A water contamination scare loomed over the South Burnett region in Queensland over the recent closure of Cougar Energy's underground coal gasification (UCG) Kingaroy facility, where testing by the Department of Environment and Resource Management (DERM) showed that water supplies were smeared with carcinogenic chemicals.

Mines and Energy Minister Stephen Robertson said that meetings would be convened in the area to address the problem as he confirmed that he would be present to personally deal with the issue even as Cougar Energy maintained that alarm is unnecessary for now since another water tests conducted last week proved that the initial findings were inaccurate.

However, DERM director-general John Bradley said that the matter is still being investigated as he added that Cougar waited a while longer to notify them on the test results, admitting as well that residents were alerted only on Thursday night.

On his part, Mr Robertson allayed fears as he clarified that the contamination is confined to a small area, stressing that "the levels of benzene and toluene are localised to those bores on Cougar Energy's project and that should be good news for the surrounding landholders around Kingaroy."

He also gave assurance that the government would continue conducting tests to ensure that the incident would be limited on the area and the contamination would remain below Australian drinking water guidelines, adding that "a longer term testing would inform us as to what is required in the weeks, months and possibly years, ahead."

South Burnett Mayor David Carter urged Mr Robertson to meet with residents if only to soothe their concerns as he complained that "the community should have been informed and there should have been a process where the community could have had input into the approval of the project."

He added that the minister should hear the community first hand in order to establish "an information flow between the community and the government and particularly the department and making sure that they understand what the community's concerns are and then actually act on them."

Premier Anna Bligh scored Cougar Energy for its failure to act on the problem appropriately and ordered an investigation to determine if sanctions must be brought forward as she assured Kingaroy residents that "this company will be required to meet the highest standards and if there's any action that we can take against them - and there are very stiff fines available - we will be taking that action."

On the other hand, deputy opposition leader Lawrence Springborg criticise the state government for mishandling the problem and stressed that Mr Robertson and his department should be made to answer for their inaction.

Mr Springborg said that "it should never have taken so long for the company to actually report those results and it should never have taken so long for the department to actually respond to what were concerning results, so there certainly needs to be some review of that."