The Kingaroy Concerned Citizens Group says a Western Australian company has permission to conduct exploration work in urban areas.

Spokesman John Dalton says no one can believe the State Government granted the exploration permit.

"Either the Government has a compelling reason for that decision - which it is unable to convey to Kingaroy residents - or else it issued the permits without realising it included urban areas of the town itself," he said.

Mr Dalton says the developments are troubling for the residents of Kingaroy in the light of the recent Cougar Energy contamination scare.

Cougar's pilot underground coal gasification (UCG) project near Kingaroy was ordered to shut down after carcinogenic chemicals were found in water supplies.

"The discovery that the Queensland Government has issued permits right into the centre of town has heightened concerns," Mr Dalton said.

"Little regard is being given to the people who are obviously most affected by these UCG operations."

The State Government has imposed a moratorium on new UCG projects until the safety of the industry can be established.

A meeting attended by about 150 angry landholders last week accused Mines Minister Stephen Robertson of not properly regulating the new gas industry.