The Hunter Jobs Alliance has called for the creation of a Hunter-based statutory authority to ensure funds from the newly created Royalties for Rejuvenation fund are used effectively and benefit coal mining communities.
The $25million fund will drive job creation and provide community support in coal mining communities as they make the transition to a clean energy economy over coming decades.
Deputy Premier John Barilaro said the fund would help communities develop other viable industries.
"Coal is here for decades but if we aren't planning for the future we get left behind," he said.
Hunter Jobs Alliance Coordinator Warrick Jordan said a clear plan, with input from local communities, was needed for the Hunter.
"We welcome the intent of this policy and the recognition by the Deputy Premier that 'if we aren't planning for the future we get left behind'. Having consistent annual funds for mining communities to invest in job creation and community support is an important building block in dealing with economic change," he said.
"While we await further detail, it is critically important that there is a clear plan for how these funds are spent that is driven by the community. Evidence shows that effective responses to economic change require public investment, public involvement and planning that builds on a region's strengths."
Meanwhile, the government will pay Chinese-owned mining giant Shenhua $100 million to withdraw from its Watermark coal mine project on the fertile Liverpool Plains in the state's northwest slopes region.
The government announced in mid-2017 that it would buy back more than half of Shenhua's licence for more than $262 million to protect farming land.
It agreed on Wednesday to buy back the remainder of the licence, which had been initially approved in 2008.
Shenhua will withdraw its mining lease application and surrender its development consent for the site, and the government will cancel the exploration licence for the site.
But Mr Barilaro said the Wollar area in central west NSW would be opened for potential coal exploration.
This will enable mining companies to apply for a coal exploration licence.
Open cut coal mining at Dartbrook in the Upper Hunter, however, will not be permitted. Underground mining will be able to proceed.
"We want to make sure that coal mining can take place in areas where it makes sense," Mr Barilaro said.
"Coal mining generates jobs for communities and royalties that can be used for essential public services and infrastructure and regional economies will depend on coal mining as a key industry for decades to come."