12/07/2017 3:19 PM AEST | Updated 12/07/2017 3:20 PM AEST

NSW Government Buys Back Part Of Controversial Mine Licence

Opponents of the Shenhua mine reckon they could have gone further.

Opponents to the proposed mine have been vocal for more that 10 years.

The NSW Government is buying back a majority share in the controversial Shenhua Watermark Coal exploration licence, in a move it says will protect the fertile agricultural lands of the Liverpool Plains.

Famed for its nutrient rich and highly productive soil, the Liverpool plains has for the past 11 years been the site of a bitter argument between some locals and state and federal governments over a controversial exploration licence issued to Chinese mining company Shenhua nine years ago.

The state government announced on Wednesday it is spending $262 million to buy a 51.4 percent share of the company's exploration licence. Exploration can continue, but only along nearby ridge-lands that keep it away from the black soil.

The relinquished area from a proposed coal mine in the Liverpool Plains area in northern NSW. The NSW government has an agreement to refund $262 million to Shenhua Watermark in exchange for a controlling 51.4 per cent stake in an exploration licence covering the affected region in the state's north.

"The Government has determined there should be no mining on the fertile black soils of the Liverpool Plains," NSW Resources minister Don Harwin told reporters on Wednesday.

"Exploration can continue on area that's away from the black fertile soil, but there's still a number of conditions that have to be met and work that has to be done before I will consider whether a mining licence will be issued.NSW Resources Minister Don Harwin

"Any future mining activity will now be restricted to the ridge lands."

The agreement strikes the right balance between agricultural protection and economic growth, said Member for Tamworth Kevin Anderson. Up to 600 new jobs will be created on top of "millions of dollars in investment for the region," he said.

For more than a decade farmers in the area have fought the proposed mine, which they fear will impact their livelihoods.

National Campaigner for Lock the Gate Alliance Phil Laird said the government could have gone further and cancelled the licence and banned coal mining altogether.

"Instead, they are handing tax-payers money to a foreign owned company and waving them through to mine our food bowl. It beggars belief," he said in a statement.

"We will support the farming community of the Liverpool Plains to keep this mine out of one of the best agricultural regions in this country.

Speaking through the Alliance, Breeza farmer Andrew Pursehouse, whose property adjoins the proposed Shenhua coal mine, said he felt betrayed by the NSW Government.

Members of the Liverpool Plains Youth Group on the black soils of Breeza Station in 2015

"If it was serious about protecting farmland, it would have cancelled the coal licence outright and stopped this coal mine," he said.

"Carving out areas that Shenhua weren't going to mine won't change a thing."

NSW Farmers' President, Derek Schoen, said Wednesday's announcement as a "step in the right direction."

"We are not against mining but it must be developed strategically and not at the expense of precious land, water and agricultural jobs," Schoen said in a statement.

"The Liverpool Plains isn't out of the woods. NSW Farmers will continue voicing its opposition to the Shenhua Watermark project and impressing upon Government the critical importance of protecting prime agricultural land and water resources.

Born in Controversy

Fairfax/Kate Ausburn
"No mines on Liverpool Plains our food bowl" at the old Breeza church.

Shenhua said it has come to terms with the state government's decision to not allow any mining on the black soil plains.

"Shenhua will continue to progress its Watermark Coal Mine on the remainder of EL7223 in line with the planning approvals from both the State of NSW and Commonwealth Government respectively in 2015," Shenhua Australia Chairman Liu Xiang said.

"We will continue to co-operate with the NSW government in respect of progressing the project and ensuring it meets the highest environmental standards."