The $360 million expansion of the Appin and West Cliff mines approved by the state's peak planning body this week is significantly smaller than what was proposed in 2009.

The plan was scaled back after fears it could cause unacceptable damage to rivers and creeks.

But the compromise means that, over 30 years, royalty payments to the NSW Treasury will drop from $3 billion to $2 billion and the number of direct and indirect jobs will fall by 1115.

NSW Planning and Infrastructure concluded the exclusion of sensitive land from mining had come at a "high cost to both Illawarra Coal and the State Government, and with significant flow-on effects to the local, regional and state communities".

Despite the reduction, the project still expected to deliver a $6.9 billion total benefit to Illawarra Coal, the NSW Government and the Illawarra region.

Illawarra Coal head of external affairs John Brannon said it was a major bonus for the state and regional economy.

"A seven billion dollar project is still a very significant project for our region, particularly at this point in time," he said.

"It's taken a long time to achieve this outcome. It's been before government for a long time - there's been lots of studies done.

"So yes, the project has seen changes but our view is they've got the right balance between business and the environment."

Continuing longwall mining operations at the Appin Mine and West Cliff Colliery will extend the life of mining operations by 30 years. Illawarra Coal has been granted permission to extract 10.5 million tonnes of coal a year.

A final report prepared by the Planning Assessment Commission found the removal of longwall mining from environmentally sensitive areas in the Dharawal State Conservation Area meant impacts on upland swamps and waterways were negligible.

NSW Greens mining spokesman Jeremy Buckingham said the economic benefits of mining should not be allowed to take precedence over the need for sustainable development.

"So I'm pleased the company has scaled back the size of the development," he said.