The Northern Territory government has lifted a ban on hydraulic fracturing of onshore gas that will open up more than half of the territory's land mass to the controversial .

The first exploration fracking by petroleum companies is expected to occur early next year after the implementation of a regulatory regime and new laws, which the government insists will be strict.

The issue has sharply divided Territorians, many of whom believe fracking threatens water supplies, but Chief Minister Michael Gunner said the industry will create jobs.

An independent report handed down by Justice Rachel Pepper last month found the risks associated with hydraulic fracturing of gas deposits could be managed and regulated.

Mr Gunner said the government had accepted the inquiry's advice about no-go zones.

“Forty-nine per cent of the Territory will be 'frack-free', including in national parks, conservation areas, indigenous protected areas, towns, residential and strategic assets, and areas of high cultural, environmental or tourism value," he said.

NT Chief Minister Michael Gunning has lifted a moratorium on fracking (AAP Image/Lukas Coch) (AAP)

In the rest of the NT, strict laws and regulations would protect areas and the independent EPA and Environment Minister would sign off on any fracking.

Environmental groups and scientists have pressured the Labor government to keep the fracking moratorium it introduced, arguing it would adversely impact on water, land and public health.

However the federal government has similarly pressured the NT government to allow the economic exploitation of its gas resources.

What is fracking?

Hydraulic fracturing is a technique designed to recover gas and oil from shale rock.

The process involves drilling down into the earth before a high-pressure water mixture, including water, sand and chemicals, is directed at the rock to release the gas inside, allowing the gas to flow out to the head of the well.

The term ‘fracking’ refers to how the rock is fractured apart by the high pressure mixture.

Why is it controversial?

In March 2015, the New York Department of Health recommended a ban on hydraulic fracturing because of unknown risks to environmental and public health.

A report by a British charity, CHEM trust, that investigated the potential impact of chemicals, found fracking poses a significant risk to both human health and the environment.

According to the Australian Institute, the potential health impacts associated with fracking chemicals include cancer, skin and eye irritation, respiratory problems, damage to the nervous system, cells and blood, endocrine disruption and reproductive problems.

The research body also argue an expanded unconventional gas industry would be responsible for substantial levels of greenhouse gas emissions, with fracking in Northern Territory potentially increasing Australia’s total greenhouse gas emissions by five percent.

Northern Territory

An inquiry into fracking in the NT, led by Justice Rachel Pepper, found risks associated with the practice could be mitigated.

“No industry is without risk, and any onshore shale gas industry is no exception. However, it is the panel’s opinion, expressed in the Final Report, that if all of the recommendations are implemented, the identified risks associated with any onshore shale gas industry can be mitigated or reduced to an acceptable level, and in some cases, the risks can be eliminated,” Justice Pepper said when the inquiry handed down its findings at the end of March.

Northern Territory independent hydraulic fracturing inquiry chair Justice Rachel Pepper hands down a draft final report in Darwin, Tuesday, December 12, 2017. Environmental studies spanning up to three years must be conducted before fracking development begins in the Northern Territory, an inquiry says. The independent hydraulic fracturing probe's draft final report was released on Tuesday with 120 recommendations for the Gunner government, which continues to feel federal pressure to lift its onshore gas ban. (AAP Image/Lucy Hughes Jones) (AAP)

She stressed it was not the inquiry’s role to decide “whether or not to retain the ban on hydraulic fracturing in the Northern Territory”.

That “is a political decision that rests with the Government alone,” Justice Pepper said.

Anti-fracking movements focused on the environmental and health risks of the practice, arguing the large amount of water used in fracking would put severe pressure on the Territory’s underground water resources.

They also argued many of the chemicals used in fracking have never been assessed for long-term impacts on the environment and human health.

Fracking also produces large amounts of toxic waste water which can threaten wildlife, agriculture and human health, it has been argued.

A group of Australia’s top scientists have also opposed lifting the ban, arguing the environmental impact would be unacceptable.

"Opening up huge new sources of fossil fuels like shale gas is completely incompatible with Australia's commitments under the Paris Agreement (on climate change)," Professor Will Steffen said on Tuesday.

Protesters and indigenous owners from the Northern Territory hold a small rally outside the Annual General Meeting for Origin Energy in Sydney, Wednesday, October, 18, 2017. The protest was calling on Origin Energy to stop their fracking gasfield exploration activities in the Northern Territory. (AAP Image/Dean Lewins (AAP)

The group said any suggestions that extra emissions could be offset were false.

"Most existing reserves of fossil fuels need to remain in the ground, and certainly no new reserves like NT shale gas can be developed if we are to avoid the worst impacts of climate change," Prof Steffen said.

Environmental groups have also called for a permanent ban while business groups and the NT opposition want the on-shore gas deposits to be developed to create jobs and provide a much-needed boost to the Territory economy.

Fracking in the rest of Australia

In Australia, fracking has been used in South Australia since 1969 in the Cooper Basin to recover gas and oil.

In September 2016, Victoria permanently banned fracking and all forms of unconventional gas extraction. The ban came after the state imposed a moratorium on coal seam gas exploration in 2012.

NSW banned all fracking within two kilometres of residential areas in 2013.

Western Australia imposed a state-wide moratorium on fracking for unconventional gas in September 2017 with the expectation it will last at least 12 months until the completion of an independent inquiry chaired by Environmental Protection Authority chairman Tom Hatton.

South Australia has implemented a 10-year moratorium on fracking for natural gas as recently as last week, with Premier Steven Marshall still considering if he will enshrine it as a law.

Fracking is also banned in Tasmania. A one-year fracking moratorium was declared in March 2014, with a five year ban put in place in February 2015.