The purchase of 590 hectares of bushland at Maddens Plains is likely to be used by Illawarra Coal to smooth the way to mine under several sensitive swamps in water catchment land at the Dendrobium mine.
The purchase, revealed by the Mercury last month, was described by Illawarra Coal as being for environmental conservation purposes.
And it seems the BHP Billiton subsidiary had been on the lookout for such a conservation opportunity.
As part of its Subsidence Management Plan (SMP) for the new 3B longwall area of the Dendrobium mine, Illawarra Coal was required to prepare an environmental offset strategy to compensate for the impact on upland swamps.
The 10 longwalls that make up the area 3B, between Cordeaux Dam and Avon Dam, are to be dug out under some of the largest upland swamps in this area of the catchment.
The company's environmental assessment report for the longwall plan concludes there is a potential for bedrock cracking under many of these swamps.
"Cracking may lead to the diversion of surface stream flow into the dilated strata leading to some surface water loss," the report says.
It was also likely "localised lowering of the shallow groundwater table" could result from the change in water flow.
This will be allowed under the SMP, approved by Planning Department director-general Sam Haddad in February 2013, because of biodiversity offset provisions. Illawarra Coal can compensate for the anticipated damage by conserving land elsewhere.
A company spokeswoman on Thursday said potential offset uses were "yet to be determined".
But environmentalists are sceptical of the value of offsets.
While these swamps lie in water catchment special areas between the Cordeaux Dam and Avon Dam, the newly purchased land is not in a catchment area. A coal washery has been operated on it previously, and some of the land may need rehabilitation.
Peter Turner, from the Northern Illawarra Sustainability Alliance, said the upland swamps in area 3B were rated as being of special significance for local biodiversity, meaning the offset "swap" was not equal.
"They wouldn't be equivalent in that sense - they wouldn't contribute to the water catchment function in the same way," he said.
"The idea of an offset in this case is quite inappropriate.
"Really [an offset] is an apology for damage to natural assets. It's very rare that they are like-for-like natural assets."
Offset deals have been used before in this area. In a 2007 planning approval signed by then Planning Minister Frank Sartor, Illawarra Coal was required to hand over 153 hectares at Bulli Tops to become national park.