Coal seam gas exploration applications will be frozen for six months across NSW while the state government reviews the controversial process.

The Premier, Barry O'Farrell, accused the former Labor government of granting petroleum exploration licences "like confetti" and warned that the government would also audit existing licences.

"We're taking decisive action to ensure the state's resources are developed for the people of NSW and not for the benefit of Labor MPs, their cronies and their union mates," he told the chamber on Wednesday after making the announcement.

The six-month freeze will also allow the government to introduce a "new, thorough regime" for allocating future licences, the premier said.

The government is concerned about the application process, which has seen small companies, sometimes run by one person, being allowed to explore large areas, despite not having the experience or financial backing for the projects.

O'Farrell said the former Labor government granted 39 exploration licences, while his government had yet to grant a single one.

Three-quarters of the licences granted under Labor were issued by former ministers Eddie Obeid and Ian Macdonald, he said, who were later found to have acted corruptly by the Independent Commission Against Corruption.



The premier said the licences granted under Labor were handed out with "virtually no oversight and clearly no thought".



He slammed Labor for only charging $1000 for exploration applications, which was "less than Ian Macdonald spent on his average lunch".



That fee is now being raised to $50,000.



Resources minister Anthony Roberts said the government was committed to ending Labor's practice of "flogging off the state's natural resources to their mates and business partners".



"We are sending a very clear message that only reputable operators are wanted in the state of NSW," he told parliament.



The Greens welcomed the decision but said the premier must go further on cracking down on CSG applications.



"The key issue remains the rights of farmers and the community to say no to CSG," the Greens' mining spokesman, Jeremy Buckingham, told AAP.



"Until that right is given to communities and farmers, this will continue to be a headache for the government."



Phil Laird, from anti-CSG group Lock the Gates, commended the government.



"The previous regime seemed to focus entirely on mining and gas, whereas this is showing that the government's trying to clean up the process," he said.



The announcement comes after Roberts on Wednesday announced that the government had knocked back five CSG exploration licences applications by Grainger Energy for a 43,100 square kilometre area in the Riverina region.



The minister said the company had one director and was formed just six days before lodging its application.



It also had "no history of conducting petroleum exploration activities" and had submitted a "manifestly deficient application".