A Defence Force training area that was the site of a huge bushfire in October was filled with unexploded bombs but had not been backburned for almost 20 years.

The State Mine fire near Lithgow burned for almost a month, destroying three homes, seven structures and 56,000 hectares of land.

The Defence Force apologised for the fire, which was caused by a botched explosive ordnance training exercise at its Marrangaroo site.

A Defence Force inquiry heard on Monday that members of the Defence Force were almost killed or injured when they initially tried to put the blaze out with shovels and were almost hit by shrapnel from two hidden explosives.

The fire then spread rapidly and was further fuelled by unknown unexploded bombs throughout the area, which severely hindered fire-fighting efforts by the Rural Fire Service.

''There was a lot of unexploded ordnance,'' said senior counsel assisting the inquiry, Lieutenant-Colonel David Jordan. ''It … exploded as the fire passed through.''

A 2011 environmental assessment of the Marrangaroo training site by consultancy firm GHD warned that a large, high intensity fire was ''probable'' due to unexploded ordnance and other environmental factors.

Marrangaroo was a big explosions store during World War II and held up to 10,000 tonnes of ammunition.

However, twice-annual backburning was stopped in 1995 for no apparent reason.

The fire trail near the blaze was also ''almost impassable'', the range had ''completely inadequate'' fire-fighting capacity and a memorandum of understanding with the Rural Fire Service was not clear enough, Colonel Jordan said.

The inquiry heard that 10 students from the Defence Explosive Ordnance Training School were conducting a demolition exercise on October 16, the day of the fire.

At the end of the exercise, their supervisors decided to detonate eight leftover heat rounds, rather than return them to stores.

The inquiry was told this was a common practice. Permission was granted by the range control officer.

However, smoke and flames could be seen after the detonation of two rounds.

Colonel Jordan said an ''optimistically named'' Stryker Unit vehicle with a 500-litre water tank and Davy pump was immediately called over but its hose was not long enough to reach the flames.

Defence members then went into the fire ground and used knapsacks and shovels to try to beat it out before two bombs went off metres away, sending shrapnel whistling over the head of one person.

''This was not exactly a safe method of operation, it was well known that … this area contained unexploded ordnance,'' Colonel Jordan told the inquiry.

By the time the RFS was called, the fire was out of control and bombs could be heard going off across the range.

The inquiry heard that detonations were only banned when there was a ''very high'' fire rating and it was ''high'' in the Lithgow area on October 16.

However the rating was ''very high'' in the greater Sydney area which includes the Blue Mountains.

The next day it was ''very high'' in Lithgow and ''severe'' in the greater Sydney region.

Wing Commander Paul Anthony Muscat, commanding officer of the Defence Explosive Ordnance Training School, who approved the detonation, said he assessed the task as low risk. ''Low risk doesn't mean no risk,'' he said. ''It's not negligent. It's just [that] we couldn't fight the fire. We just need to make sure we don't have this happen again.''

Colonel Jordan will argue that fire ratings are a ''rather crude method'' of assessing conditions for ordnance detonation.

The inquiry before former judge John O'Meally continues.