Sutherland Shire Council is calling on the state government to defer a decision on a proposed extension of long wall coal mining under Woronora Dam.
The council wants more time to assess potential impacts, make an informed decision and provide submissions.
In-principle approval for the proposal by Peabody Energy subsidiary Metropolitan Coal has been given, with Planning Minister Rob Stokes to make the final decision.
Sutherland Shire Environment Centre and other groups are campaigning against the proposal.
They point to recent photos taken by The Sydney Morning Herald, including some from a drone, showing discolouration in the Eastern Tributary of the Waratah Rivulet, leading to Woronora Dam.
The groups say water is seeping into bedrock cracks, releasing metal contaminants such as iron, manganese and aluminium, which is turning the water orange and green.
Thousands of signatures have been gathered on a petition being circulated by Sutherland Shire Environment Centre, which will be presented to State Parliament.
The council resolved at this month's meeting for staff to prepare a comprehensive report on the potential impact of mining operations on the environment, water catchments, water quality and any other items that may be of concern.
Mr Stokes will be asked "not determine a position or any approvals so that council can make an informed decision and submission on these proposals".
The council decided, if the minister does not provide additional time to make a fully informed position, then it will oppose the proposal.
The council will also write to Mr Stokes and state MPs in the shire seeking guarantees there will be no negative impact on the quality of the shire's drinking water and no environmental damage to fauna and flora in the catchment area.
Cr Diedree Steinwall, who moved the resolution, said Woronora Dam provided 100 per cent of drinking water for residents in the suburbs of Bundeena, Maianbar, Waterfall and Engadine and 30 per cent of water for all suburbs from Sutherland to Cronulla.
"It appears that there is already considerable evidence to suggest that long wall mining has a significant impact on the environment through subsidence and oxidation of water," she said.
Cr Steinwall said it was "outrageous the state government would even consider extending mining directly under the pristine area of the Woronora reservoir".
"I share the deep concerns of residents about our precious drinking water, especially in times of drought," she said.
"We should be taking all possible steps to protect our water resources and this area from environmental damage"
The Sutherland Shire Environment Centre petition says residents "have a right to expect a clean and secure water supply, unpolluted by contaminants".
The centre said state government body WaterNSW had detailed the detrimental impact existing long wall mines had had on the Eastern Tributary of the Waratah Rivulet.
"The area around Woronora catchment is a 'Special Area' - so protected that people are not even allowed to walk in there - and fines for doing so can be up to $44,000," the centre said.
A spokeswoman for Peabody Energy said the miner "understands the sensitivity of mining in the Sydney Water Catchment and that we must operate in a way that protects the environment".
"This includes abiding by a strict regulatory framework, including stringent performance criteria and comprehensive monitoring requirements.
Since the Project Approval was granted in 2009, Metropolitan has continuously demonstrated compliance with project approval conditions that demonstrate 'negligible reduction in the quality or quantity of water resources reaching the Woronora Reservoir' and 'no connective cracking between the surface and the mine'.
"The absence of connective cracking is a result of our conservative mine design with the narrowest long walls of any coal mine in Australia.
"This was most recently confirmed by the Independent Expert Panel for Mining in the Catchment Initial Report.
"Peabody works very closely with our Metropolitan community as part of its operations.
"We hold regular community meetings and conduct a range of activities to help ensure the community has access to information about our current and future operations.
"We would be happy to provide a full briefing to council to address any concerns they may have about our activities.
"At Metropolitan, we employ around 400 local people whose families live in Helensburgh and surrounding areas and understand the pressures of current drought conditions.
"These people value our environment too and they support the hard work we do to minimise our environmental impacts."
