The state government has no plans to remediate coal ash dams at Eraring and Vales Point power stations following their closure despite a growing body of evidence pointing to the harmful effects of coal ash.
Similar remediation projects undertaken elsewhere have cost hundreds of millions of dollars to complete.
Under the terms for the sale of the power station assets, Origin Energy and Delta Electricity are liable for the cost of remediating pollution which they cause during their period of operation.
The state government remains liable for the coal ash pollution that occurred prior to the 2015 sale.
Greens MP Abigail Boyd, who uncovered details of the arrangement as part of a call for papers, said taxpayers would ultimately be left to foot the massive clean-up bill for decades of pollution that occurred prior to the sale.
"The Vales Point power station 'sale' is not an asset sale as most people would understand it - it's more like the sale of the income stream generated from the power station. At closure the power station will be handed back to the government with the state remaining responsible for billions in rehabilitation and clean up," she said.
"Even a very simple rehabilitation of a coal-fired power station would be expected to cost hundreds of millions of dollars. Hazelwood's rehabilitation costs were estimated at over $700 million, and I understand that figure is now over $1 billion.
"Given the asbestos dumps at Eraring and Vales Point, and their unlined ash dams that are known to contaminate Lake Macquarie as well as the ground water, the state is likely to have rehabilitation costs in the billions."
A spokesman for NSW treasurer Dominic Perrottet confirmed Origin Energy and Delta Electricity were responsible for remediation of any new coal ash deposits which occur under their operation.
"There are currently no NSW Environment Protection Authority orders that would trigger the state's obligation to remediate the sites and therefore no provision has been made for clean-up costs," he said.
An Envrionmental Justice Australia report into coal ash dams released this month found coal ash contained toxic heavy metals - including mercury, lead, arsenic, selenium and chromium - that have been linked to asthma, heart disease, cancer, respiratory diseases, nervous system damage and stroke.
The report - Unearthing Australia's Toxic Coal Ash Legacy - cited research and water sampling done by the Hunter Community Environment Centre earlier this year that found the creek that takes overflow from the Eraring ash dump had a selenium concentration of 110 parts per million, more than 55 times the level recommended to protect fish and birds.
Delta Electricity spokesman Steve Gurney said the company would hand the Vales Point site back in the condition that it received it.
"Simply, Delta will bear the costs for the time that it operates the power station and the state will bear its responsibility for the time that it operated the power station. Additionally Delta must meet the decommissioning costs of Vales Point, which would ordinarily have been a NSW Government cost, and the government gets the future beneficial use of the land," he said.
Unearthing Australia's Toxic Coal Ash Legacy recommended a parliamentary inquiry be held into coal ash dumps to better understand their impact and to make recommendations to protect human and environmental health.
It also recommended Australian governments impose an immediate obligation on ash dump owners and operators to prepare best practice rehabilitation, closure plans and post-closure plans in consultation with the communities who live near these toxic sites.
In addition it recommended Australian regulators who oversee ash dumps should immediately develop and implement actions to clean up and manage ash dumps causing groundwater contamination, including re-siting operational ash dumps to thoroughly rehabilitate existing sources of contamination to best practice standards.
An Environment Protection Authority spokesman told the Newcastle Herald this month that all NSW coal-fired power stations are subject to stringent legally enforceable conditions, outlined in their environment protection licences, as well as requirements under environmental legislation, to protect the community and environment.
"The licences for the Eraring and Vales Point power stations include comprehensive and regular monitoring of ash dam water quality for a range of pollutants - including selenium and cadmium," he said