A corruption inquiry has heard that the awarding of mining contracts to friends of former Labor ministers has robbed the people of New South Wales of assets worth hundreds of millions of dollars.

In his opening address to the Independent Commission Against Corruption (ICAC), Counsel-Assisting Geoffrey Watson SC said the level of alleged corruption had not been seen since the days of the Rum Corps in the early years of European settlement.

He was speaking at the opening of the second stage of the corruption inquiry into three ministers in the former New South Wales Labor government.

Operation Jasper is examining a decision by former primary industries and mineral resources minister Ian Macdonald to open a mining area in the Bylong Valley, in the Upper Hunter Valley, for coal exploration.

Mr Watson said the inquiry was looking at whether tendering information was leaked to the family of another former minister, Eddie Obeid.

"We will examine how it came to pass that massive benefits were lost to the people of New South Wales while the profits were ultimately acquired by a small group of well-connected businessmen on the back of comparatively paltry investments," he said.

What was the Rum Corps? The 'Rum Corps' was the nickname given to the 102nd Regiment of Foot, or the New South Wales Corps, the British regiment charged with maintaining order in the early days of European settlement.

The 'Rum Corps' was the nickname given to the 102nd Regiment of Foot, or the New South Wales Corps, the British regiment charged with maintaining order in the early days of European settlement. The Corps was formed in 1789 and the first members arrived in Sydney with the Second Fleet in 1790.

The Corps was formed in 1789 and the first members arrived in Sydney with the Second Fleet in 1790. The Rum Corps became synonymous with corruption in the fledging colony and got its nickname because of its stranglehold on the importation of alcohol.

The Rum Corps became synonymous with corruption in the fledging colony and got its nickname because of its stranglehold on the importation of alcohol. The Rum Corps overthrew Governor William Bligh in 1808 after he tried to crack down on corruption.

The Rum Corps overthrew Governor William Bligh in 1808 after he tried to crack down on corruption. The regiment was recalled to Britain in 1809 and the following year Major-General Lachlan Macquarie took over as governor.

"In all, decisions taken or influenced by Ian Macdonald may have enabled Eddie Obeid and his family to acquire profits in the order of $100 million."

The inquiry heard that the initial investigation has been widened to cover a series of coal leases issued by Mr Macdonald.

It will now also examine why the Obeid family and their associates purchased a number of farms near the coal licence area in 2007-2008.

The inquiry has heard one of the tenements, Mount Penny, fell directly under a farm owned by Eddie Obeid's family.

The Counsel-Assisting said the inquiry was looking at whether Mr Macdonald or his staff, "provided confidential information ... to members of the Obeid family," and whether they then used that information to their own benefit.

There were expressions of surprise in the full public gallery when the Counsel-Assisting said the Obeid family has received $30 million from the contracts already, and could stand to profit over $100 million.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Listen Duration: 4 minutes 49 seconds 4 m 49 s Peter Lloyd reports from the ICAC hearings. Download 2.2 MB

Mr Watson said the issue of the mining contracts could be a result of bad governing, or a result of corruption.

"To be fair, on one view, the decisions might be explained solely by bad governing, but the decisions might also be explained by corruption," he said.

"This public inquiry will be investigating whether corruption was involved.

"If it is corruption, then it is corruption on a scale probably unexceeded since the days of the Rum Corps," he said.

He said the inquiry was the most complex and important in the ICAC's history because it would go inside the New South Wales cabinet room.

Commissioner David Ipp, who is presiding at the public inquiry, noted that the opening statement may "harm reputations" but said he also hoped it would encourage other members of the public to come forward.

The public inquiry is likely to run until December, then into 2013 and is linked to two other Labor-related ICAC inquiries.

Labor MP Eric Roozendaal has been suspended from the party while the ICAC investigates allegations he accepted a discounted car as an incentive.