The Queensland Resources Council says New South Wales and Victoria should be penalised financially for not fully developing their gas resources.
Chief executive Ian Macfarlane has told the Queensland Media Club mining royalties should be discounted before they are included in GST calculations.
"States like Queensland and Western Australia that make the tough decisions shouldn't be penalised in the GST distribution, and states that sit on their resources without the political courage to develop them should be penalised," he said.
The mining and resources sector is still seething from the recent intervention by the Turnbull Government to restrict gas exports when a domestic shortage is looming.
Mr Macfarlane said such a measure would not have been necessary if New South Wales had not continually "baulked" at developing its own resources, under pressure from misinformation by "extreme green" groups.
He said cutting GST distribution would send a powerful message to states not prepared to base resource development decisions on science and fact.
"So, rather than embroil itself in an issue of whether or not Queensland is producing enough gas, the Federal Government should be concentrating on getting New South Wales and Victoria to lift its bans and moratoriums and actually developing the resources they have, in the same way as Queensland gas," Mr Macfarlane said.
"New South Wales draws only 5 per cent of its consumption from its own state.
"There's more than enough gas in eastern Australia to supply both the domestic and export market, but what we need to see is some political courage among leaders in states like New South Wales and Victoria."
Mr Macfarlane pointed to the Canadian model where royalty income was discounted by 50 per cent before it was added to equalisation calculations.
"If such a system was adopted here, Queensland would gain about $100 million a year, which is money in the bank to pay for infrastructure and services to make our state an even better place to live," he said.
But Lock the Gate Alliance national coordinator Carmel Flint said it was an extraordinary attempt by the mining and resources sector to undermine the democratic distribution of the taxation system.
Ms Flint said states that had listened and responded to genuine community concerns about the long-term environmental impact on land and water resources should be applauded, not penalised.
