THE NSW Government has promised that any mining in the Highlands will not compromise water systems.

Energy and Resources Minister Chris Hartcher held a meeting last week with the Southern Highlands Coal Action Group (SHCAG), who are opposed to any coal development in the region, as well as the firms squarely in SHCAG's sights, Cockatoo Coal and POSCO.

Cockatoo, backed by Korean steel manufacturing giant POSCO, were continuing exploratory drilling in the Belanglo State Forest after buying the rights to a lease late last year for $75 million.

The renewal of the lease is due in November and SHCAG are lobbying the government to refuse renewal until its Strategic Regional Land Use Policy for the Highlands was implemented. They also wanted the 60-day moratorium on new licences extended to 12-months and all present drilling included.

Mr Hartcher stopped well short of agreeing to the demands but said he recognised the concerns.

"All licence renewals are considered on their merits in line with the requirements of the Mining Act and Government policy," he said.

"Under no circumstances will the Government allow our water systems to be compromised."

How the land use policy will be implemented and what effect it will have on current projects is still unclear. The Hunter Valley is the first area marked for a plan and Goulburn MP Pru Goward said the Highlands would be next after that.

She also said the promised Aquifer Interference legislation would also be formulated soon.

A Cockatoo spokesman said the minister was briefed on its projects in the Highlands and Bylong.

"The new government's policies relating to strategic land use were also discussed in addition to the rigorous assessments that apply to projects such as ours," he said.

SHCAG coordinator Tim Frost said Mr Hartcher was "left in no doubt" about the "depth of feeling" over the issue in the Highlands.

"If the leases get renewed then we are left to fight around the detail," he said.

"Our battle is to stop them."