Bruce Barbour has also suggested a levy incorporated into activity licence fees could be used to ensure the government has adequate resources to regulate the industry and enforce conditions.

In a submission to a state parliament inquiry, Mr Barbour said his office had looked into several incidents at coal seam gas sites in NSW and found there was a "lack of clarity" around the intersecting roles of different government agencies.

As well, the state had fewer than 20 inspectors in the Office of Water to ensure compliance and enforcement of all regulations in relation to water.

"Given the breadth of responsibilities and the geographical spread of water-related matters across NSW, it is difficult to see this as adequate for ensuring appropriately robust compliance and enforcement," Mr Barbour said.

The Department of Trade, Investment, Regional Infrastructure and Services was "advocating for businesses and industries across the state while, at the same time, being an independent arbitrator of regulatory issues in relation to those same industries".

The Office of Environment and Heritage and the Office of Water were also involved in compliance and enforcement activities for environmental incidents, but their roles in relation to coal seam gas sites were not clear, Mr Barbour said.

"Our inquiries suggest that despite being the environmental regulator, the (Environmental Protection and Regulation Group in the Office of Environment) has only an advisory role in regard to coal seam gas environmental issues," Mr Barbour said.

A spokeswoman for Environment Minister Robyn Parker said the office had given advice for 25 assessments of coal seam gas exploration activities this year, and would regulate the environmental protection licences of coal seam gas field production and treatment sites.