(Adds comment from NSW state government)
April 21 (Reuters) - Australia's New South Wales state government halted development of two coal mines, it said on Wednesday, even as it opened up a new area of land for coal exploration.
The state government will pay China's Shenhua Energy 601088.SS A$100 million ($77.17 million) to withdraw its mining lease application for the Shenhua Watermark Coal project in the Hunter Vally, north of Sydney, it said in a statement.
In a separate statement, the state government also refused an application by Australian Pacific Coal AQC.AX to turn its underground coal mine into an open cut mine, citing community opposition.
"This decision will deliver certainty to farmers and the Liverpool Plains community, while guaranteeing protection to parcels of land with high value biodiversity,” deputy premier John Barilaro said, regarding Watermark.
China Watermark Coal has tried to develop the A$1 billion thermal and semi-soft coking coal mine since 2008. China's halt to Australian coal shipments and a deteriorating price outlook have eroded the mine's economics.
The proposed mine had met with stiff opposition.
Farmers have opposed it since it would be on prime agricultural land that could impact the region's water table and local Aboriginal people are against the development because it would disturb important cultural sites.
"This decision reflects shifting economic and social circumstances since the project first commenced in 2008," Shenhua Watermark said in a statement.
In a separate release, the NSW state government also declined to allow Dartbrook mining to expand to open cut, as it opened up a new area for coal exploration and invited tenders.
“We want to make sure that coal mining can take place in areas where it makes sense," 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."
($1 = 1.2958 Australian dollars)