Natural Resources and Mines minister Stephen Robertson said there was a variety of uses identified which could make the growing coal seam gas industry more sustainable and stimulate new complementary industries in south-west Queensland.

"The Surat Basin has the potential to become one of Queensland's most important energy resource provinces but water is a very scarce in the south west," Robertson said.

The water could supply industry and communities including Murilla, Wambo, Chinchilla and Dalby Town shires.

While unsuitable for domestic use the water could be used in industrial applications including coal mining and water cooling.

The Queensland government is now in consultation with industry and stakeholders and conducting further feasibility work.