Synthetic gas producer Carbon Energy Ltd (ASX: CNX) said on Friday that it is willing to accept any requests for environmental study on its Queensland facility as the state's Department of Environment and Resource Management (DERM) had hinted that it may ask for an environmental evaluation of the company's Blookwood Creek underground coal gasification (UCG) trial plant.

Carbon's plant is near Dalby and west of Brisbane and the company said that it currently employs the UCG technology, which burns coal underground and utilises heat, high pressures and water to spawn synthetic gas.

DERM ordered on Thursday the closure of Cougar Energy Ltd's (ASX: CXY) Kingaroy plant following findings that the facility's underground water carries traces of benzene, a known carcinogen and toluene, a toxic chemical.

The agency also ordered Linc Energy Ltd's (ASX: LNC) UCG trial plant in Queensland to be submitted for environmental assessment as DERM noted that both companies are in the forefront of the emerging UCG industry.

On its part, Carbon said that DERM could expect full cooperation from the company as it has been assured that the evaluation should be taken "as a precautionary measure in light of its concerns in relation to Cougar Energy that uses its own alternative UCG technology."

The company said that it is in constant communication with DERM officials as it stressed that "Carbon Energy has complete confidence in the CSIRO-researched technology used at Bloodwood Creek and in particular in the integrity of the environmental systems and processes used at the plant."

DERM said that Carbon failed to report the leak of contaminated water from its facility to a nearby creek last year though the company clarified that only a small amount of processed water was discharged and it was immediately cleaned up, as it stressed that "the water released was surface water and was in no way connected to the water table."

In light of the emerging questions on the UCG technology, investors started selling off their Carbon and Linc shares while Cougar shares entered a trading halt pending the release of its official statement on the matter.

As of 1354 AEST on Friday, Carbon shares were trading at 34 cents, losing 5.5 cents while Linc shares were trading at 8.5 cents.