reith on the role of unconventional gas was released on Thursday, with the Victorian Premier, Denis Napthine, saying there would now be a period of public consultation on the issue, which has extended the exploration moratorium beyond the November 2014 state election.
Unconventional gas is being tapped in Queensland to supply several gas export projects , with oil companies now expanding their hunt to the Cooper Basin in central Australia, along with areas in the Northern Territory.
In NSW, after an effective moratorium since the 2011 state election, a limited amount of exploration and development work is being started by Santos, near Gunnedah in the north-west of the state and near Scone, north of Newcastle.
The debate over tapping unconventional gas reserves comes amid surging demand for gas to supply the Queensland export projects that is driving up domestic gas prices.
"The [Victorian] government has got a major problem," the chairman of Lakes Oil, Rob Annell, said.
"The gas price will probably double. The Liberals and Labor are already fighting the next election."
Gas exploration would also reduce rural unemployment, he said.
The taskforce said communities should be offered a share of the benefits of an unconventional gas industry through a "royalties for regions" program, and the compensation limit for loss of amenity should be doubled to $20,000.
To allay concerns at the potential impact on water aquifers of tapping coal seam gas, the taskforce called for an independent assessment of water resources in affected areas, while also calling for bans on hydraulic fracking to be removed.
"The decision taken by the Victorian government is an extraordinary rebuff of the [Reith] review that will further delay diversifying the development of natural gas resources ... and it will result in higher than necessary energy prices," said Paul Fennelly, chief operating officer for eastern Australia with oil and gas lobby group APPEA.
"The Victorian government is paying more attention to short-term politics than science-based evidence and is clearly not displaying enough focus on attracting investment and building the economy."