The government has been criticised for appointing a former business adviser to David Cameron who has had corporate links to the fracking industry as the new chairman of the Environment Agency.

Sir Philip Dilley, who will work three days a week on a salary of £100,000, was until April the chairman of Arup, an engineering firm that has been employed to write environmental reports on fracking for Cuadrilla – the company hoping to become the first to exploit Britain's shale gas resources. He will take on his new role in September.

Arup, an employee-owned company whose website still lists Dilley as a trustee, has donated money to the all-party parliamentary group on unconventional oil and gas and is an associate member of the organisation founded to "debate and explore the potential for developing" such reserves in Britain. Dilley, who was knighted for services to engineering last month, also worked for at least two years on Cameron's business advisory group that gave "regular, high level advice to the prime minister on critical business and economic issues facing the country" according to his CV.

The Environment Agency will have responsibility for granting permits for fracking across the UK as part of the coalition's promised shale "revolution". While Cameron has signalled he believes it could help bring down energy bills, green groups and local campaigners have protested over potential damage to the landscape, harm to the environment and greenhouse gas emissions.

Cameron was criticised for allowing the appointment of Tory donor Andrew Sells as chairman of Natural England, the government body tasked with promoting countryside access. Sells, an investment banker and venture capitalist who described his donations as "serious money", was approved last year by MPs to lead the statutory adviser to government on the natural environment. Wealthy Conservative donors Theodore Agnew and David Ross are reportedly contenders to become the next chairman of Ofsted.

The choice of Dilley to lead the Environment Agency is very different from Lord Smith of Finsbury, the former Labour cabinet minister, who fought the effects of budget cuts when body was criticised for its handling of the floods over Christmas.

Dilley's appointment was approved by the House of Commons environment select committee last week. Its only concern was to query why the government "felt necessary, during the recruitment period, to extend the time commitment required from two days a week to two-to-three days a week, and to raise the salary offered from £60,632 to £100,000".

Caroline Lucas, the Green MP for Brighton who was arrested last year during protests over fracking, said it was "untenable" for Dilley to hold the role when his former company is so clearly linked to support for the shale gas industry.

"When you've got an issue as sensitive as fracking, the public needs to have real confidence in the independence of people making decisions over licensing and so forth," Lucas said.

"Even if Mr Dilley pledges to be as independent as he likes, as I'm sure he will, nonetheless questions will still be raise. It seems the public will not be able to have full confidence in his role given the background that he has. It is a bit of an insult to appoint someone to this post who is so clearly linked to support for the shale gas industry. I think it's an untenable position when public feeling is so high and controversy is so rife. I think it makes for him very hard to be perceived to be the independent arbiter that one would hope the Environment Agency would be."

A spokesman for Defra said: "Philip Dilley was recruited in a fair and open competition. He is an excellent candidate and we are confident of his ability to fulfil the role of chair."