The Queensland State Government has approved Indian-owned Kevin’s Corner project in Central Queensland despite a coordinator-general’s report warning nearby groundwater supplies would "be permanently lost".
The project located in the state’s Galilee Basin, is run by GVK which is also developing the Alpha Coal project.
GVK has estimated about 1800 workers will be needed to kick start the $4.2 billion project and another 1600 when mining begins, Daily Mercury reports.
Kevin’s Corner will supply 30 million tonnes a year of thermal coal, utilising Abbot Point port near Bowen.
Queensland deputy premier Jeff Seeny said the project approval demonstrates the government’s determination to enhance the state’s economy.
But in a recent report completed by coordinator general Barry Broe, he warns at least 28 landholder bores near the project would be at risk.
"Long term (post-mining) predictions indicate that groundwater levels would not recover to pre-mining levels adjacent to the project," he wrote.
"Thus, the groundwater resources would be ‘mined’ from the Permian Sandstone and permanently lost."
Brow added that the company is committing to mitigate the mine’s impact on landowner water supplies and that negotiations had already begun.
GVK will also be asked to compile a long-term water security plan before mining begins.
With state approval under GVK’s belt the project now needs to be approved by Federal Environment Minister Tony Burke.
The Kevin’s Corner development will include two open-cut and three underground mines, a workers camp which will accommodate up to 2000 workers, and an airport with 2.5kilometre run way.
There are already a number of coal projects in the development phase in the Galilee Basin, west of Rockhampton, including Adani Group, also based in India, which is pushing ahead with its $10 billion Carmichael Coal mine, rail and port project, flagging the need for 9000 workers.
Late last year Australian Mining reported GVK was predicting coal prices to improve by April.
At the time spot coal prices had fallen to a three-year low during 2012 hitting $US81 ($AUD78.51) a tonne at the end of October.
"We're near the bottom and it's only up from here,” GVK Hancock Coal chief development officer Justin Crotty said.
Crotty at the time predicted coal would recover to $US100 ($A96.92) a tonne by the end of this year, but falling commodity prices and rising operating costs are continuing to wreak havoc on Australia’s coal sector.
After peaking just over the $US100 mark in February, thermal coal dropped to $US93.44 ($AUD89.96) a tonne in April.
The Australian Coal Association is claiming over 9000 jobs have been slashed from the QLD and NSW coal sector in the last 15 months.