Fellow independent MP Tony Windsor will introduce the legislation which Mr Oakeshott has agreed to second.

The Bill will provide heavy penalties for any mining action that has, will have, or is likely to have a significant impact on the water quality, structural integrity or hydraulic balance of a water resource.

"This is an issue that has been raised by all communities across the electorate, particularly the fracking processes involved in coal seam gas mining," Mr Oakeshott said.

"It elevates, and underlines, the importance of water quality to our community and long-term planning in the areas of better water, better soils and more productive farmlands," Mr Oakeshott said.

The proposed legislation amends the Environment Protection and Biodiversity Act to require companies to seek a licence before undertaking any mining activity in a region that has water resources.

"The Bill will not affect responsible mining practices that have no impact on our water resources, but it will help protect surface water and underground aquifers," Mr Oakeshott said.

"This is long overdue protection for our most precious resource given that Australia is the driest populated continent on earth, and the science is not clear in the way underground water in communities such as the Gloucester and Lorne basins interrelate," Mr Oakeshott said.