Environmental groups in Australia have claimed that mining companies will be allowed to damage fragile swamps near Sydney and then pay penalties to the government under new regulations.

The New South Wales (NSW) Government’s Department of Planning and Environment recently introduced a new policy requiring coal mining companies to contribute to a biodiversity fund to offset the damage to subsidence or cracking.

The new ‘swamp offset’ is applicable for companies that could not purchase or protect a similar swamp as an offset, environmentalists said.

Under the new proposal, mine operators can pay into a government fund to offset damage such as sinking or cracked swamps.

"Under the new proposal, mine operators can pay into a government fund to offset damage to swamps."

The damages may also include water loss, as well as impacts on wildlife.

According to planning authorities, the proposal is system that helps manage damages caused to the region’s swampland.

During drought, the swamps supply drinking water to Sydney residents.

Subsidence and bedrock fractures that occur due to longwall coal mining could affect water in swamps, while causing severe erosion, the NSW Scientific Committee said.

Said to be a vital part of the water catchment system, the swamps in Sydney’s water catchment are listed as Endangered Ecological Communities under both NSW and Commonwealth law, Mercury reported.

Nature Conservation Council chief executive Kate Smolski told ABC that the proposed changes would affect Wollongong Coal in Russell Vale and Centennial Coal’s Springvale mine located near Lithgow mines.

The companies have submitted their applications to planning authorities to use longwall mining techniques in the water catchment.

Part of an integrated mining policy, the new change has been designed to improve industrial regulations in NSW.