Proposed exclusion zones on coal seam gas (CSG) activity in and around NSW's residential areas has done little to quell the concerns of farmers, who say prime agricultural land remains under threat.

Planning Minister Brad Hazzard announced on Thursday that NSW planned to introduce the "toughest CSG controls in Australia" by extending the two-kilometre exclusion zone around residential areas.

New CSG projects could also be banned from future growth areas in 56 council areas across NSW.

CSG no-go zones are proposed to take place in newly-mapped critical industry clusters, which include more than 460 viticulture and 290 equine properties.

"Ninety-five per cent of all residential properties across the state in cities, towns and villages are now protected," Mr Hazzard told AAP.

"This is completely different from every other state in the country."

The changes would ensure that new CSG activity would not occur in areas that "should be absolutely safe-guarded", he said.

The minister denied the announcement was an indication the government wasn't sure the industry was safe.

"The community at this point have wanted no CSG in residential areas and we are listening to what the community says."

But the NSW Farmers Association (NSWFA) have raised serious concerns over the ability of the government's proposed `Gateway Process' to protect prime agricultural land from mining.

Under the process, a panel of scientists, engineers and groundwater experts would assess CSG projects.

NSWFA Association President Fiona Simson claims the panel lacks teeth.

"If the panel is not empowered to recommend that a particular project should not proceed, their expertise and experience are not being fully utilised," she said.

Meanwhile, the Australian Petroleum Production and Exploration Association (APPEA) said the government was once again sending the message that it does not welcome development.

But Premier Barry O'Farrell believes the government has struck the right note.

"Today we have both farmers and miners criticising the government's moves," he told reporters in Sydney.

"It sounds as though we've achieved the balance we want, and no system's ever perfect."

The news comes amid increasing pressure from the federal government for NSW to boost CSG production.

Last week Federal Resources Minister Ian Macfarlane announced he would be forming a committee of stakeholders, including farmers and gas producers, in a bid to solve "the NSW gas challenge".

He claimed that unless the industry was kick-started, thousands of jobs in the industrial sector would be lost between Newcastle, Sydney and Wollongong.

State Opposition Leader John Robertson has said he would be tabling legislation this month seeking to ban all CSG activity in Sydney's core water catchments.

Australian Industry Group chief Innes Willox said it was unfortunate NSW had decided to proceed with the "most restrictive elements" of its proposed CSG regulations.

"The NSW (policy) announced today goes well beyond what is needed by excluding large tracts of the state's best energy resources from development," he said in a statement.