Tanya Plibersek was rebuked by NSW minister for decision to block $900m gold mine, documents reveal

The New South Wales resources minister rebuked the federal environment minister over her decision to block the McPhillamys gold mine project and declared Indigenous heritage shouldn't be protected at the expense of critical minerals investment, new documents have revealed.

Correspondence tabled in federal parliament shows NSW minister Courtney Houssos wrote to Tanya Plibersek in August, five days after Plibersek announced she had refused Regis Resources' mining application because of the proposed location of a tailings dam and its possible impact on Indigenous heritage.

The letter followed earlier NSW government correspondence backing the $900m McPhillamys open-cut gold mine project, to be located near Blayney in the state's central west.

In her 21 August letter, Houssos emphasised the importance of critical minerals to the nation's clean energy transition and the NSW economy and reiterated that state-level cultural heritage and planning assessments had given the project the green light.

"It is important that both of our governments align our efforts on supporting investment in Australia's critical minerals while protecting Indigenous heritage, and that these goals are pursued in parallel – not at the expense of one another," Houssos wrote.

Plibersek made her decision under section 10 of the Aboriginal Heritage and Torres Strait Islander Heritage Protection Act. Such section 10 declarations are rare.

The declaration was based on the advice of the Wiradyuri Traditional Owners Central West Aboriginal Corporation that the tailings dam, proposed for the headwaters of the Belubula River, would cause irreparable damage to an area that was sacred to its blue-banded bee dreaming tradition.

The Orange Local Aboriginal Land Council initially opposed the mine but changed its position to neutral. Both Regis Resources and the land council have challenged the existence of the dreaming tradition and asked why it was not raised when the application was first lodged.

Plibersek replied to Houssos on 5 October.

"I was not satisfied that current NSW protection laws afford adequate protection of the of the intangible heritage of the specified area," she wrote in a letter seen by Guardian Australia.

Houssos' August letter was among documents provided to parliament in response to a request by shadow environment minister Jonno Duniam. They also included a letter from NSW Planning and Public Spaces Minister Paul Scully – previously tabled in the state parliament – outlining the Indigenous heritage protections available under state law.

Scully's letter said that NSW consent for the McPhillamys project was conditional on the company mitigating and managing impact on Aboriginal cultural heritage.

"I also note that the section 10 application has been underway for more than 3 years and that other statutory processes available under NSW legislation, such as seeking declaration as an Aboriginal place under the NPW Act or for listing under the Heritage Act as a site of state significance have not been sought by the section 10 applicant," Scully wrote.

Duniam told Guardian Australia that Plibersek's decision undermined NSW state government processes.

"The enmity between the federal and state Labor governments through Ms Plibersek's shocking decision are plain and real for all to see," he said, adding that cross-government partnerships helped generate revenue and pay for services.

"We want our federal and state governments to work in partnership so that worthwhile projects can gain approval, create jobs, stimulate local economies and create lasting revenue flows for governments to pay for hospital beds, schools and our first responders. In the case of McPhillamys gold mine, this has not been the case."

In her 21 August letter, Houssos said the proposed mine would create 860 jobs over its 15-year life and inject $67 million annually into the local economy.

She wrote that its proponents had expressed concern at the time the decision took and its impact on the project's viability.

"More broadly, if proponents are not able to have certainty in the planning process (including heritage decisions), then our shared goals to attract mining investment into the Central West and to regional NSW will be at risk."

She wrote that she would be "pleased to discuss this further" with Plibersek, "in particular how the NSW and Commonwealth Governments can work together to realise our shared aims of environmentally and culturally sustainable mining practices in support of Australia's Net Zero goals".

The NSW minister copied her letter to the federal resources minister, Madeleine King, as Plibersek did with her reply.

Announcing the decision on 16 August, Plibersek said it was not a decision to stop the mine. She said Regis had indicated it had assessed other potential locations for the tailing dam.

"Protecting cultural heritage and development are not mutually exclusive," she said at the time. "We can have both."