Environment Centre NT is challenging the lawfulness of the federal government's $21 million grant to gas company Imperial Oil and Gas for exploration in the Beetaloo Basin.

It says federal Resources Minister Keith Pitt didn't follow the proper process when he made the decision to award the money.

"We want to see taxpayers' money used wisely and with all the consequences being fully considered," director Kirsty Howey said.

"It's not apparent from the available public documents that the minister made any inquiries about the climate change risks."

Mr Pitt said the claim was baseless, saying it was another example of activists using the courts to delay a nationally important resources project.

"This is a classic case of green lawfare and is nothing more than a legal fishing exercise trying to stop new jobs and economic opportunities," he said.

Under federal law, the minister is required to make "reasonable inquiries" to ensure any proposed use of public money is "efficient, effective, economical and ethical".

ECNT argues Mr Pitt failed to correctly assess the increased risk to Australia's ability to meet its Paris Agreement targets if proposed gas fracking in Beetaloo Basin goes ahead.

The case, which is a judicial review in the Federal Court, also questions whether Mr Pitt properly inquired about the economic impacts of the grant.

"We say that means inquiries into the risks of a heating climate if the heart of the NT was opened up to fracking," Dr Howey said.

ECNT's lawyers, the Environmental Defenders Office, called on the minister to pause the grant until the court action is complete.

Mr Pitt announced on July 7 that three grants of up to $7.5 million each had been awarded to Imperial Oil and Gas to speed up gas projects in the NT.

"The Beetaloo Basin is potentially a world-class gas resource which could create thousands of jobs and help bolster supplies of gas for the domestic market and for exports around the world," he said at the time.

The basin is one of five gas fields the Commonwealth plans to develop to support exports and manufacturing, under its "gas-led recovery" from the COVID-19 crisis.

An independent inquiry found that even small-scale developments in the basin could create more than 6500 full-time jobs and generate $2.8 billion for the cash-strapped NT economy over 25 years.

But plans to frack in the basin have caused concern among many Territorians, who fear it would not only jeopardise efforts to meet the Paris emissions reduction target but also contaminate groundwater.

About 90 per cent of the Territory's supply comes from groundwater sources, according to the NT government.

Further grants are expected to be announced in the coming months.

Under the Paris Agreement, Australia has committed to reducing greenhouse gas emissions by between 26 and 28 per cent below 2005 levels by 2030.

Australian Associated Press