The NSW government should tear up an agreement with Santos to fast-track a coal seam gas project after the energy producer was fined for contaminating an aquifer, reportedly with uranium, the state opposition says.

The Environment Protection Authority issued a $1,500 fine to Santos last month following the “pollution incident” at the company’s Narrabri Gas Field operations in the Pilliga in NSW’s northwest.

Fairfax Media reports that the aquifer was contaminated with uranium at levels 20 times higher than safe drinking water guidelines.

Labor environment spokesman Luke Foley said it was “unbelievable” that the government had signed a memorandum of understanding with Santos to fast-track approval of the project.

“The MoU should be torn up in light of the contamination,” Foley said in a statement on Saturday.

“This contamination of the water aquifer is highly alarming.”

Greens NSW MP Jeremy Buckingham called the contamination “totally unacceptable” and urged all coal seam gas projects in NSW to be halted immediately.

“Here is definitive proof that unconventional gas, such as coal seam gas, pollutes aquifers with extremely toxic elements,” he said in a statement.

“It is totally unacceptable for groundwater to be contaminated with radioactive uranium 20 times the safe drinking water limit.

“Other aquifers cannot be put at risk of serious pollution.”

The Wilderness Society’s national director, Lyndon Schneiders, said the incident showed no groundwater was safe from coal seam gas operations.

“Federal environment minister Greg Hunt ... must call in all coal seam gas operations immediately and put in place a moratorium until there is a thorough, independent and transparent investigation into the industry,” he said in a statement.

He questioned why Santos was only fined a “paltry” $1,500 when the maximum penalty was $1m.

“Santos has a long tragic history of failure in the Pilliga forest,” he added.

Community alliance Lock the Gate also urged the NSW government to halt CSG projects and investigate the Santos incident.

The group’s president, Drew Hutton, said the government should stop “all CSG exploration immediately, and conduct a far-reaching investigation into how things have gone so horribly wrong”.

Santos has been contacted for comment.