Jobs and tax revenue have won out over concerns about the region's drinking water catchment, with the NSW government endorsing Wollongong Coal's huge Russell Vale Colliery expansion project.

Five years after the troubled miner - then known as Gujarat NRE - submitted its preliminary plans to expand, the state's planning department has recommended it be given approval to mine under the Sydney water catchment area, saying the colliery would otherwise shut down.

The project has been scaled down significantly since it was first lodged, but would still allow Wollongong Coal to extract 4.7 million tonnes of coal from eight longwalls over a five-year period.

The government has acknowledged the potential for cracks to form in the riverbeds of water-storing swamps and other sensitive areas of the Cataract Dam catchment area.

There could also be effects on local and regional surface and groundwater, the recommendation says, as well as potential flooding along Bellambi Gully and Bellambi Creek. However, it says these risks can be "adequately mitigated" by the company.

"The department has weighed the residual impacts of the preferred [underground expansion project] against its social and economic benefits," the recommendation says.



"This assessment has found that the preferred [project] would result in significant social and economic benefits for both the local area as well as the state as a whole."

These benefits include employment of 219 existing workers, 81 new mine workers, 100 people during construction and the "indirect" employment of nearly 1500 people, the government says.

The project would also be worth $85 million in capital investment, $34 million in state royalties and $110 million to the federal government in tax revenue.

Wollongong Coal's chief operating officer Dave Stone welcomed the recommendation, saying it would help ensure the long-term future of his company.

"The [expansion project] is the result of lengthy, rigorous and detailed planning to develop a sustainable and balanced mine design and associated operating processes," Mr Stone said. "We have made substantial design changes in response to feedback from the community and regulators to minimise impacts.

"We engaged industry leading experts to develop best practice plans and associated management practices in the fields of ecology, subsidence, noise and water."

Planning Minister Pru Goward has asked the Planning Assessment Commission (PAC) to review the merits of the expansion plans, because of the high level of public interest in the project. She also asked the PAC to hold public hearings no later than January 30, and complete its review by March 2015.

Last month, the commission gave Wollongong Coal approval to extend one longwall at Russell Vale Colliery despite considerable opposition from residents, Wollongong City Council, Sydney Water Catchment Authority and other government agencies.

NSW government backing for a huge underground expansion of Wollongong Coal’s Russell Vale mine is ‘‘irresponsible’’ and puts the interests of big business ahead of the community, a conservation group says.

In recommending approval be given for the troubled Illawarra company to extend the life of its mine by five years, the state’s planning department acknowledged a number of environmental risks.

The planned underground expansion would allow longwall mining under a large portion of protected water catchment area, including much of the reservoir behind Cataract Dam, which supplies drinking water to Wollongong and Sydney.

The planning department noted its recommended approval was at odds with policies from various councils and government agencies, but said it was confident Wollongong Coal could adequately mitigate environmental risks.

Nature Conservation Council chief Kate Smolski said this was ‘‘ridiculous’’ and she had no faith in the government’s ability to monitor these risks.

‘‘The risk to the sensitive special areas in Sydney’s drinking water catchment cannot be mitigated,’’ she said.

‘‘We’re talking about a water catchment for a city of 4.5million people, and the cracks that longwall mining causes in the river beds – as well as the coastal upland swamps and other areas that are critical for storing and filtering the drinking water for the city – should not be undermined.’’

The government said Wollongong Coal would be required to ‘‘offset’’ any damage done to swamps in the catchment area by funding or undertaking other environmental initiatives.

But Ms Smolski said there would be no way to reverse the damage done in these areas.

‘‘Swamps are critically important because they help store and slowly release the water in times of drought and they also help to filter natural elements that are in the water,’’ she said.

‘‘They take a very long time to form and once they’re gone, they’re gone – they are not areas that can be offset or rehabilitated.’’

