The growing controversy over shale gas in Britain has engulfed what Jane Austen once described as the "fine and striking environs" of Bath, home to the world famous hot springs.

Council leaders and MPs have hit out at plans to drill gas wells in the nearby Mendip Hills, which they fear will lead to highly toxic chemicals pumped into the ground in a threat to local water supplies. Two Australian-owned companies, Eden Energy and UK Methane, have obtained licences to explore for shale and are applying to Mendip district council for planning permission to test-drill.

Paul Crossley, head of the local authority, said: "There is great concern that the process of fracking will result in the water courses leading to the natural hot springs being contaminated with pollutants from this process, or for the waters to adopt a different direction of travel through new fractures in the underlying rocks.

"Bath and North East Somerset council has obtained the very best expert advice on this matter and there is little to suggest that any thought has been given to the potential for damage to the deep water sources that supply the springs in Bath."

The springs have been used for medicinal purposes since Roman times and now supply the successful Thermae Bath Spa, which is a big draw for tourists.

Tessa Munt, Liberal Democrat MP for Wells, has written to the energy minister, Charles Hendry, demanding to know why local people have not been consulted. "I share my constituent's unease of this highly suspect method of squeezing the last drops of non-renewable fuel from a highly sensitive and indeed fragile part of the country," she argues.

The potential of shale energy was outlined last week when an energy company claimed that two wells it had drilled in a rural area behind the Lancashire city of Blackpool indicated the presence of 200 trillion cubic feet of gas.

Cuadrilla Resources, whose board contains former BP boss Lord Browne, said it could create more than 5,000 jobs and might want to drill up to 800 similar wells in the Lancashire region, although critics have described the estimates as excessive.

The shale boom, which uses "fracking" – the fracturing of rock via toxic chemicals – but also groundbreaking drilling methods to extract gas out of shale rock, started in the US and has sent the price of natural gas there spiralling downwards.

It has also triggered strong opposition from environmentalists who claim the chemicals can easily seep into drinking water ,and they give examples of tap water igniting in people's homes.

A New York state assembly in June passed a one-year moratorium on hydraulic fracturing, while a month earlier the lower house of parliament in France approved a bill to ban shale gas drilling there.

The EU is considering whether restrictions need to be imposed on fracking amid a rush to better understand what this new form of shale drilling entails.

But there is also enormous excitement in countries such as Poland that they could escape from their dependence on Russian or other foreign gas suppliers if indigenous shale reserves can be found, as many gas experts predict.

ExxonMobil, the American oil giant, will begin fracking at a second shale well in Poland next week, having recently finished the process at a more advanced well, it said on Wednesday.

Meanwhile, in Bath, the local council wants the government to extend the controls contained in the County of Avon Act, which require municipal consent for excavation below certain depths. The controls do not cover activities outside specific geographical areas, including the Mendip district council area and Crossley said this must change. "Understandably the act approved by parliament in 1982 did not foresee the levels of protection required to protect the hot springs from fracking."

Clearly Austen, who lived in the city during the early 1800s and wrote some of her most famous novels there with the city as a backdrop, could not have foreseen Bath as the new Baku.

In Northanger Abbey, she writes: "They arrived in Bath. Catherine was all eager delight; her eyes were here, there, everywhere, as they approached its fine and striking environs, and afterwards drove through those streets which conducted them to the hotel. She was come to be happy, and she felt happy already."