Singleton council has called on the state government to reinstate the Resources for Regions program.
The program, which ensured a portion of mining royalties were spent in the regions which generated them, was axed in Labor's first budget.
Singleton and Muswellbrook account for a combined total of 43 per cent of NSW's coal mining output, which in 2021 amounted to more than $18billion of the State's mining output total of almost $40billion.
More than $25 million was injected into the Singleton local government area through rounds 7, 8 and 9 of the Resources for Regions program.
Singleton Mayor Sue Moore said it was crucial that the government reconsider its decision given the program's positive impact in mining-affected communities.
"Resources for Regions has proved to be a successful mechanism to deliver a fair return to our community for the daily and unavoidable impacts of mining," Cr Moore said.
"Issues including air quality, traffic congestion, visual impairment and reputation are matters that affect us so much more as a result of being where the mining activity actually occurs."
A spokesperson for NSW Treasurer Daniel Mookhey said following the state budget that existing commitments under the Resources for Regions program would be honoured and were included in the budget for the Department of Regional NSW.
"Over time the NSW government will move away from opaque grant funding and provide more targeted and transparent funding for projects people need," the spokesperson said.
While not a direct replacement, the state government has committed to the establishment of several clean energy transition authorities to help mining regions to adjust to unprecedented social and economic changes in coming years.
Minister for Natural Resources, Courtney Houssos and Minister for Energy Penny Sharpe attended a meeting in Cessnock in August, which was a first step towards the establishment of Future Jobs and Investment Authorities in coal-producing regions.
The regional authorities will work with the Commonwealth government's Net Zero Authority to support workers, industries and communities to seize transformational opportunities.
The NSW government is also considering how they will work with existing Royalties for Rejuvenation regional expert panels.
