The ageing Liddell power station is allowed to emit nearly three times the amount of toxic nitrogen oxide that is accepted as world's best practice, according to documents obtained under Freedom of Information (FOI).

Liddell, which sits on the outskirts of the township of Muswellbrook in the New South Wales Hunter Valley, is permitted to emit 1,400 micrograms of NOx per cubic metre, while less than 500 mg/m3 is considered an international standard.

Energy company AGL is scheduled to close the 47-year old coal-fired plant by 2022 and replace the bulk of its capacity with renewable energy and battery storage.

But the company has come under intense pressure from the Federal Government to keep Liddell open, which is citing lower electricity prices and greater energy stability as potential benefits.

The FOI documents obtained by Environmental Justice Australia reveal that a power station of Liddell's age would normally be subject to a NOx limit of 800 mg/m3, however AGL successfully applied to the NSW Environment Protection Authority (EPA) for the increase.

"Just to put that into context, a power station in the United States would be required to keep emissions down to 100 mg/m3," said James Whelan, from the Environmental Justice Australia.

"That is one-fourteenth of what Liddell is licensed to emit."

NOx is deemed a poisonous gas and is known to aggravate respiratory conditions, causing inflammation of the airways at high levels.

Long-term exposure can decrease lung function, increase the risk of respiratory conditions and response to allergens.

The information was contained in a report AGL was required to submit to the EPA to investigate a range of available emission-controlled devices that would reduce NOx emissions by 20 to 90 per cent.

"The kind of emission controls that this report highlights are mandatory in the United States, in Europe, in Korea, in Japan," Mr Whelan said.

"Many places around the world are not only requiring these controls for new coal-fired power stations, but they're mandating that they be retrofitted on older coal-fired power stations regardless of how long those power stations are expected to continue operating."

Living between eight coal mines, two power stations

In a statement, AGL said the Liddell Environment Protection Licence (EPL) conditions for NOx emissions were originally determined prior to AGL's acquisition of the power station in September 2014.

"They are the same as Bayswater NOx EPL conditions, and a number of other NSW coal-fired power stations," it said.

"AGL has announced the intention to close Liddell in 2022 when it will be more than 50 years old, and replace its capacity with modern, cleaner, more reliable electricity generation."

Muswellbrook Shire Council acting general manager Fiona Plesman said the council and the community welcomed the closure and the plant.

She said fine particle dust from nearby coal mines was the primary worry for many residents, but the levels of NOx emissions would be a community concern.

"The community does have a concern around its air quality and a good reason to be concerned... being an area with eight coal mines and two power stations, air quality needs to be concern for regulators and it certainly is a concern for council," she said.

On Monday, AGL rejected an offer by rival Alinta Energy to buy Liddell for $250 million and keep it open beyond 2022.

Alinta had said it would spend a further $750 million on Liddell, including upgrades and site improvements, but did not outline whether or not that would have included improved emissions controls.

The NSW Minister for Environment, Gabrielle Upton, and Energy Minister Don Harwin were contacted by the ABC, but deferred comment to the department.

In a statement the EPA did not address the ABC's questions, but said AGL is meeting its operational requirements, and "is in the process of lowering its emissions through a pollution reduction program".