A landowners group in Papua New Guinea's Southern Highlands province says Governor Hami Yawari was within his rights to be handling landowners benefits.
Mr Yawari is alleged to have misappropriated money from a local government authority and could face disciplinary action from the Leadership Tribunal.
However the Foe Landowners Association is threatening to shut down key energy projects, including the Kutubu oil field, on their lands, unless the Ombudsman Commission withdraws its referral of Mr Yawari to the public prosecutor.
The Association's executive officer Roy Magari says allegations that Mr Yawari has mishandled landowners benefits are wrong because the Governor is himself the principal landowner.
"Which means he has got all the powers to release all the equities, all royalties, and all other benefits. So in this case, what the ombudsman commission is saying is that as the governor of the province, he's not allowed to touch any of those benefits that are deriving from the project, and that is not correct because he's entitled as the principal landowner."
The landowners have also threatened to stop negotiations on the proposed PNG-Queensland gas pipeline set to feed from their fields.