Federal Industry Minister Ian Macfarlane has indicated he will try to break down barriers to coal seam gas development in NSW, before a state government energy summit in Sydney on Thursday.

As the NSW government comes under increased pressure to relax proposals to rule out coal seam gas drilling, Labor will on Thursday give notice of a bill to be introduced to State Parliament next month. If adopted, it would ban coal seam development in Sydney Water catchment areas.

Opposition Leader John Robertson said the proposed bill would protect drinking water from the impacts of coal seam gas activities.

''It makes no sense that we ban people from walking through special areas in our water catchments because of the risks posed to water quality, but then allow coal seam gas activities in those same protected areas,'' he said.

Two years before the Coalition government's election in 2011, Mr O'Farrell said the next Liberal Nationals government would ''ensure that mining can't occur in any water catchment area''.

In April the Liberal MP for Kiama Gareth Ward said he believed ''CSG extraction in water catchments should be banned''. In July the Liberal MP for Wollondilly, Jai Rowell, said: ''There shouldn't be coal seam gas drilling in the water catchment areas in Wollondilly''.

Nature Conservation Council of NSW campaigns director Kate Smolski welcomed NSW Labor's plan to introduce a bill to ban coal seam gas operations in core areas of Sydney's water catchment.

"The ALP's commitment … is a very welcome first step to giving Sydney's drinking water supply the protection it deserves,'' she said.

NSW Minister for Resources and Energy Chris Hartcher said the state was determined to address the issue of future gas supply and NSW energy security and will be working with all stakeholders at Thursday's summit to identify and agree on the major energy challenges. He said existing laws offered protection to water catchments. ''This is absolute hypocrisy from a Labor party who, when in Government, approved and renewed coal seam gas exploration licences with no community awareness or input, with no concern for agricultural or environmental impacts, and with no consideration of any potential impact on our water catchments,'' he said.

Attending the meeting will be Mr Macfarlane, the state's chief scientist, Professor Mary O'Kane, representatives of industry lobby groups, the head of Snowy Hydro, Paul Broad, and union representatives.

''Addressing the possibility of a gas shortage in NSW is one of the most important priorities.'' Mr MacFarlane said. "Australia is an energy and resources superpower and the challenge now is to make sure the opportunities in this sector extend to NSW.''