"No, we're not there - we're in the Hunter Valley, and there are no water issues there," is how Windsor remembers the delegation head's reply. Made through a translator, it prompted at least one of the Australian legal representatives to blush with embarrassment. Andrew Pursehouse (left) with Tim Duddy, two local farmers opposed to the Shenhua Watermark mine. Credit:Dean Sewell The tale seems almost too apocryphal to be true, but Windsor claims then state independent and member for Tamworth Peter Draper also heard the comments. Nor are tales of China's state-owned corporations blowing huge sums on poor investments during the mining boom so outlandish - witness the billions likely to be lost on low-grade iron ore mines in WA. Fairfax Media sought comment from Shenhua about whether the company had misunderstood the location of what it hopes will be a 30-year, 10-million-tonne open-cut mega coalmine beside the famed black soils plains. What the company does concede is that it has ploughed some $700 million into the venture so far, and will need to spend another $1 billion to get the mine started. The latter sum includes $200 million eagerly awaited by the NSW Treasury for the final mining licence.

That payday came closer this week when federal Environment Minister Greg Hunt approved the Watermark project, claiming he was applying "18 of the strictest conditions in Australia history". These include an automatic halt if the region's vital aquifers - the largest source of groundwater in the Murray-Darling Basin - were shown to be damaged. "There will be no impact on the availability of water for agriculture," Hunt says. Cash cow The approval sparked anger from mine opponents, such as Tim Duddy, a farmer whose land straddles both the Shenhua plan for an open-cut coal mine and also BHP Billiton's adjacent Caroona claim for a future underground mine.

Duddy, who says his forebears were among the first farming families in the district back in 1837, called the Shenhua approval "agricultural genocide", and vows to keep battling both companies. Others point to the giant 35-square-kilometre hole to be gouged in the middle of Australia's richest farmland, about 1½ times the size of Sydney's municipality and twice the area of the nation's largest new coalmine being developed by Whitehaven to the west at Maules Creek. "BHP's equally as vile, but Shenhua are in a league of their own," Duddy says. "Everyone just saw [Shenhua] as a cash cow," he says. "They've been completely ripped off." Joyce breaks ranks Agriculture Minister Barnaby Joyce, Windsor's successor in the seat of New England, also broke cabinet ranks to decry the approval of the mine, near the town of Breeza.

"It is ridiculous that you would have a major mine in the midst of Australia's best agricultural land," Joyce said, adding the "world has gone mad when apparently you cannot build a house at Moore Creek because of White Box grassy woodlands but you can build a super-mine in the middle of the Breeza plains." Hunt signed off on the project on Saturday, July 4, the same day the Nationals MP unveiled his much-delayed agriculture white paper. Australia has a bumper future for farming, the report said, making only passing references to how climate change threatens to dull Australia's competitive edge. Joyce also discounted Hunt's confidence that the mine could be stopped immediately and farmers compensated if groundwater resources were damaged. "If you destroy an aquifer it doesn't matter what condition you put in there about making good, you can't make good. It's gone," Joyce told ABC's RN Breakfast on Friday. Taking aim at Windsor, who says he is considering running again for his old seat, Joyce inadvertently raised doubts about the ability of hydrologists to model mine impacts.

Attacking Windsor as "a multi-millionaire" for selling his own farm to Werris Creek Coal, Joyce said "he was quite happy to accept the hydrology that said there would be a draw-down of 40 centimetres, when in essence it was 15 metres". Windsor says his neighbouring mine opened in 1937 and they wished to expand into part of his land. With a council gravel quarry nearby, "it's exactly the sort of land that should be mined", he says. History of mining The Shenhua mine, meanwhile, has its supporters, such as Owen Hasler, the mayor of Gunnedah Shire. Apart from the promise of some $1.5 billion in royalties to NSW, the mine will help shore up population in towns such as Gunnedah and Tamworth, Hasler says.

Gunnedah is doing better than many neighbouring towns but its numbers have sagged below 12,500 from 13,000 back in 1993. "We've had a history of mining in our shire for more than a century," Hasler, a former high school history teacher, says. The company has "gone about it in an extremely professional manner for a long period of time", with independent scientific panels giving it the tick, he says. Shenhua is also supporting the council's efforts to build closer ties with China, helping to provide "on-ground support" for a 17-person delegation to Beijing and the Inner Mongolian steppe land of Bayannur ("rich lake") that Hasler will lead next week. Hasler says members of the group, including his partner Di, will pay for flights and hotels to ensure there is no hint of a conflict of interest.

The mayor is less supportive of BHP's Caroona mine. "It's probably a bit more problematic, that mine, because of its location," he says. "It extends to the plains and brings other issues to the fore." To Sandy Blomfield, whose family has farmed at Caroona since 1946, and whose land sits atop the proposed mine, the threats include subsidence and a drop in water tables. He points to BHP's own modelling, which found the average draw-down would lower water levels over a 10,000-square-kilometre region by two metres and take at least 280 years to be restored. "It's a lot more complex than under Shenhua, with more aquifers and more interconnections," he says, adding the draw-down could reach 185 metres in places. Legal triggers

The issue of water may stall both mines in the courts, says Duddy, who worked with Windsor on the federal water trigger legislation, which was among the final acts signed off by Julia Gillard's government before she fell to Kevin Rudd in 2013. Another legal fault line to be tested will be the decision in August 2013 by state resources minister Chris Hartcher - who later stepped down during an unrelated inquiry by the Independent Commission Against Corruption - to alter the definition of a flood plain to ensure both Watermark and Caroona were excised from existing controls. A senior source within the Baird government notes the state has yet to approve Shenhua's mining operations plans, and that definition change may be rejected. "Technically it's a way to throw a spanner in the works," the source said. "If Shenhua doesn't get going, BHP hasn't got a hope in hell of going ahead," Blomfield says, a view that mayor Hasler shares. For its part, Shenhua says it hopes to have remaining operation and management plans ready for assessment by the end of 2015.

The company also stressed that falling global coal prices - down about a third since 2013 - and a slew of distressed existing coalmines available for a song offer no temptation to ditch Watermark. "The project has a sound economic case regardless of the current coal price given the quality of the coal, multiple products available from different seams and the low expected operating costs," Paul Jackson, project manager, says. "Unlike other miners, Shenhua is not just a coal trader but an end user of the coal at its power plants." Tim Buckley, a former Citigroup analyst and coal industry critic, doubts Shenhua's mine will ever get going. Coal use in China is down about 5 per cent so far this year compared with a year earlier, as the government steers investment into renewable energy.

Coal imports have crashed 41 per cent as local suppliers win out against foreign suppliers, and Shenhua, China's largest coal producer and trader, has imported no coal at all, Buckley says. "Does Shenhua Energy really want to spend $200 million for a mining licence, then $800 million more building a coking coal mine that they will use as lower-value thermal coal to blend with their Chinese thermal coal?" he says. "The Australian chairman will talk up Watermark, because without it, he doesn't have a job. But the Shenhua China chairman is actually astute, and unlike almost all other coal companies globally, Shenhua is trying to adapt and respond to market changes," Buckley says.