The states are rejecting calls from Malcolm Turnbull to relax restrictions on gas development as Australia faces a projected shortfall.
The Prime Minister received two reports on Monday showing the expected shortfall in gas for 2018 is more than three times larger than forecast earlier in the year.
He has threatened to trigger gas-export controls if exporters fail to make more supply available locally.
Mr Turnbull also has the Berejiklian government in his sights, criticising NSW for not moving quickly to approve the Narrabri Gas Project.
But NSW Resources and Energy Minister Don Harwin rejected Mr Turnbull’s criticism, telling The Australian the state had more projects in the pipeline than any other state.
The state government has identified new areas for exploration but it would take years to yield while the Narrabri project has faced strong opposition from farming and environmental groups over the controversial practice of fracking.
The state has a ban on coal seam gas near residential areas, horse studs and wine centres.
Victoria and the Northern Territory also have bans in place on fracking.
Victoria’s Resources Minister Wade Noonan hit back at a letter from Mr Turnbull on Tuesday, insisting the state’s ban on fracking is legislated and supported by every political party.
“Our agricultural sector is very important to the Victorian economy and simply attacking the states such as Victoria is not showing any leadership on Malcolm Turnbull’s behalf,” he told ABC radio.
The Business Council of Australia believes the shortfall problem is due to the states restricting supply.
“Unless we fix that problem we’re not going to fix the entire problem in the medium term,” the council’s chief Jennifer Westacott told ABC radio.
“The Commonwealth has to look at the means by which it can actually exert pressure on the states.”
Mr Turnbull spoke with gas companies on Monday and will talk to their bosses again during the week, seeking concrete plans on how they will avoid running out of gas for the domestic market.
If they don’t produce satisfactory suggestions, Agriculture Minister Barnaby Joyce is prepared to pull the trigger on gas export controls.
“They can fix up the problems for themselves or they can have us try and fix them up for them,” he said.
“It would be a lot smarter if they fixed them up for themselves.”