Vales Point received a five-year licence variation in December 2021. The variation exempts it from meeting some pollution standards for nitrogen oxide.

The EPA granted the variation to the plant's operator, Delta Electricity, despite significant opposition from Lake Macquarie and Central Coast environment groups.

Environmental Justice Australia (EJA) challenged the legality of the variation, arguing that it was not legal because Delta Electricity failed to meet its deadline to submit the licence variation application.

Documents obtained under NSW Government Information (Public Access) Act (GIPA) show the challenge has reached the highest levels within the EPA and has also resulted in environment minister James Griffin being briefed about the matter.

The documents show the EPA's legal department sought approval from the Attorney General to engage senior counsel to advise on the legality of the Vales Point variation. It estimated the advice would cost between $14,000 and $25,500.

Another document shows environment minister Minister Griffin signed off on a briefing paper on the matter in April.

Under questioning during a NSW Budget Estimates hearing on Tuesday, EPA chief executive Tony Chappel said the matter remained under consideration.

"We are in the process of finalising our position on that issue....it's something we obviously take very seriously and we are giving it careful consideration."

An EPA spokeswoman said on Wednesday that the authority was considering the information it had received from EJA and would respond as soon as possible.

The EPA may be forced to retract the licence variation if it is found to have been issued illegally.

Environmental Justice Australia Lawyer Jocelyn McGarity said the EPA should respond to the legal concerns as soon as possible.

"We have air pollution standards that are meant to limit how much toxic pollution companies can legally pump out. Last year, the EPA gave Delta an exemption to some of those standards.

"It has been six months since the concerns around the lawfulness of Delta's exemption were first raised. Only through questioning in Budget Estimates has the EPA at last indicated it intends to take some type of action very soon, but despite having met with Delta about this on at least three occasions, it appears to have no plan for community consultation."

Australian Conservation Foundation climate and energy campaigner Suzanne Harter challenged the EPA to release the legal advice it had received about the licence variation.

"Keeping health-impacting pollutants within legal limits is the EPA's job.

"Allowing excess amounts of nitrogen oxide pollution is not in the best interest of the community, yet the state EPA has given Vales Point power station a special exemption that allows it to emit higher levels of nitrogen oxides into the environment than would otherwise be allowed - and it appears this exemption may have been made unlawfully.

"The EPA owes it to the local community to respond to these concerns in a timely manner and fix regulatory problems where they exist."

A Delta Electricity spokesman said the company respected the EPA's processes and was awaiting a decision in due course.

Central Coast GP Ian Charlton said nitrogen dioxide pollution harmed community health, in particular it elevated the risk of childhood asthma and chronic lung conditions.

"It should be an absolute priority that we can all breathe clean air," he said.

Vales Point power station is due to close in 2029.

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