The Queensland government is set to overturn a 20-year ban on shale oil mining, setting up a new battlefront with conservationists.
The Newman government says a commercial industry could generate thousands of jobs, and will see new money flowing into the state's coffers.
However, it will maintain the ban, until 2028, on the McFarlane deposit near Proserpine in the Whitsundays amid fears for the reef and nearby wetlands.
Natural Resources Minister Andrew Cripps says his government will otherwise undo the ban imposed by the former Bligh government in 2008.
The change will allow Queensland Energy Resources to take its trial plant at Gladstone to a full commercial operation.
Other proponents will also be invited to gear up for commercial production but the government says all projects will be subjected to strict environmental standards.
Mr Cripps says the industry could provide vast economic benefits to Queensland, with the current resource considered capable of producing 22 billion barrels of oil.
"As the world supply of conventional crude oil diminishes, there are strong prospects for oil shale to become the next major source of liquid fuel supplies in Australia," he told The Courier-Mail.
Shale oil is extracted from sedimentary rocks, and the process can produce synthetic crude oil and combustible gas.
The rocks are mined using open cut technology which requires large amounts of energy and water.
Conservationists argue the process has the potential to significantly impact on local habitats and ecosystems through emissions and waste water.
Greenpeace was euphoric in 2008, when the Bligh government said it would not allow the development of the McFarlane deposit, nor any other unless research showed it could be done in an environmentally acceptable way.
Environment Minister Andrew Powell said the environmental bar would be set high, as other commercial shale oil operations in Australia and overseas had been extremely limited.
Any proposal to mine or process oil shale will be forced to undergo a trial stage.
Mr Powell said that was partly about assessing the environmental effects of unproven technologies.
He said the Queensland Energy Resources trial plant at Gladstone had demonstrated the viability of its processing technology, and for that reason would be allowed to move to full commercial operation.
This is the second Bligh government mining ban the Newman government has overturned.
In October last year, it lifted a long-standing ban on uranium mining in Queensland after Prime Minister Julia Gillard decided to allow uranium sales to India.
Premier Campbell Newman said a shale oil industry promised a huge royalty stream for the state and thousands of jobs.
He said Queensland had 80 to 90 per cent of the nation's reserves, and a successful industry could help address Australia's reliance on oil from overseas.
Mr Newman said the trial plant at Gladstone had been operating without issue for some years, and other proponents should be given the opportunity to follow suit.
He defended his environmental record on ABC radio, when it was pointed out that the last Queensland premier to approve a shale oil project was Joh Bjelke-Petersen.
"I'm my own man," he said, listing his environmental achievements including planting two million trees in his final years as Brisbane's lord mayor.
He said development was necessary but it would not be at the expense of the environment.
Greenpeace says the state government appears intent on making Queensland the "dirtiest state in Australia".
"Shale oil is probably the dirtiest fuel source around. It's worse than brown coal, and that's worse than CSG," spokeswoman Louise Matthiesson said.
She said the mining process used vast amounts of energy and water and could destroy complex ecosystems.
"Normally it's done in low-lying wetland areas close to the coast. It's open cut mining, they just come in and dig them all up."
Lock the Gate Alliance president Drew Hutton said the decision was more evidence of the government's support for high-polluting technologies.
"Shale oil is a dirty, bottom-end technology and by giving it the go-ahead the Newman government is taking Queensland on a course toward making us the dirty state."