Wollongong Coal's financial reputation and previous breaches of planning controls were not allowed to be considered by the Independent Planning Commission (IPC) during its determination of the Russell Vale mine expansion plan.
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The IPC on Tuesday approved Wollongong Coal's application to mine further under the water catchment above the Illawarra Escarpment, drawing angry criticism from environmentalists who said the process had lost more credibility.
"It doesn't make any sense at all," Protect Our Water Alliance spokeswoman Kaye Osborn said.
"We know these factors influence the company's ability to carry out the project and deliver on the purported benefits to the community."
In particular, Wollongong Coal's history of years-late or non-compliance with environmental conditions on its mining approvals - including the failure to realign Bellambi Creek to reduce runoff during storms - raised concerns.
Wollongong Coal had been investigated by the NSW Resources Regulator as to whether it was a "fit and proper person" to hold a mining licence, but the investigation was shelved in 2019 without a finding.
Its financial accounts had often been subject to a warning about the company's solvency, as its liabilities far outstripped its assets.
But at public hearings into the plan in October, the IPC panel's chair Professor Alice Clarke emphasised there were "certain matters" which by law the commission could not consider.
"These factors include the reputation of the applicant and any past planning law breaches by the applicant," she said.
The same point was made by IPC panel chair Stephen O'Connor last week at hearings into the extension of the Dendrobium mine.
Ms Osborn said the final step in the process may be different.
"The project still requires approval under the [Commonwealth] EPBC Act, which does have a requirement to consider the environmental history of the applicant," she said.
"It will be residents and taxpayers who will pay the price of this mining expansion through further damage to the water catchment, more pollution of our air and waterways and accelerating climate change.
"The 118 conditions of consent are useless if the NSW government will not monitor and enforce them and Wollongong Coal has a long track record of serial non-compliance with conditions of development approval."
The IPC found the proposed bord and pillar mining plan would not produce environmental impacts beyond what was acceptable.
"The project would result in some amenity impacts and additional environmental disturbance associated with recommencement of mining operations [however] the additional environmental and amenity impacts can be appropriately managed and mitigated in accordance with the applicable guidelines and policies," the IPC said.
Comment has been sought from Wollongong Coal but the miner has so far not given any response or statements.