Documents obtained by Fairfax Media show the NSW Environment Protection Authority found the government's draft native forestry bill unfairly favoured Forestry Corp by remove licensing requirements for the corporation while maintaining them for landholders or industry seeking private native forestry.

It would also leave the corporation with powers unmatched for a state agency, including its protection from third-party challenges such as from environmental groups.

"The inherent conflict of interest for a corporation in having a concurrency role for negotiating, revoking or changing the terms of their licence ... and the removal of third party legal rights, exists nowhere else in NSW legislation or regulation," the EPA's leaked assessment made last December shows.

Fairfax Media understands the EPA also sought legal advice on how to restrict "very intense" harvesting that the Forestry Corp had conducted for years in areas such as the blackbutt-dominant forests of the NSW mid-north coast.

The Integrated Forestry Operations Approvals (IFOAs) that permitted the logging were, however, found to be poorly worded, curbing the watchdog's ability to take legal action.

Even if it could act, though, the penalties available remain tiny. While other breaches, such as by coal mines, could attract fines of as much as $1 million, most forestry penalties were in the hundreds of dollars.

Many of the sanctions were decades old and although the cabinet had discussed a review of the penalties in 2014 - and agreed on million-dollar fines for forestry impacts on threatened species in late 2015 - it is yet to update them.

The EPA on Monday did not backtrack on this assessment of the forestry bill.

"The NSW Forest Industry Roadmap (August 2016) commits to a new native forestry regulatory framework, which will incorporate modernised penalties and regulatory tools, and a remade Coastal IFOA," a spokeswoman said, adding the government would consult the public on these later this year.

A spokesman for Gabrielle Upton, the environment minister, echoed the EPA. He declined to comment on the EPA's specific concerns.

Dawn Walker, the Greens Forests spokeswoman, said it was "scandalous that we have potentially a decade of widespread, illegal intensive harvesting operations by Forestry Corporation and nothing has been done to stop it".

"The government should heed the EPA's call to restore third-party appeal rights, to ensure Forestry Corp can be prosecuted by private citizens when they break the law," Ms Walker said.

The EPA's record of audits on native forestry operations point to a good success rate in uncovering alleged breaches.

In 2016-17, the EPA conducted 17 audits and 95 monitoring inspections on such operations. "This resulted in three warning letters, 15 official cautions, one clean-up notice and seven penalty notices being issued," the agency said.

A year earlier some 40 audits prompted more than 60 notices, including official cautions and eight penalty notices.

In the latest annual report by the Forestry Corp for the 2015-16 year, it said had "disappointingly" received "a small number of penalty infringement notices" during the year, with the EPA commencing prosecution for infringements on the NSW south coast in 2013.

"We take breaches of the stringent native forestry and plantation rules seriously and above all are committed to ensuring that environmental harm does not take place," the report said.

The corporation's hardwood division has posted an operating loss for each year since at least 2012, with annual revenue down about 10 per cent over the period to last financial year.

"It is time for NSW to get out of native forest logging and move to plantation timber only as the sustainable and profitable option," Ms Walker said.

Fairfax also sought comment from Forestry Minister Paul Toole.