The commission found the proposed 268 million–tonne mine in northern NSW did not intrude on to the region's fertile black soils. It also sought expert advice and modified the plan to provide "additional protection to the [area's] critical groundwater resource", according to its final report.

The Chinese government-owned Shenhua plans to extract the coal over 30 years, with construction starting in 2015-16. Its own power plants in China are likely to be among the biggest customers, a spokesman said.

The mining industry welcomed the PAC decision after several recent proposals were knocked back. There is also no merits appeal possible on the verdict following changes to planning regulations, with the final decision now resting with the federal government under the biodiversity act.

"This decision reflects positive long-term prospects for the industry and will create hundreds of new jobs for the Gunnedah region," Stephen Galilee, chief executive of the NSW Minerals Council, said. "The Watermark Project has been subjected to unprecedented levels of scrutiny by the Planning Assessment Commission and its approval comes as a welcome relief for the industry."

Planning Minister Pru Goward said the mine had been approved after "to comprehensive, transparent, and scientifically rigorous assessments" by the independent commission.

"The project is a real boost for the north-west region, delivering a range of major economic benefits," Ms Goward said.

However, Tim Duddy, a local farmer and head of Caroona Coal Action Group, said the PAC's report was "very, very lightweight" and had failed to acknowledge that water resources to be used in the mine are already allocated to farmers.

"The PAC has signed the death warrant for the Liverpool Plains," Mr Duddy said.

"This is the new frontier" for the coal industry, he said.

However, Shenhua's project manager, Paul Jackson, said the mine would have no impact "on the wider agricultural production" in the region.

"We will not mine on the Liverpool Plains and the PAC has once again confirmed the irrefutable evidence showing the project will not harm the valuable irrigation groundwater accessed by those who farm on the plains," Mr Jackson said.

The proposed mine, about 3 kilometres west of the town of Breeza, will destroy 789 hectares of an endangered ecological community, much of it box gum woodland, and 148 hectares of other woods.

The mine's owners have earmarked offsets to compensate for the wildlife losses and most of the mine will eventually be rehabilitated, the spokesman for Shenhua said.

Greens NSW mining spokesman Jeremy Buckingham predicted the National Party would face an electoral backlash from a mine that is unpopular in the region.

"The Nationals came to power four years ago promising to protect strategic agricultural land from the threat of mining, but this approval shows they have comprehensively failed," Mr Buckingham said. "If the NSW Nationals and federal Agriculture Minister Barnaby Joyce can't protect the most precious farming area in NSW and their political heartland, then what use are they?" he asked.

Fairfax Media sought comment from Labor leader Luke Foley.