Some of the worst environmental pollution in the world has been discovered among the World Heritage-listed Blue Mountains, according to researchers from Western Sydney University.

For several years, environmental science lecturer Ian Wright and his team has been studying the effect of the Clarence Colliery on the Wollangambe River, which runs deep within the Wollemi National Park.

Since the 1980s the operators of the underground coal mine, Centennial Coal, have been allowed to discharge mine waste into the river under its environmental licence.

Dr Wright said they discovered pollution not just at the discharge point, but 22 kilometres downstream, right in the heart of the World Heritage-listed area.

"This is very, very sick," he said.

"This is big on an international basis, this could be one of the most polluting coal mines in the world," he said.

"One of the reasons we make that statement is because it's so clean here. It's looking at the stain of pollution on a very clean background.

"Most coal mining across the world happens in areas that are quite disturbed.

"This is unusual because it's happening in area that's so clean. Any disturbance stands out like a bright beacon.

Dr Wright says the Wollangambe River is effectively a drain.

"It's a waste disposal for the mine," he added.

The team discovered high levels of salt and metals like nickel and zinc when they compared the river downstream of the discharge point to tributaries and waterways located metres away, as well as the river above the discharge point.

"The salinity level increases 10 times from background (other waterways) due to the mine drainage but we also get things like zinc and nickel, metallic elements at unnaturally high levels than you don't see in the background," he said.

"Often in the tributaries away from the mine here, we don't get any zinc or nickel.

"But the levels raised 9,300 per cent in some cases and the level is 10 times above that recommended in the water quality guidelines protecting ecosystems."

Number of insects drops by 90 per cent

Dr Wright says this contamination has had a major impact on insect species in the water.

"The numbers of insects of any type whatsoever drops by about 90 per cent downstream. We do get some recovery but still way below the natural background, that's upstream and in the tributaries."

Aeschnidae (a dragonfly larvae). One of the insects missing from the study area. ( Supplied )

Parts of the river Dr Wright described as an "ecological desert".

"We had hours where we would only find one or two animals, and they are the species that are really tolerant."

It is not the first time the mine has polluted the river. A coal wall collapsed two years ago, contaminating the water.

The new study prompted swift action from the Environment Protection Authority (EPA), who changed the operating licence.

EPA regional director for south and west Gary Whytcross said they reduced the amount of metals and salt that could be in the discharge water.

"The science is very clear, there are impacts there, we need to make changes and that's why we're going to be tightening the licence," Mr Whytcross said.

He said the EPA had been working with the company, along with Dr Wright and other community groups to address the issue.

"[We are] tightening limits comparable with the World Heritage area that this creek is in so that the water quality can improve and the critters can come back and be healthy," he said.

It is hoped this will enable the water to be suitable for drinking.

Pollution in the Wollangambe River downstream from the Clarence Colliery, where containment cells broke in 2015. ( Supplied: NSW Environment Protection Authority )

Mayor says mine is environmentally responsible

The mine has been a major employer for the local community in Lithgow for nearly four decades, currently employing hundreds of people.

The Deputy Mayor of the Lithgow Council, Wayne McAndrew, said it was vital in supporting the town.

"We talk about one permanent job in the coal mining industry, it had a flow-on effect of up to four and a half to five jobs that flowed on from that," he said.

Mr McAndrew worked at the mine up until 1990 and defended its environmental operations.

"It's a mine that's always taken its environmental responsibilities very carefully and very importantly," he said.

"I entered the industry in 1975 and I must say the environmental checks and balances now are a lot more stringent on what they were then and they needed to be."

Mine 'committed' to cleaning up act

A spokeswoman for Centennial Coal, Katie Brassil, said the EPA was currently finalising the five-year review of its Environmental Protection Licence (EPL).

"This process included extensive aquatic ecology, ecotoxicology and macroinvertebrate investigations and monitoring in consultation with the EPA, Office of Environment and Heritage, and community stakeholders including Dr Ian Wright," she said.

Water being discharged from Clarence Colliery. ( Supplied )

"As a result of this review Clarence will operate under a new EPL, which will include agreed reductions in metal concentration limits for all water discharged to the Wollangambe.

"Clarence will also be required to comply with a Pollution Reduction Programme (PRP), also to be issued by the EPA, which will result in Centennial formalising options to address all water quality issues and to meet specific water quality milestones."

Federal Environment Minister Josh Frydenberg said the Government had been briefed on Dr Wright's report.

"While regulation of the Clarence Colliery is primarily the responsibility of the NSW Government, the Federal Department of Environment and Energy will continue to work with the NSW Government in relation to Colliery's compliance."