Iemma – who gave testimony to the Independent Commission Against Corruption yesterday – said granting of the licence was a “significant departure from normal practice”

He said Macdonald would have been expected to consult the Cabinet or the caucus before making a decision that was worth tens of millions of dollars to the state.

ICAC launched the investigation – one of three in progress over former Labor government decisions – to establish whether Macdonald gave inside information about areas that would be opened for coal mining to interested parties associated with Labor powerbroker Eddie Obeid.

Obeid’s family purchased the Cherrydale Park property in late 2007 and subsequently a coal exploration licence was granted over the land in June 2009.

Obeid interests held a 25% stake in Cascade Coal which went on to win the licence.

Later Obeid agreed to sell the stake for $60 million, with $30 million already received and $30 million outstanding.

Iemma said when the government granted the licence for BHP Billiton’s Caroona coal project in the Liverpool Plains the company ended up paying an extra $91 million.

By contrast Cascade Coal only paid the $1 million mining licence fee.

The tender process for the licence was not advertised and was limited to smaller coal mining companies rather than larger production companies, he said.

Former premier Nathan Rees, Iemma’s successor, also appeared before the ICAC hearing yesterday.

Rees said he decided to remove Macdonald from Cabinet while he was premier when he became aware of many “surprises” following on from decisions made by the former minister.

On Monday counsel assisting the inquiry Geoffrey Watson SC told the hearing that Obeid had manipulated Macdonald to make changes to the state’s coal licence maps to ensure his scheme would “confer massive cascading profits upon Mr Obeid and his family”

“It is corruption on a scale probably unexceeded since the days of the Rum Corps,” he said.