David Ipp, QC said a decision to process the Ridgelands coal mine licence renewal bid in the Upper Hunter while the Resources Regulator investigates a secret $5 million deal between Ridgelands and the government causes “respect for the whole system to be lost and corruption to be encouraged”.

“When a government goes to the trouble of creating an elaborate procedure for the granting of mining tenements and doesn’t respect its own laws it’s a recipe for corruption,” Mr Ipp said.

“There is little point in creating this elaborate process if the government doesn’t comply and respect its own procedures. It becomes an illusion. It’s a Clayton’s process.”

There was “no doubt” the Ridgelands exploration licence over 7600 hectares of land at Wybong near Muswellbrook should be put out for fresh expressions of interest, Mr Ipp said.

The Hong Kong-based Ridgelands Resources failed to establish a $5 million community fund until days before its five year licence expired in February, and as the company applied to renew the licence for another six years.

An exploration licence agreement in 2013 required Ridgelands to establish and publicise the $5 million fund “as soon as reasonably practical”. Ridgelands was also required to call for applications from the community and provide regular updates to the minister through a government department head.

The secret condition was made public in August after Ridgelands made an unsolicited $500,000 offer to Muswellbrook Shire Council which had no knowledge of the deal and launched NSW Supreme Court action to recover the full $5 million for the community.

Mr Ipp said Ridgelands, as the licence holder, had failed to comply with licence conditions to a material extent and the government’s acceptance of the licence renewal application provided the company with a “second chance”.

“If the laws the government established do not provide for a second chance, then no second chance should be given. If a second chance is given then the government is creating an exception outside the law,” Mr Ipp said.

“You cause respect for the whole system to be lost and corruption to be encouraged.”

The NSW Government showed a lack of respect for its own laws by considering the renewal after Ridgelands had only allocated $550,000 of the $5 million fund to the community by February 27 when the licence expired, Mr Ipp said.

“The holder of the tenement doesn’t comply with conditions to a material extent and it’s treated as a nothing, as being unimportant. It really is saying to the world that either we are going to ignore our own laws or everybody should know we have a discretion,” Mr Ipp said.

“They shouldn’t do it. Such a major breach causes a complete lack of respect for the processes. People are encouraged just to ignore them. Those who are fairly trying to compete in this market are unfairly treated and discouraged.”

In its statement of claim Muswellbrook Council alleged secrecy around the deed condition raised questions about whether NSW Government representatives “have not and do not care whether the local community obtains the benefit” of the $5 million fund.

In NSW Parliament last week Resources Minister Don Harwin said the Ridgelands case was “a complicated matter” and the government only became aware the $5 million community fund was not established in August after the council launched its case.

In a statement on Monday Mr Harwin said Resources Regulator Lee Shearer was continuing an investigation into Ridgelands.

“I have no intention of making a decision on the renewal of the licence until I have seen the full report,” Mr Harwin said.

Lock the Gate spokesperson Steve Phillips said coal exploration reforms in 2017 “were supposed to fix the dodgy processes exposed by the ICAC”.

While the reforms were welcomed, they did not apply to extensions or renewals of old exploration leases, Mr Phillips said.

“That’s a big loophole, and it needs to be closed. Here in the Hunter, most exploration lease developments are extensions or renewals of old leases that were granted under the dodgy old system. There's no transparency, no accountability and no public consultation about these leases,” he said.

“We call on the NSW Government to close this gaping loophole in the new guidelines. There are sundry exploration leases in the Hunter that should never have been granted, and these leases should not be renewed and expanded indefinitely without proper assessment and consultation.

“Otherwise the high risk of corruption and poor planning, which ICAC exposed, remains present.”

NSW Greens MP David Shoebridge said the planning and exploration approvals process in the Hunter was a farce.

“Despite ICAC pointing out the corruption risk caused by unregulated discretions and the absence of clear procedures, this government has done nothing for five years,” Mr Shoebridge said.

“There is nothing to stop renewals being granted to dodgy multinationals, nothing to ensure taxpayers get value for money and it’s impossible to see how any environmental concerns ever get a look in.”