The NSW Office of Water will use the additional funds, to be spent over the next five years, to install a further 70 groundwater monitoring bores in priority areas such as the Gloucester, Gunnedah and Clarence Morton basins.

"Water is the lifeblood of communities across the state and that is why the NSW government is gathering the information we need to make decisions that ensure our water resources are protected," Kevin Humphries, Minister for Water, Lands and Natural Resources, said.

"While the groundwater monitoring has historically focused on water levels and pressures, this monitoring will be expanded to include water quality information at many more sites across NSW," Mr Humphries said.

Water issues have become central to community concerns linked to new coal mine approvals, such as the Shenhua Watermark open-cut mine given approval by the Planning Assessment Commission last month. Opposition to coal seam gas near Narrabri and Gloucester is also linked to worries about ground and surface water contamination.

"This information will allow people living in areas such as the Gunnedah Basin to monitor and investigate activity within the basin and see how groundwater is responding," Mr Humphries said.

Groups such as Groundswell Gloucester, however, said monitoring alone would not be enough.

"The announcement about more water monitoring bores is just so much window dressing," John Watts, a spokesman for the group, said.

"What the government really should be doing is banning activities such as CSG fracking so that poisoning of the groundwater does not happen in the first place," Mr Watts said. "In the case of Gloucester we know this has happened and AGL's operations should be permanently halted."

The government suspended AGL's Gloucester CSG gas field last month after the company delayed disclosing details of toxic chemicals found at its pilot project for 12 days. Two investigations into the chemical findings are now under way.

Other water initiatives to be launched this month include providing interactive information on surface and groundwater on a new Our Water website.

The government will also make available the entire groundwater data archive through a single online gateway.