Approving the Warkworth Extension project for Coal & Allied also means the loss of 764.7 hectares of woodland, affects 114 Aboriginal sites and significant noise and dust for 16 private residences.

It is also considered likely to have a significant impact on the nationally endangered swift parrot and regent honeyeater.

Overruling protests by residents who have complained about the company reneging on its undertakings, the department's recommendation stands to earn the state government about $170 million a year in royalties for about 11 years.

Coal & Allied (owned by Rio Tinto and Mitsubishi) does not want to move Wallaby Scrub Road for the benefit of residents who use it, because it says that would prevent some coal being mined.

Nor does the company want to stick to its earlier promise in a 2003 deed of agreement not to remove Saddleback Ridge, near Bulga.

It says it made that promise when coal was cheaper than its present estimated $120 a tonne.

Bulga and Milbrodale Progress Association spokesman John Krey said the department's reasons for recommending the total elimination of Wallaby Scrub Road showed the interests of residents were of no "real" consequence.

"The value of the coal exceeds all other matters," Mr Krey said.

Residents' objections to the proposed road closure were backed by Singleton councillors. The company needs to obtain the council's approval to close the road.

Planning and regulation manager Mark Ihlein said the council would consider making a submission to the commission to "reinforce its position".

The approval comes with conditions and an $11 million in community contributions.

Mount Thorley Warkworth general manager operations Cam Halfpenny welcomed the recommendation.

The operation mines 18 million tonnes of coal a year and the company wants to extract another 200 million tonnes over an 11-year extension period.

The approval and recommendation has been passed to the Planning Assessment Commission.