Illawarra Coal Holdings Pty Ltd was found to be taking the water at its Dendrobium mine, about 75km south of Sydney, following an investigation by the NSW water regulator.

The company, owned by energy firm South32, will contribute almost $2.9 million to wetland or waterway restoration in an “enforceable undertaking” stipulated by the Natural Resources Access Regulator.

The regulator says the mine’s operations at Kembla Heights, west of Wollongong, caused the incidental taking of up to five megalitres of surface water a day without a licence from 2018 to 2023.

Chief regulatory officer Grant Barnes said the agreement was an alternative to court action.

“We have achieved the most effective outcome for the people of NSW which redresses the alleged breaches that occurred, delivers benefits to the local community and puts in place much improved processes to better manage water at this mine in the future,”  Barnes said.

South32 said it has paid $5.6m to account for the passive taking of water resulting from underground activities at the Dendrobium mine since 2014.

“We understand that water is a critical resource and recognise our obligation to pay for all water used by our operations in the same manner all water users do,” a spokesman said.

Greens MP Cate Faehrmann said the public had a right to know how much water was being taken by mining operations in Sydney’s water catchment.

“Mining companies are taking even more water than anyone realised from Sydney’s water catchment,” she said.

“Investigations like these just go to show how vigilant we have to be in ensuring mining companies are acting in accordance with the law and responsibilities under their approvals.”

Faehrmann called for Illawarra Coal’s application for a surface water licence to be rejected, particularly as the state enters into a period of El Nino and associated drought conditions.

-with AAP