Chinese-state owned Shenhua company has applied for an extension to its exploration licence as doubts grow over the future of the $1.2bn mega-coalmine on the Liverpool Plains.

The Shenhua exploration licence, which was granted for $300m in 2008 by disgraced former NSW Labor resources minister Ian Macdonald, was due to expire this month.

Rather than applying for the mining licence which would involve a further $200m payment, the company has opted to apply for an extension of the exploration licence, which has no extra cost.

The NSW government still needs to approve the exploration licence extension for the project, which covers 35 square kilometres in rich farming land in the state’s north.

A spokesman for the NSW minister for industry and resources, Anthony Roberts, said the extension application could take a number of months as the department would need to go through the company’s record since Shenhua was granted the original licence.



Once granted, the spokesman said, the exploration licence extension would simply extend the “status quo”.

The project has already received development approval under the NSW government. The project has also received approval from the federal Coalition government under the “water trigger” laws following scrutiny by the Independent Expert Scientific Committee. The federal government has yet to approve a further water management plan.

But the future of the Shenhua’s approval hangs in the balance as it awaits a judgement in the NSW land and environment court on Friday morning at 10am in a case brought by the Upper Mooki Landcare Group.

The group, through the Environmental Defenders Office NSW , argued the Planning Assessment Commission which approved the development application for the mine did not follow proper legal process to assess the impact on the local koala population.



Sue Higginson, chief executive officer of the Environmental Defenders’ Office, said if the judgment found the approval of the Watermark mine was invalid, under normal practice the PAC would have to repeat the approval process.



“Usually what happens is if the approval is invalidated, the proponent may have to do a few more things and the PAC has to go through the process again because Shenhua would have no lawful authority to construct,” Higginson said.



Guardian Australia understands at least one federal Coalition MP’s office has advice that the Turnbull government has the power to end the mega-mine’s application which is causing difficulties for the newly elected Nationals leader Barnaby Joyce.



The project sits in Joyce’s electorate of New England but will move to a neighbouring National electorate under the new boundaries at the upcoming federal election. It has provoked strong opposition among farmers, who make up the National party’s natural constituency. Joyce could face a challenge from former independent Tony Windsor, who has left open the possibility of running in the upcoming election.

In order for the mining project to go ahead, Shenhua must submit a water management plan to the federal IESC after environment minister Greg Hunt promised 2GB broadcaster Alan Jones he would apply an extra layer of scrutiny to the approval process. Jones has been a fierce campaigner against the mine.



“That’s above and beyond, to the best of my knowledge, anything that’s happened in environmental history,” Hunt told Jones in July last year.



As the original architect of the water trigger legislation, Tony Windsor said the federal government had “short-circuited” some of the processes around the referral of the Watermark mine to the scientific committee.



Windsor said the federal government has always had the power to stop the project.



“They short-circuited some of the processes and Greg Hunt knew he was on very sensitive ground by saying all the processes had been ticked,” said Windsor.



“I think [the extra process] was to buy time. If tested there’s a number of areas where the government hasn’t done their work properly.”



If the federal government approves the water management plan, Shenhua must still apply for a mining licence at the cost of $200m before the company can begin construction.

The NSW department of resources and energy would review the mining licence application against a number of tests including the “fit and proper persons” test, relating to the company management.

Shenhua’s representative would not comment for this story.