The New South Wales Hunter Valley village of Bulga could be relocated to avoid the impacts of a massive mine expansion, the state's Planning Assessment Commission (PAC) suggests.

It is one of three options put forward by the commission to address the noise, air quality and visual impacts from the Mount Thorley-Warkworth mine expansion, which it has been given the green light.

It proposed the New South Wales Government and Coal and Allied foot the bill for the relocation of the village of about 350 people, with the state delivering all new infrastructure and the company paying for construction of new houses.

The commission noted that any relocation and associated planning would need the involvement of Bulga residents.

It acknowledged the company's relationship with the community needed to be rebuilt, suggesting it engage an independent mediator as a first step towards reconciliation.

The Environmental Defenders Office (EDO) New South Wales led several challenges against the mine, with the extension twice rejected by the courts.

EDO Principal solicitor Sue Higginson said despite recommending approval, the commission acknowledged the disastrous impacts on the village of Bulga.

"The Planning Assessment Commission recommends that consideration be given to relocating the entire village of Bulga at the expense of the New South Wales Government and Rio," she said.

"This would indicate that it is its view that the negative impacts on the village of Bulga is extremely unreasonable."

Bulga residents and anti-coal activists celebrate a Supreme Court decision in Sydney, stopping the proposed Rio Tinto mine expansion near Bulga in April 2014. ( Supplied: Kate Ausburn )

The PAC also recommended Coal and Allied undertake further investigations to minimise the size and depth of the final void, prior to a determination of the application.

It also suggested, as a matter of priority, that the Government conduct a review into the cumulative impact of voids on the Hunter Valley coalfields.

The PAC said the study should include the impact on the water table in the short, medium and long term, and the future of agriculture and associated industries.

The findings would be used to establish a policy position for future mines and mine expansion projects in the region.

Benefits outweigh impacts say union, industry and opposition

Rio Tinto's Mount Thorley Warkworth open-cut mine near Bulga in NSW in 2012. ( Supplied: Rio Tinto )

The PAC said the expansion would boost the New South Wales economy by $1.5 billion.

CFMEU northern district president Peter Jordan said the benefits were massive.

"The Hunter region desperately needs this economic boost, because you only have to look over the last two years and we've seen almost 2,000 coal miners in the Hunter lose their jobs," he said.

"In just the last 18 months, unemployment in the region has risen from 5.8 per cent to now 9 per cent.

"The region couldn't afford to lose this mine, based on all of that."

New South Wales Minerals Council chief executive Stephen Galilee said the extension would guarantee ongoing work for more than 1,300 Hunter miners.

"More than one in 10 of the Hunter's coal miners are employed by this project alone," he said.

"It's been in operation in the Hunter for nearly 30 years.

"It is an important part of the Hunter community and the Hunter economy, and the recommendation from the Planning Assessment Commission that it should be allowed to proceed is very welcome news."

Labor's resources spokesman Steve Whan said the benefits outweighed the impacts.

"It's always difficult when you have got to weigh up all the different options, and I think though we have got to be positive about the fact that these are a lot of families who will continue to take home incomes," he said.

"Overall, I think it is probably in the interests of the industry for the region."

Singleton Business Chamber president Ryan Fitzpatrick said the PAC decision would help to restore confidence in the local community.

"People say to you, 'how long is this going to go on for, my husband's had to leave the region and we're here by ourselves'," he said.

"For this to happen is just going to make everything so much easier for everybody.

"So it's good to see not only the companies and businesses involved have a win but the community as well."