Few people would still defend corrupt former Labor minister Ian Macdonald but in an extraordinary speech to NSW Parliament, a Liberal MP said the Premier should order a new investigation into how Macdonald came to be jailed.

Liberal MLC Peter Phelps has launched a surprising defence of a jailed former Labor minister. Credit:Jon Reid

Upper House MP Peter Phelps told Parliament this week one of the "most egregious examples of injustice" was the state government's handling of NuCoal's Doyles Creek exploration licence, which the government stripped from the company after an explosive ICAC inquiry.

Macdonald, the former mining minister, was jailed last year for 10 years for giving the lucrative coal exploration licence to former union boss John Maitland.

After the ICAC's findings that Macdonald and Maitland acted corruptly, the state government passed legislation to tear up NuCoal's licence and took the extra step to deny compensation to thousands of NuCoal investors.