The New South Wales (NSW) Planning Assessment Commission (PAC) in Australia has recommended the Watermark coal mine for approval, but imposed 25 conditions to be addressed relating to water modelling.
The Watermark Coal project, which is being developed by the China-based Shenhua Group, is located on the Liverpool Plains near Gunnedah in northern NSW.
During the review, the commission also pointed out that the mine should not affect the black soils of the Liverpool Plains.
PAC said in a statement that it is: "Generally satisfied that the site of this proposal, on the less fertile, higher ground above the Liverpool Plains, should be able to be mined without significant impacts on the agricultural productivity of the Liverpool Plains."
The project is being opposed by farmers due to the impacts it is likely to have on water availability in the area and on its highly fertile black soil.
NSW Farmers president Fiona Simson said: "The NSW Government has comprehensively failed to put in place the right checks and balances to protect precious agricultural areas.
"The commission has rightly identified that the mine would be located in the middle of some of the most significant and valuable agricultural land in the country, but has underestimated the actions needed to ensure the long-term viability of farming in the area.
"We will work through the report over the coming days but we strongly believe it is past time the NSW Government drew a line in the sand and protected our land, water and livelihoods."
Watermark Coal project manager Paul Jackson said: "We have always maintained the project should be considered using fact and science and we hope the PAC review will satisfy any doubts there may be about the science underpinning our assessment.
"For the last six years we have worked tirelessly, consulted widely with the community, listened to their views and refined our proposal to accommodate community concerns."
The open cut Watermark mine is estimated to produce up to ten million tonnes of coal a year during the mine's life of 30 years.