A CONTROVERSIAL composting proposal with potential to threaten the Lower Hunter’s water supply has been approved with strict conditions – and final sign-off retained by the&nbsp;Environment Protection Authority. Port Stephens Gardenland can process up to 10,000 tonnes of compost per year on a site with Seven Mile Creek on its boundary, and within the Grahamstown Dam catchment area, but only with conditions that recognise&nbsp;the sensitive nature of the site, Land and Environment Court Commissioner Graham Brown said on Wednesday. He had “little trouble” accepting&nbsp;evidence by composting&nbsp;expert for the EPA, Anthony Dixon, over evidence by expert Peter Jamieson for Gardenland operators Laurie and Jacqueline Bowtell, on the extent of conditions needed to protect the water catchment from pollution caused by the composting operation. “I have not been satisfied that Mr Jamieson fully recognised the implications of any leachate escaping the site through insufficient sealing of the shed, dams and working areas, into a water supply area,” Commissioner&nbsp;Brown said. “Mr Jamieson’s less rigorous approach may be acceptable in other locations but not in a drinking water catchment. The protection of the water supply to Lower Hunter Region's major water supply is a matter of extreme importance and consideration.” Mr Dixon told the court studies showed the existing water quality in Seven Mile Creek was already under considerable water quality stress. The likely source of the contamination was at least partly from Gardenland’s existing landscape and nursery operations, the court heard. Mr Dixon told the court that water quality data in August, 2016 for two dams on the Gardenland site showed&nbsp;elevated concentrations of ammonia, total nitrogen, total phosphorous, E-Coli and faecal coliforms, with the ammonia and E-coli levels exceeding Australian drinking water standards. Mr Dixon told the court there was concern that “operations on the site have in the past impacted upon water quality in the drinking water catchment, both of surface water and groundwater; and that there is potential for impact in the future unless properly controlled”. “Mr Dixon’s approach for the site, in adopting a higher standard than the minimum in the composting guidelines, is appropriate given the sensitive location in a water supply catchment. His oral evidence that “all dams leak” is pertinent,” Commissioner Brown said. He accepted Mr Dixon’s calculation that a reduction in the depth of the floor lining could mean up to 7 million litres of leachate a year entering the groundwater. The court was told Seven Mile Creek is on the southern and western boundaries of the 8 hectare Gardenlands site, flowing towards Grahamstown Dam about two kilometres to the south-east. Grahamstown Dam provides 40 per cent of the region’s water, with the proportion sometimes much higher in times of drought. Seven Mile Creek supplies half the dam’s inflow, with the Williams River providing the other half. Commissioner Brown rejected Gardenlands’ proposal to leave part of the shed uncovered because of “safety conflicts between workers, truck drivers and the structure”, and accepted the EPA’s advice that a roof was needed to prevent leachate. Hunter Water Corporation water planning manager Kirby Morrison expressed concern that Grahamstown Dam could be affected by any run-off from the composting proposal. Given the dam’s importance to the supply of potable water to part of the Hunter region that was an “unacceptable outcome”, Mr Morrison said. The EPA has approval authority over strict conditions applied to construction and operation of the composting plant, including leachate and stormwater management and organic material storage. Gardenland&nbsp;has operated as a bulk store for landscaping supplies and a wholesale nursery since 2000. Port Stephens mayor Bruce MacKenzie supported the compost proposal, saying possible pollution of groundwater had been “blown out of proportion”.