Bayswater B, a new 2000 megawatt station near Muswellbrook, was given the green light by the Government on Wednesday, although it was not decided whether it would be fired by gas or coal.

Ms Tebbutt said the Department of Environment and Climate Change would establish a dust monitoring network in the Upper Hunter, to look at whether the community was negatively affected by dust.

"Data is inconclusive as to whether the Upper Hunter has higher rates of respiratory illness than other areas of NSW," she said.

"It's not conclusive."

But Upper Hunter resident Bev Smiles said the station would more likely be run on coal and would contribute to air pollution.

"It will mean on-going devastation of the Hunter Valley and the coalfields to the west in the Gunnedah basin," she said.

"Until we have the air monitoring stations set up we won't have that baseline data but what we do know is that this is doubling the size of the power station.

"If it's coal, then there's known toxic emissions from coal-fired power stations and if it's gas then there's emissions from burning fossil fuels."

Greenpeace activists have protested against the Government's decision, saying it gave a green light to coal power at the expense of renewable energy sources.

But Ms Tebbutt said that would not necessarily be the case.

"We've always said that we're fuel source-neutral, so these may well be gas or coal-fired power stations," she said.

Greens MLC John Kaye said the NSW Government was locking in a future of coal stations and "yet more respiratory disease in the Upper Hunter."