''There is no toxicity and we are sure we are in compliance with our environmental requirements. We are monitoring it closely.''

The leak was reported by the Sydney Catchment Authority, which manages the land above the mine. Catchment authority officers visited the site last week, in the company of environmentalists and a scientist.

They photographed methane bubbling to the surface and large blooms of brightly-coloured algae in the stagnant water.

The chief executive of the authority, Michael Bullen, said the group recorded methane bubbling up at various points, surface cracking, iron staining and discoloured water above the mine, but said there was no risk to human health and little likelihood of large algal blooms downstream in the Woronora Reservoir.

"The SCA is working closely with the Department of Planning to address the issues identified," he said. It had also written to Peabody Energy seeking further information.

A Total Environment Centre spokesman, Dave Burgess, said the methane plume was obvious from the bank of the river.

''It's outrageous that, six years after the rivulet was first damaged by coalmining, this damage continues to happen,'' Mr Burgess said. ''We'd like to see a trigger mechanism where mining stops when damage reaches an unacceptable level.''

A two-kilometre stretch of the Waratah Rivulet ran dry six years ago when drought combined with cracking of the river bed, upstream from the site of the current methane leaks.

Longwall mining, which cuts broad horizontal slices of coal from about 500 metres underground, caused major cracking in bedrock beneath the river.

In a novel attempt to repair damage, Peabody is glueing the broken river back together using polyurethane resin to fill cracks between the shattered rocks.

''It's probably about six months behind schedule … but that is purely because there has been a lot of heavy rain and the river has been flowing,'' Ms Morgan said. ''But it shows we are serious about fixing any damage.''

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