Coal & Allied, a Rio Tinto subsidiary, has pledged to spend $130 million on mine improvements, creating 100 construction jobs and 50 long-term coalmining jobs.

The approvals allow Hunter Valley Operations South to increase coal output from 12.4 million tonnes a year to 16 million tonnes.

Documents published with the approval decision show the State Government expects Hunter Valley Operations South to contribute about $350 million a year to the NSW economy, as well as taxes and royalties.

The Government said the mine had operated under 35 separate development consents and that consolidating these into a single consent would streamline regulation of the mine and remove potentially contradictory requirements under the present regime.

Some risks including impact on groundwater are described as moderate but the Government says the residual environmental and socio-economic effects can be managed adequately, offset and/or compensated for.

But days after the Federal Government delayed its carbon pollution reduction scheme by a year, environmentalists have criticised the State Government approval as a backward step.

Rising Tide spokeswoman George Woods said yesterday that Rio Tinto seemed determined to keep the Hunter Valley dependent on coalmining and to chain it to an industry that has had its day.

Hunter Valley Operations South sits between two other Coal & Allied mines, Mount Thorley Warkworth and Hunter Valley Operations North.

Even though coal prices have fallen substantially in the worldwide economic slump, they remain much higher than they were before the China boom began in 2005.

Recent prices have been $US70 ($93) a tonne.