Cascade Coal – a company formed by Duncan and fellow Felix founder Brian Flannery – went on to win the licence, which was on land owned by interests associated with Labor party power broker Eddie Obeid, counsel assisting the Independent Commission Against Corruption, Geoffrey Watson SC, claimed.

Obeid and his interests later agreed to sell a 25% stake in the mining venture with Cascade Coal for $60 million.

In May 2008, Macdonald asked a small group of junior mining companies to bid for the Mt Penny exploration lease. These included Monaro Coal, which was linked to Obeid and was formerly involved with uranium mining in the former Soviet Union.

According to reports in the Australian Financial Review, Watson alleged that Cascade Coal entered into two written agreements with Monaro Coal in June 2009 in which Monaro would “stand aside” as the lead bidder for the exploration licence.

As part of the agreement, Cascade Coal would buy the three properties owned by interests associated with Obeid for four times their value if the approval for Mt Penny was given. Contracts for the sale were drawn up in June 2009, Watson alleged.

Earlier this week, Macdonald's barrister, Tim Hale SC, reportedly suggested Macdonald was concerned smaller miners were having difficulty obtaining NSW coal exploration permits and the government had experienced a "xenophobic" backlash among farmers after awarding the Watermark coal licence to Chinese firm Shenhua, according to The Australian.

Last week, former NSW premier Maurice Iemma told ICAC that Macdonald deviated from the normal protocols in granting a coal exploration licence for the Cascade Coal project.

Iemma said granting of the licence was a “significant departure from normal practice”

In April last year, White Energy – which has Duncan as its chairman and Flannery as its managing director – scrapped its controversial $486 million takeover offer for Cascade Coal, blaming the uncertainty caused by the mining approvals process ushered in with the new O’Farrell government.

Cascade Coal was targeting up to 5 million tonnes per annum run-of-mine thermal coal over 20 years from the Mt Penny open cut project, according to its preliminary environmental assessment and project application to the NSW Department of Planning last year.

Located in the Western Coalfields, 3km northwest of Bylong and 60km northeast of Mudgee, the thermal coal project’s exploration licence (EL 7406) covers 84sq.km south of Goulburn River National Park.