A small but colourful group of environmentalists protested outside the office of the Department of Planning and Environment in Wollongong on Friday morning, organised by the Protect Our Water Alliance.

They were continuing their campaign to end coal mining in the drinking water catchment behind the Illawarra Escarpment, of which the Dendrobium expansion has been the most prominent example.

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Protect Our Water Alliance (POWA) spokesperson Dr Rada Germanos said the Independent Planning Commission had rejected the proposal, in line with the concern of more than 900 local people, in 2020.

"Here we are in 2022 faced with a still-incredibly damaging proposal to extend longwall mining underneath the water catchment of the Illawarra for another 20 years," she said.

"This government's decision to overturn the IPC's deliberation and roll out the Planning Minister's red carpet reeks of state capture. We demand Minister [Anthony] Roberts reject this proposal."

The term refers to powerful corporate interests exerting significant influence over a state's policy formation and decision making.

A spokesperson for the NSW Department of Planning and Environment said its assessment would consider all feedback received and independent expert advice.

"The new application incorporates changes intended to address the issues raised by the Independent Planning Commission, including a 60 per cent reduction to the longwall mining area," the spokesperson said.

"Community consultation is an important part of the assessment process and South 32 will need to address all issues raised before we undertake our rigorous assessment of the proposal."

A spokesman for South32 said revisions to the plan resulted in less impact, and the new Environment Impact Statement showed the expansion would cause less water losses - estimated at 78 per cent less predicted peak surface water losses - than the original.

"In December last year, the NSW Government recognised the project's importance to the local workforce and economy by declaring it State Significant Infrastructure," he said.

"Our revised mine plan considers feedback from the Independent Planning Commission and minimises environmental impacts while enabling the continuation of mining activities at the Dendrobium mine, protecting local jobs and continuing to provide a significant contribution to the Illawarra and New South Wales economies."

South32's plans are on exhibition until mid-June via the Planning website.

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