The draft report, which conservationists have rejected as “outrageous”, says laws guarding the state conservation areas should also be changed to head off potential legal challenges.

The Natural Resources Commission says dense stands of white cypress pine in four state conservation areas in north-west NSW are damaging other forest life and thousands of hectares should be “ecologically thinned”, or logged.

“Ecological thinning [would] encourage the growth and regeneration of important trees and shrubs our native animals rely on,” Commissioner John Keniry said.

"We continue to risk losing things we value, such as threatened species, with the current business-as-usual approach."

The report said the problem was worst across 57,000 hectares, or 30 per cent of the conservation areas around Dubbo and Narrabri. The commission prioritised the Pilliga, Pilliga West, Goonoo and Trinkey state conservation areas for “active management” including logging, grazing and controlled burning.

The commission, which advises the government on natural resource management, said “secondary commercial benefits” should be sought to recover the cost of logging. This could involve supplying logs to sawmills, burning them for electricity or selling them as kindling. Another tree species, bulloak, had “good potential” as firewood, it said.

Noting the risk of a legal challenge, the commission said laws should be redrafted to expressly allow for “commercial use” of the logged material. Laws should also be amended so the native trees could be burnt for electricity generation, it said. The practice is presently illegal.

Nature Conservation Council of NSW chief executive Pepe Clarke said the “outrageous” plan bowed to pressure from local sawmill operators.

He agreed with the commission’s assessment that a decrease in Aboriginal forest burning practices since European settlement, and other disturbances, had increased the density of white cypress pine. But he said the careful use of fire, not logging, was the answer.

“We don’t create parks to protect conservation values and then go through later and log them for commercial purposes,” he said. “Logging in conservation areas, and changing … laws to prevent a legal challenge will fundamentally compromise the integrity of the national parks system.”

National Parks Association chief executive Kevin Evans said the reserves were important animal habitat and allowing logging would be "environmentally irresponsible and deeply unpopular”.

State conservation areas protect significant ecosystems and natural phenomena. They differ from national parks in that mining is allowed.

Australian Forest Products Association chief executive Ross Hampton said forests must be managed and not locked up “like a cathedral”. He said the report's findings were commonsense and involved the removal of “woody weeds” that were impacting the environment.

Submissions to the draft report close on August 1. Environment Minister Rob Stokes said the commission “operates at arms-length” from the government. He will consider the final report “in light of my legislative responsibilities to protect … national parks and state conservation areas”.