4nature president Andrew Cox said the environmental group had found no evidence the government had taken the SEPP into account for water catchments when approving the project.
"This case was launched to uphold the law and protect the water quality of a major Blue Mountains river and Sydney’s drinking water," he said.
"The extension to the Springvale coal mine was approved in September, but we contend that the law applying to developments in Sydney’s drinking water catchments, introduced to protect the quality of Sydney’s drinking water, was not correctly applied.
"The law requires that the NSW Government’s Planning and Assessment Commission (PAC) had to be satisfied that the mine would have a 'neutral or beneficial impact' on water quality. We say that the PAC was not satisfied, nor could it have been.
"Each day the mine is set to discharge up to 19 million litres of water laden with nutrients, salt, metals and other contaminants into the Coxs River before it flows into Warragamba Dam, Sydney’s main drinking water supply."
Centennial gained approval by the Planning Assessment Commission last September to extend the operations of the Springvale coal mine for another 13 years after receiving backing by the Planning Ministry.
The longwall mine is planned to produce as much as 4.5 million tonnes of coal a year from 20 new panels.
Environmentalists claim untreated waste water will continue to be discharged into the Coxs River.
Centennial Coal spokeswoman Katie Brassil said: “Over the past five years Springvale mine has been through a rigorous and exhaustive assessment process to secure an approval to allow Springvale (an existing mine) to continue to operate.
"Centennial Coal is confident all issues were addressed during the extensive assessment process and after fighting to obtain our approval will fight to retain it."