The Berejiklian government will pause new approvals for coal mining under Sydney's drinking water catchment until well into next year as it considers an advisory panel's report into the impact of mining on water supplies.
The independent panel led by Jim Galvin, a retired UNSW professor of mining engineering, has made 50 recommendations on how future mining should be managed under the Upper Nepean and Woronora catchments that account for about 28 per cent of Sydney Water.
The Woronora catchment also supplies water to the Illawarra's northern suburbs.
Underground mining in the catchment has become particularly controversial during the drought as the levels of Sydney's dams drop faster than at any time since at least 1940 even with the city's desalination plant at full tilt.
The panel found subsidence following coal extraction and the subsequent fracturing of the sandstones reaching the surface about 400 metres above may result in water losses of as much as 8 million litres per day.
But the NSW National Parks Association, an environment group, said the panel's admitted its conclusion that the "knowledge base" on impacts to groundwater and surface was incomplete. A broader assessment of all mines in the Special Areas - not just the four currently operational mines that the panel examined - put the loss as high as 42 million litres a day, or as much as 14 per cent of supply from nearby dams, it says.
The panel's recommendations also deal mostly with future mining proposals, including stepping up monitoring and adjusting to findings if damage turns out to be worse than expected. For instance, the Metropolitan mine, owned by Peabody Energy, has approval for its longwall extraction to pass under Woronora dam itself.
In general, the panel supported ongoing mining but said the government should verify sufficient entitlements are retained by Metropolitan and the other big mine in the region - South32's Dendrobium - "to cover surface water losses resulting from mining-induced effects".
Among the recommendations for future approvals, the panel said designs for proposed mines should be supported "by robust, independent peer review and/or a demonstrated history of reliability".
Planning Minister Rob Stokes said Sydney's drinking water catchment was "so important to the future of our city and state, which is why we established the panel".
While the government considers the recommendations "no new development applications for mining in the Special Areas will be determined", he said.
It's understood Minister Stokes will take up to March next year to respond to the panel's findings.
Peter Turner, mining projects officer at the National Parks Association, said community groups and agencies such as WaterNSW had "been warning governments of the problems and uncertainties for decades".
"The magnitude, complexity, extent and costs of the problems caused by decades of effectively turning a blind-eye and deaf-ear to mining impacts in Sydney's catchment are now beginning to crystallise at the front doors of the government and the Department of Planning," he said.
However, mining companies Peabody and South32 welcomed the report.
"The report confirms that Metropolitan's mine design will safeguard against connective cracking from our underground mine to the surface and therefore only a negligible change in the quantity of water reaching the Woronora Reservoir," a Peabody spokewoman said.
"We also welcome the panel's recognition that our future operations pose no immediate or long-term concerns for the catchment based on ongoing environmental performance measures in place to minimise impacts on water quantity."
A spokesmand for South32 said: "We take our environmental responsibilities seriously and understand the sensitivities of working within the Metropolitan Special Area. We will work with government as it considers the recommendations."