Storm clouds gather: Phil Laird in Leard State Forest, at Maules Creek in north-western NSW.

Leard State Forest, at Whitehaven's Maules Creek open-cut coal mine in northern NSW. Photo: Dallas Kilponen

Mining companies will be given greater flexibility in how they compensate for sensitive habitats destroyed by their operations under a draft policy proposed by the O'Farrell government.

The new biodiversity offsets policy for major projects, released on Thursday, aims to provide greater certainty, cut negotiation time while improving outcomes.

“Previous ad-hoc negotiations around offsetting environmental impacts have served neither the environment, nor the community or business,” Environment Minister Robyn Parker said.

Whitehaven Coal Maules Creek Mine site

The Maules Creek Mine site

“At present the costs associated with the assessment of a project's environmental impacts are highly variable, the time taken to move through the process is uncertain and environmental outcomes are inconsistent,” she said.

The draft policy, which is open for feedback until May 9, proposes a fund to boost biodiversity in cases where environmental offsets for a major project are not available, such as spending on research.

Rehabilitation of mine sites will be assessed as part of such compensation efforts, while so-called “like-for-like” requirements will be “broadened” where exact eco-systems aren't available elsewhere for protection.

Offsets may also be discounted “in exceptional circumstances”, where compensation “may make the project unviable” or the project demonstrates “significant overall social or economic benefits”, the draft states.

Credibility

Environmental offsets have become controversial for some projects, such as Whitehaven's Maules Creek open-cut coalmine. Opponents of the project say separate regions set aside to balance the felling of critically endangered box gum woodlands contains as little as 5 per cent of such species.

Pepe Clarke, chief executive officer of the Nature Conservation Council of NSW, said offsets had to be consistent and predictable “to have any credibility”.

"For too long, the planning system has allowed for negotiated offsets, with no meaningful limits on the ability of planning authorities to compromise on environmental outcomes," Mr Clarke said.

However, "the draft policy appears to have been heavily compromised by pressure from the mining industry, and does not provide adequate protection for threatened species and their habitat," he said. Concerns include the potential for offset discounting, the departure from “like-for-like” conservation, and the use of spending on education as an option.

The NSW Minerals Council, though, welcomed the new policy as reducing uncertainty and regulation, while providing more opportunities for landowners.

“New mechanisms aimed at reducing the amount of agricultural land locked up in offsets should also help improve relations with farmers and other landowners,” NSW Minerals Council CEO Stephen Galilee said.

“As the new policy will be mandatory, it is vital that it is designed and implemented properly and the science behind it is robust,” he said.

A spokesman for Ms Parker said a biodiversity fund linked to offset could swell to tens of millions of dollars a year, depending on the number and size of projects approved.