A Queensland Government official has been stood aside for not acting sooner on concerns about water contamination caused by an underground coal gasification trial in state's South Burnett region.

Cougar Energy has been ordered to shut down its underground coal gasification trial at Kingaroy and landholders in the area have been told not to use bore water pending test results.

The company detected carcinogenic chemicals, benzine and toluene, in monitoring bores in April but did not notify the department until the end of June.

The Queensland Government has promised a full investigation into the water contamination at the South Burnett gas project.

The company cannot reopen its operation until further tests are conducted.

The Government says the low levels of benzine and toluene do not pose a health risk, but nearby property owners are being told not to drink bore water.

Energy Minister Stephen Robertson says other bores in the area will be tested.

"What I want to do is assure landholders and the community more generally that we will leave no stone unturned in terms of investigating the discovery of these chemicals in the water supply," he said.

DERM director-general John Bradley says the company took too long to report the test results.

Residents were not told until last night and Mr Bradley says a departmental officer has been stood aside for not acting sooner.

"They were looking at levels that were below Australian drinking water guidelines and I think they have taken that into account," he said.

"Nevertheless our commitment is to make sure that we've transparency in relation to any exceedence or detection in relation to these kinds of chemical compounds.

"We have stood the officer aside."

DERM has asked Carbon and Linc Energy to also carry out an environmental evaluation their Dalby and Chinchilla operations.

Carbon spokesman Andrew Dash says they will cooperate.

"It certainly won't change our operation," he said.

But Kingaroy resident Wendy Buttsworth says locals have been vindicated.

"Obviously our concerns have been well founded," he said.

DERM officers are currently in Kingaroy talking to residents.

Cougar Energy has been contacted for comment.

- Reporting by Fidelis Rego, Melinda Howells and Andree Withey