It was a phone call Neil O'Toole will never forget.

Key points: The Myuna Bay Sport and Recreation Centre was evacuated in March

The Myuna Bay Sport and Recreation Centre was evacuated in March The State Government closed it due to fears that a nearby coal ash dam could pose a risk in the event of an earthquake

The State Government closed it due to fears that a nearby coal ash dam could pose a risk in the event of an earthquake But Government advisers said the centre's closure was not necessary

"The fella in Sydney called and said there was a risk," Mr O'Toole, the founder of Myuna Bay Waterski Club on Lake Macquarie, said.

"He said there was a public risk.

"He said they were closing the camp this afternoon."

It was Friday, March 29, and Mr O'Toole and 200 others were deep into the second day of an international waterskiing competition at the centre.

He was told they had to evacuate. The competition was over.

"I had to gather them all … I had to deliver this [news] to these people," he said.

"I remember the kids' mouths dropped, their jaws had dropped. They just went, 'you're kidding me'."

Kayakers at Myuna Bay Sport and Recreation Centre prior to its closure. ( Supplied: NSW Office of Sport, )

In the phone call, Mr O'Toole was told there was a risk a coal ash dam about 3 kilometres away could collapse on the facility in the event of an earthquake.

It was a call that spelled the end of the Myuna Bay Sport and Recreation Centre — a popular camp that has catered to tens of thousands of kids from across NSW each year since 1944.

The closure — six days after the March state election — sparked outrage across the local community, with 20 jobs lost at the site.

Twenty-four days before Mr O'Toole got the call to evacuate, an email obtained by the ABC showed Origin Energy advised the NSW Office of Sport that the wall of a coal ash dam attached to its nearby Eraring coal-fired power station could fail in the event of a magnitude 5.7 earthquake — an earthquake deemed as a once-in-a-5000-year event.

Eraring Power Station next to Lake Macquarie in NSW. ( Supplied )

In a letter to then chief executive of the NSW Office of Sport Matt Millner, who stepped down in May, Origin stated the material beneath the dam was susceptible to liquefaction — a process where soil might break down into liquid form in the event of a stress like an earthquake.

If this happened it would likely pose a serious threat to the recreation centre.

Against evacuation

But internal documents obtained by the ABC under Freedom of Information revealed the NSW Office of Sport, which operated the Myuna Bay Sport and Recreation Centre, went against the advice of its own government experts when it suddenly closed the popular Lake Macquarie facility.

In an email sent the day before the centre's closure, the head of the NSW Dams Safety Committee, Chris Salkovic, warned the NSW Department of Industry against evacuation.

"I caution the Office of Sport in conflating Dams Safety risk with an obvious commercial decision to relocate the [Myuna Bay Sport and Recreation Centre], particularly when presented to the community and users of the facility," he said.

"From the limited information we have been provided to date, we do not feel immediate evacuation is warranted, although it is not our decision to make."

Independent MP for Lake Macquarie Greg Piper said he believed the centre's closure could have benefited Origin Energy.

"It's very clear that they were leaning on the Office of Sport to do this," he said.

"At the same time Origin Energy had an application in to the State Government to increase the capacity of the Eraring ash dam.

"I imagine that would have been something that would have been on their mind."

The application to increase the capacity of the dam is being assessed by the NSW Department of Planning and Environment.

The Myuna Bay Sport and Recreation Centre has closed amid safety fears. ( Supplied: Office of Sport NSW. )

NSW Public Works chief emergency engineer Martin Dwyer was also asked to validate the risk reported by Origin.

In the emails obtained by the ABC, he too expressed concern.

"So, what we have here is an investigation that is looking for trouble and when it finds it, it recommends against further checking," Mr Dwyer wrote to the Dams Safety Committee and the Office of Sport.

"And it is an investigation based on second-best information.

"In my view, this whole story of safety concerns for Myuna Bay Sport & Rec Centre needs to be viewed through the lens of a plan to increase the dam capacity."

'A risk is a risk'

Origin Energy has strongly rejected any allegation it influenced the closure of the facility.

It said it provided engineering reports to Mr Piper, the Office of Sport and the Dams Safety Committee, the latter of which is undertaking an independent peer review of these assessments on behalf of the NSW Government.

The NSW Office of Sport also sought advice from legal firm K&L Gates to make its decision to close the centre.

The firm, relying on Origin correspondence, Office of Sport documents and public information from Geoscience Australia, recommended the centre be closed.

It said the failure to eliminate the risk to the centre would result in a contravention of the WHS Act.

"A risk is a risk, it either exists or it does not," the report from the firm read.

"The Hunter and Lake Macquarie region are susceptible to earthquakes … and it would not be a defence to rely upon the prediction of an earthquake in 50 or 1000 years."

But Mr Piper said the knee-jerk reaction to this advice was uncalled for, and he would have liked the Office of Sport to rely more heavily on the NSW Government's own experts in the Dams Safety Committee and NSW Public Works.

Origin Energy's initial report, completed by engineering firm Stantec, has not been publicly released, and is being reviewed by the Dams Safety Committee, which is expected to deliver its findings in the coming days.

A spokesperson for the Office of Sport said it "takes the safety of staff and clients very seriously and decided to act on advice to close the centre in accordance with its work, health and safety obligations".

The Myuna Bay Waterski Club is still pursuing compensation from the NSW Office of Sport for expenses incurred by the Australian and NZ teams and the club for the cancellation of the competition.

Origin Energy has offered to pay for the relocation of the centre, which it estimated would take two to three years.