What price the habitat of the endangered Blue Mountains skink, the giant dragonfly and rare swamp plants, and an increase in salinity in rivers that feed Sydney's water drinking supply? Is it worth the loss of 300 jobs and a possible terminal blow to a town that has already lost a power station and two other mines in the past two years?

This week the Planning and Assessment Commission handed down its report on the extension to the Springvale mine in Lithgow, and with the wisdom of Solomon, tried to split the difference between what appears to be irreconcilable interests.

Despite evidence that the mine has caused damage to four endangered swamps on the Newnes Plateau near Lithgow over the past decade – the federal government ordered Centennial Coal to pay a massive $1.45 million as an enforceable undertaking in 2011 – the NSW Planning department has urged the approval of a mine extension.

The PAC, a body at arm's length from NSW Planning, recommended that an extension to the Springvale mine is "approvable".

It has asked Centennial Coal to come up with conditions including monitoring of swamps and subsidence, ways to reduce salinity of the mine water in the Coxs River, and a plan of "adaptive management" which will swing into action if problems emerge.

The decision has caused heartache among environmentalists campaigning for decades for greater protections for the unique landscape around Lithgow, but relief for 300 miners  working the mine.

The extension will allow the underground longwall mine, which has already burrowed about seven kilometres under the plateau, to extend further beneath the Newnes Plateau's remaining swamps. It will extend the mine's life for another 15 years and provide a convenient source of coal for Mount Piper power station, just a few kilometres away. The station provides 15 per cent of Sydney's power.

Longwall mining involves extracting the coal seam hundreds of metres below the surface in huge strips or "longwalls"  280 to 350 metres wide.  Huge hydraulic chocks support the roof at the coal face, but as it advances, the ceiling behind the machine caves in, causing subsidence as the thousands of tonnes of rock above settle into the void. At Springvale, the expected subsidence will be between 0.85 and 1.25 metres. Newnes Plateau above will slump, tilt and move, running the risk of fracturing the sandstone layer on top.

Lithgow has been doing it tough.

In 2013, a proposal for a new open cut mine at Cullen Bullen was refused on environmental grounds. Then in mid-2014, Wallerawang Power station was closed, and early this year the Angus Place mine, also owned by Centennial, was put on care and maintenance, surprising the locals as the company had been seeking an extension here too.

That left Springvale and the much smaller Clarence mine in the once great mining town of Lithgow. In all, 150 miners lost jobs. That was on top of 80 job losses when "Wang", as the locals call it, closed in November 2014.

"The effect on the blokes was pretty devastating - seeing friends without work," said Adam Powell, an apprentice electrician who was one of the lucky ones taken on at Springvale when Angus Place mine closed.

"It's extremely important. You go home and your wife says, 'have you heard anything yet?' It's a huge thing for the community," Darrin Francis, a fitter who keeps the longwall machine running, said.

John Tilley, a longwall miner, said Lithgow's future as a coal town has been adversely impacted by the Abbott government's decision to scrap the carbon tax.

It's made the Victorian brown coal generators more cost competitive than Lithgow.

Lithgow mayor Maree Statham said the importance the town placed on the mine was demonstrated when the PAC held public hearings. "There were 300 people and they stayed all day to listen," she said.

She said environmentalists came from "outside the area". "Do any of them have a son, a father or a brother working in the mines? Do they pay rates here?"

Her attitude deeply upsets local environmentalists, Chris Jonkers and Julie Favell, from the Lithgow Environment Group, who see the PAC's recommendation as a bitter blow.

Newnes Plateau may not look like much – it's mainly dry eucalypt forest – but hidden in small valleys and on the sides of hills are scrub swamps and hanging swamps full of vibrant green vegetation and home to endangered species such as the Blue Mountains skink, giant dragonflies as large as a spread hand, and several species of endangered plants, including the oak-leaved daisy bush (Olearia quercifolia), and Boronia deanei.

We visit Carne West swamp, the next large shrub swamp that will be undermined by the longwalls in the extension. It's a pristine jumble of shrubs, sedges and mosses, with many plants about to flower.

"It's like groundhog day," Jonkers said. "You know what's going to happen but it will be too late."

Next we visit East Wolgan swamp. Jonkers said he came up after the longwall travelled under the swamp in 2008 and found a huge crack across the swamp and the stream literally disappearing down it. The crack has been covered by rehabilitation work.

He said the base of that swamp and three others have been fractured. This view is supported by the NSW Environment department and the federal department, which sought $1.45 million in enforceable undertakings from Centennial.

However, Centennial says the damage to East Wolgan swamp was due to emergency discharges of mine water, not fracturing. It said East Wolgan will recover, though four years into the process, there are few signs.

Environmental groups had hoped the PAC would order the mine to leave the coal beneath the swamp. This happened at Sunnyside swamp in the wake of the fines and it is still flourishing.

Instead, the PAC has recommended a wait-and-see approach, along with a commitment from Centennial to use narrower long walls of 280 metres and leave thicker columns of coal in between to reduce subsidence.

A spokeswoman for Centennial, Katie Brassil, said the company had developed a monitoring and management plan for subsidence for current and future mining areas. In addition, it had developed a monitoring handbook for flora monitoring.

"This monitoring outlines the methodology for a scientifically robust and statistically defensible set of triggers that provide the early warning system suggested by the PAC," she said.

"If there is evidence that underground mining has caused irreversible impacts to swamp communities (bearing in mind there is currently no evidence to support a case that this has occurred), Centennial will implement the Trigger Action Response Plan developed under the documents mentioned above," she said.

"This may include remediation of swamp impacts or the provision of offsets," she said.

This will greatly disappoint environmental groups. Keith Muir, executive director of the Colong Wilderness Foundation said buying equivalent swamps on private land was very difficult because of the unique nature of the Newnes Plateau.

"The swamps are just 2 per cent of the Newnes Plateau. Why not just leave the bit of the coal beneath them?" Jonkers said.

The other highly controversial impact of the mine is the high salinity and toxicity of the mine water. This was being used by Wallerawang power station until it closed but will now go directly into the Coxs River, which finds its way into Burragorang Dam.

Environmental groups want Centennial to build a desalination plant to treat the mine water.

Centennial said it had agreed targets and timelines with the Environment Protection Authority to improve water quality and is currently investigating options.

But time is running out. The last of the coal under the old development consent has been mined and Centennial is now moving the longwall machine in to place for the new extension in anticipation of a final approval. Miners will be sent on leave if it is not granted in five weeks.

The decision rests with the NSW Planning Assessment Commission and the Federal Department of the Environment, which must also sign off the decision because endangered habitat is involved.

In the next few weeks both sides will argue their case. The environmentalists want the swamps to be avoided. Centennial said it has proposed enough safeguards. The Blue Mountains skink doesn't get a say.