NSW Environment Protection Authority chief executive Barry Buffier on Monday rejected suggestions by upper house Liberal MP Scot MacDonald that the organisation devoted too much effort to regulating coal seam gas, saying the industry posed a significant environmental issue.

Mr Buffier was addressing a parliamentary inquiry into the performance of the embattled authority, which critics claim is too close to polluting industries and fails to properly protect the environment and human health.

The authority's duties in regulating coal seam gas are likely to expand if the government adopts the recommendations of NSW chief scientist Mary O'Kane's landmark report into the industry, which called for improved regulation and monitoring.

Asked whether coal seam gas was a significant environmental issue, Mr Buffier told the hearing that "my assessment would be yes, it is".

"The evidence would indicate that it's what happens with the produced water and the impact on the aquifers, which is likely to be the area where environmentally things could go wrong," he said.

He said some community unease about coal seam gas was legitimate, adding "the lack of knowledge, the lack of information are valid concerns. We don't have all the answers … you do have to spend a fair bit of time and effort making sure that you get that understanding sorted out."

A spokeswoman for Mr Buffier later said he was referring to issues raised in Professor O'Kane's report, including the need to better understand pollution and other potential environmental risks, and to collect data to better manage the industry's cumulative impacts.

Mr MacDonald questioned the level of resources devoted to regulating coal seam gas when "the impact on the environment, by many accounts, is very, very, very small".

The hearing heard evidence from the Hillsdale-Eastgardens Residents Action Group, which is concerned about chemical contamination around Orica's Botany site. The group's Hywel Lewis-Jones said many in the community felt the EPA hid "behind scientific verbiage" and could not be trusted.

Andrew Helps from Hg Recoveries, an expert who conducted tests on behalf of the residents, claimed the authority did not act on samples he collected outside the Orica site, including one that showed high levels of chlorine.

Mr Helps presented a report by chemical waste expert Ron McDowall that concluded "many dangerous chemicals" were present around the Orica site and "it is clearly grossly contaminated land and should be treated as such".

Mr Buffier told the hearing "there are areas of our operations which can be improved" but "we work hard to ensure that the NSW environment is healthy, that communities are protected and that businesses meet their environmental responsibilities".