NSW's deputy premier says his department will explore all legal options to "find a way forward" for a major Illawarra coal mine expansion after the Independent Planning Commission rejected the proposal.
Mining corporation South32 sought to expand the Dendrobium coal mine at Kembla Heights, extracting an additional 78 million tonnes of coal from two new areas, and to extend the mine's life through to 2048.
The NSW Department of Planning in October recommended the approval of the mine expansion, saying it would provide "major economic and social benefits", including by protecting about 400 local jobs.
But the IPC this month deemed the project's risks to Greater Sydney's drinking water catchment were too high, and knocked back the proposal.
The IPC found the mine design did not successfully balance the revival of the mine and the maintenance of a safe drinking water supply.
Adverse impacts on the local environment were also likely to be permanent.
"The level of risk posed by the project has not been properly quantified and based on the potential for long-term and irreversible impacts - particularly on the integrity of a vital drinking water source for the Macarthur and Illawarra regions, the Wollondilly Shire and Metropolitan Sydney," the IPC said.
Deputy Premier John Barilaro on Monday participated in a roundtable discussion on the mine's future with South32, nearby steelworks operator BlueScope, unions and local business chambers.
Local members Ryan Park and Paul Scully, who is NSW Labor's natural resources spokesman, were also present.
Mr Barilaro said the implications of the IPC's decision on the Illawarra region and the supply of material to the Port Kembla steelworks may prove large.
He told reporters he would work to "find a way forward" for the mine expansion plans, including by seeking legal advice on overturning the IPC's verdict.
"At no point does anybody, any stakeholders, anybody in government, want to see a detrimental outcome to Sydney's water catchment," Mr Barilaro said.
"But at the same time we've got to balance the advantages and opportunities for the economy, and we know we can. We know they can coexist.
"There's a failure there wasn't an opportunity to work through those issues."
Greens and environmental groups have supported the IPC's decision, saying it should be "the nail in the coffin" for mining near water catchments.