MINING companies are being encouraged to look for coal under some of NSW's richest farming land, as the State Government opens up to exploration a second area in the Liverpool Plains.

The Government last month called for expressions of interest in an exploration licence over the 190-square-kilometre Watermark area next to the Caroona Basin, about 35 kilometres south-east of Gunnedah.

Green groups and landowners accused the Government of seeking large fees and royalties at the expense of farming communities. They said mining would put the aquifers farmers relied on at risk.

The Government said the licence would be for exploration only and any mining would not take place for at least five years.

Last year, BHP Billiton paid $100 million to explore for coal in another part of the basin.