Hunter Valley Protection Alliance spokesman John Thomson said AGL and the state government had "intentionally whitewashed" the community over the discharge of 120,000 litres of underground water that flooded and killed an adjoining pasture.

Mr Thomson said AGL was obliged to cart the water for treatment but discharged it to save costs. He said the alliance would hold a protest against coal-seam gas exploration at Sunday's Broke village fair.

An AGL spokesman acknowledged the water discharge but said it was allowed under its state government water bore licence.

Mr Thomson said the group had the water sampled and found it contained glycol and ethers, which he said were signs of "fraccing" - a process used in coal-seam exploration.

The AGL spokesman said its independent tests showed no signs of glycol or ethers, and that the water came from groundwater monitoring, not coal-seam exploration.

A government spokesman said AGL had a licence for water bores but was directed to remediate the land after the discharge.