A company that wants to build an underground coal mine in the NSW Southern Highlands says it has never discussed the proposed mine with a state government minister whose property borders the project area.

Hume Coal has issued a statement that strongly rejects suggestions that the location of Primary Industries Minister Niall Blair's property in Sutton Forest was a consideration when deciding the boundaries of the proposed mine.

"The location of individual landowners' properties, including that of the minister, did not and does not come into consideration when deciding the project boundary," a spokesman for Hume Coal said.

"Given that our project plan was released in July this year, the considerable work that goes into it significantly pre-dates Mr Blair's appointment to his portfolio.

"At no time has Hume Coal held discussions with the minister regarding his property as it relates the project area."

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The NSW Greens had suggested it was "remarkable" that the boundaries of the proposed mine followed the Illawarra Highway at Sutton Forest and then appeared to dog-leg around Mr Blair's property, which borders the highway.

But the company said the project boundary was "restricted to bound areas underlain by the mine plan, or land owned by Hume Coal, or state forest - within the boundaries of the exploration licence".

"The areas within the mine plan have generally been selected based on geology," a Hume Coal spokesman said.

"Even if the project boundary had continued to follow the Illawarra Highway, the minister's property would still fall outside the boundary since the property is to the south of the Highway."

Mr Blair has declared a conflict of interest and is refusing to answer any questions about the Hume Coal project.

Consultant groundwater engineer for Southern Highlands residents Dr Philip Pells, has concerns about the groundwater. ( ABC News )

Philip Pells is a groundwater engineer who was hired by the Southern Highlands Coal Action Group to carry out a peer-reviewed study of the Hume Coal license area.

Mr Pells said he had frequently observed mining companies avoid including certain properties in their mine boundaries.

"It often happens that the mining company, in order to avoid triggering concerns by certain persons who own certain land, show the mine plan avoiding that land," Mr Pells said.

"That's happened often and I wouldn't be surprised if it happens down in Sutton Forest."

Locals concerned about impact on groundwater

The impacts of coal mining on the Southern Highlands' pristine groundwater systems is one of the biggest concerns of locals.

Rural contractor Matt Mitchell said water was the lifeblood of the region's dairy and cattle farms, vineyards and orchards.

"Coal mining in the Southern Highlands is a situation that's just not going to work," Mr Mitchell said.

"We rely very heavily on the water underground here. That aquifer that has formed over thousands and thousands of years is going to be severely affected. To even contemplate (coal mining) in the highlands is really a very silly decision."

Mr Pells said he had significant concerns about the long-term impacts on groundwater.

"The Southern Highlands is not a suitable place for mining," Mr Pells said.

"The mining will certainly impact the groundwater. The groundwater resource is very valuable. It's high quality water and there's lots of it.

"This idea that somehow we can fall back to a position of modifying the mine and therefore safeguarding the groundwater system is just a nonsense."

Hume Coal is conducting a water-monitoring study in the region and has formed a Water Advisory Group to keep the Southern Highlands community informed of its plans.

Rural contractor Matt Mitchell is concerned about HumeCoal's proposed mine would endanger local farms. ( ABC News )

It said the findings of its study would provide a model identifying the location, connectivity and depths of various aquifers. The company will use surface water data to inform future mine planning and environmental assessments.

With Mr Blair the state government minister responsible for water, locals are demanding to know who is taking responsibility for the impacts of Hume Coal's proposed mine on Southern Highlands' groundwater systems.

"I think it's once again a politician moving the responsibility off to someone else," said Mr Blair's neighbour Virginia Brousse.

But another neighbour, Margaret Alexander, was more sympathetic of Mr Blair's position.

"I do have sympathy for him, because it's under his land as well, the lease," Ms Alexander said.

"I can understand why he can't have any say in what goes on, because naturally it's a conflict of interest, and that's important."

Mr Blair said he could not answer questions about Hume Coal and referred the ABC to the NSW Department of Industry.

A spokesperson for that department said that mining project applications were determined in the planning portfolio and Mr Blair would have no role in approving Hume Coal's mining proposal.

"The minister is not a decision-maker in relation to this proposal, however, the Department of Primary Industries (DPI) has an important advisory role in ensuring that the land and water impacts are properly considered under the Environmental Planning and Assessment Act 1979," the spokesman said.

"To prevent any conflict whilst ensuring that all proper assessment processes and protections are undertaken these matters will be dealt with by the Head of the Department of Industry. In fact, this is what would normally happen even if the minister did not live near the proposal."

Final approval for the granting of a Mining Lease is the responsibility of the Minister for Industry, Resources and Energy.

Mr Blair's office also declined to answer questions about whether the minister had ever met with representatives of Hume Coal to discuss the mine.