The controversial Narrabri coal seam gas field was on Wednesday granted phased approval by the NSW Independent Planning Commission subject to 134 conditions.

"The commission concludes the project is in the public interest and that any negative impacts can be effectively mitigated with strict conditions," the IPC said in a statement.

Oil and gas giant Santos wants to develop the $3.6 billion project over 95,000 hectares in the Pilliga forest and nearby grazing land.

It involves drilling 850 new gas wells over 20 years, with Santos saying it had the potential to provide up to half of NSW's natural gas needs.

The project was recommended for approval earlier in the year by the NSW Department of Planning, Industry and Environment before being referred to the IPC.

The commission received nearly 23,000 public objections, with concerns raised about the impact on groundwater, climate change, biodiversity, agriculture, bushfires, health and Indigenous heritage.

The federal government argues the project has an important role to play in the plan to boost gas supplies, drive down energy prices and fuel a gas-fired recovery from the COVID-19 pandemic.

Resources Minister Keith Pitt said the Commonwealth - which has the final say on the project - will work with Santos and the NSW government as it progresses.

"The commission's decision confirms that Narrabri gas is in the public interest and will provide new economic and job opportunities, particularly in the regions," he said in a statement.

NSW Premier Gladys Berejiklian says gas is an essential part of energy security into the future, and that the Narrabri project went through a "very robust" independent process.

Santos must meet specific requirements before the project can progress to the next phase of development.

The IPC argues the potential groundwater impacts can be managed under the conditions imposed which include Santos improving its impact modelling.

Santos must also fully offset its predicted greenhouse gas emissions and must strengthen measures that mitigate impacts on flora and fauna.

The approval does not include consent for Santos to build a proposed gas-fired power station at Leewood, the Westport workers' accommodation or non-safety flaring infrastructure.

The decision has resulted in significant backlash from locals, farmers as well as energy and climate experts.

Coonamble stock and station agent David Chadwick said the commission made the wrong decision, while Mullaley farmer Robyn King has vowed to keep fighting against it.

The state's peak farming body says it's "dismayed" by the decision which poses an unacceptable risk to water resources, soil and air quality, and local food production in western NSW

"Our members have indicated very clearly that they have no appetite for risk to their precious water sources," NSW Farmers president James Jackson said in a statement.

Dr Madeline Taylor from the University of Sydney Law School says the project should have been rejected as it could be commercially unviable and risks becoming a stranded asset.

NSW Greens MP Cate Faehrmann labelled it "disastrous" while Independent MP Justin Field said it was "hugely disappointing".

NSW Labor supports the IPC decision but noted the project needs to honour its commitments of ensuring all gas is kept in NSW, creating jobs and lowering gas prices.

The Australian Workers' Union welcomed the project's potential to boost jobs and alleviate pressure on households with more affordable gas.

Santos managing director and chief executive Kevin Gallagher said the decision was a major step forward which confirms the project can be delivered safely and sustainably.

Australian Associated Press