However, the department’s approval for two Dendrobium longwalls last December ensures the mine’s impact on Sydney’s water catchment area is limited. 

The study by consultants PSM found the effects of bulging "do not appear to be recognised or incorporated into modelling" by the Dendrobium underground coal mine.

"Investigations at [one] site showed new cracks extended through to the ground surface and the permeability increases post-mining by one to three orders of magnitude" or as much as 1000 times, the report stated.

A South32 spokesman told Australia’s Mining Monthly:  “South32 confirms it has received the Report commissioned by the NSW Department of Planning and Environment in relation to Dendrobium mine and is examining its details.

“We will continue to engage with government agencies and other key stakeholders to ensure continued compliance with consent conditions, to provide ongoing employment to 400 people who are part of the local community, and to continue to supply our customers with premium quality metallurgical coal.”

South32 won approval for two more 305 metre-wide longwalls at its Dendrobium mine.

The department adopted a precautionary approach with the approval of Dendrobium Subsidence Mine Plan and had only allowed two of the five longwalls in the SMP to go ahead.

The SMP approval comes with strict conditions based on extensive consultation with relevant government agencies and the community. The department also sought the advice of two independent experts on groundwater and subsidence.

Based on advice from the NSW Dam Safety Committee, the department has imposed a substantial setback of 320m from Avon Dam for Longwall 14 to ensure its integrity and protect Sydney’s drinking water.

A restriction on the height of mining within the coal seam in order to limit the extent of potential surface impacts has also been imposed. The SMP approval caps the mining height at 3.9m, which is substantially less than the company, South32’s, proposed 4.6m.

The Dendrobium mine is a significant contributor to the regional economy.

A department spokesman said it employed more than 400 people and produces more than $600 million of coking coal each year used for steel making in Australia and overseas.