Springvale Coal mine, whose previous expansion was approved despite its release of highly saline wastewater into the World Heritage-listed Blue Mountains National Park, is seeking permission to lift annual output 22 per cent to 5.5 million tonnes.

Environmental groups are calling on state and federal governments to take advantage of the modification to impose stricter limits to prevent more destruction of the sandstone-based highland peat swamps – an endangered ecological community.

A report by the independent monitoring panel led by Emeritus Professor Jim Galvin not only found a "very significant drop" in the water level of Carne West Swamp but also that changes had begun when the underground mine was 700 metres away.

That range was "well outside the impact zone" predicted in the mine's environmental impact statement, the report released in June said. The outcome prompted the panel to question whether swamps may be responding "in ways not fully accounted for in the extensive studies" by mine owner, Centennial Coal.

Keith Muir, director of The Colong Foundation for Wilderness, said the mine must be restricted to protect the next swamp to the east, Gang Gang Swamp, and a "dramatic" waterfall downstream.

"Important populations of the Blue Mountains skink and the giant dragonfly that lived in [the Carne] swamp have been lost as a result of the collapse in groundwater levels, destroying the habitats of these nationally endangered animals," he said. 

Mining in the water catchment

Sydney is one of the few major cities to allow mining in its water catchment. The Springvale mine alone has to pump as much as 23 megalitres of water a day, most of it ending up in the Coxs River, which then flows into Warragamba Dam.

A spokeswoman for the NSW Planning Department said Springvale's proposal "is being assessed under strict criteria … with special consideration given to the impacts on swamps and water".

The department has required Centennial to act on all 16 of the panel's recommendations, including installing additional monitoring as "soon as possible".

Katie Brassil, a spokeswoman for Centennial, said the miner was seeking to lift the cap on Springvale's workforce, production limits and coal stockpile capacity.

"There is no change to the approved longwall mining technique, the approved mine plan or existing surface footprint," she said. "Any potential impacts from an increase in production will remain within Springvale's current planning approval."

The Blue Mountains Conservation Society, meanwhile, has written to Josh Frydenberg, the federal environment and energy minister, seeking his intervention to require Springvale mine no closer than 700 metres of any swamp listed under the national Environment Protection and Biodiversity Conservation Act.

'Accelerate the rate of damage'

The mine's plan to increase output by 1 million tonnes per year "will accelerate the rate of damage, which is likely to result from further undermining of swamps", the society said.

It also noted that the independent panel found there was no baseline data for Carne West swamp before it was affected by mining.

A spokesman for Mr Frydenberg said mine conditions were varied "so as to impose a demonstrably more rigorous swamp monitoring program than either the interim monitoring arrangements or those initially submitted by Springvale Coal in their February 2016 request".

"The revised conditions set robust standards for current activities and clear expectations for Springvale's future swamp monitoring programs," the spokesman said, adding his department is reviewing the society's letter.

Jeremy Buckingham, NSW Greens energy spokesman, said coal mining was incompatible with protecting Sydney's water catchments.

"Longwall coal mining is an incredibly damaging technique and this report shows that the damage can spread a long way from the location of the mining itself," Mr Buckingham said.

"It would be negligent to approve an accelerated mining program for a mine that has already caused so much environmental damage, and when previous environmental assessment documents have clearly been dishonest on the true impact of longwall mining."

The company will prepare a response to submissions following public consultation on its proposal.

The Planning Department will finalise its assessment before referring it to the independent Planning Assessment Commission for a final decision, the spokeswoman said.

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