NSW Environment Minister Gabrielle Upton said in a statement: “The EPA is the state’s lead protector of the environment and the Minister supports any findings that result in a better outcome.”

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“The EPA has considered the Auditor-General’s report, has responded to all the findings and is in the process of implementing many of the recommendations.”

Chris Minns, Labor's water spokesman, said government agencies had been bickering over taking responsibility "and we are still none the wiser as to who is responsible for this mess".

“It is frankly shocking that the NSW government refused to lift a finger for two years after being warned about potential threats to Sydney’s primary water source.”

Justin Field, the Greens urban water spokesman, said the lack of an agency response to deteriorating water quality showed the government was "putting coal ahead of community health".

"The increasing salinity in our major water supply will increase the cost of water treatment and that cost is being shifted from mine operators to the bills of Sydney resident," he said. "That cost needs to be put back on the mines and no new mining approvals should be granted in the catchment."

'Serially ignored'

Peter Turner, the mining projects science officer at the National Parks Association, said concerns about the impacts of mining on water date back to at least the 2014 report of the NSW Chief Scientist.

"Successive governments have been repeatedly warned in various reports over more than a decade of the increasingly adverse impacts of mining on Sydney’s drinking water catchment," Dr Turner said.

"No matter ministerial assurances of careful consideration, these reports and their recommendations have been serially ignored or shelved," he said, adding that there was no reason to expect the soon-to-be released advice from the expert panel "would fare any better".

While Lake Burragorang got most of the attention in the Auditor-General's report, other mining-impacted reservoirs that supply southern Sydney, Wollongong and the Illawarra had been left "in the shadows", Dr Turner said.

For its part, WaterNSW said reducing salinity at the catchment storages was consistent with its water-quality objectives.

"However, salinity levels are not problematic and do not currently impact on WaterNSW's ability to meet water-quality guidelines," an agency spokesman said.

Other EPA issues

While recommending the EPA take responsibility for addressing the issues at Lake Burragorang, the Auditor-General found the authority had a range of other shortcomings.

For instance, the report determined the EPA had "unreliable detection practices, and weaknesses in its governance approach, [limiting] its effectiveness to consistently apply regulatory action".

As a result of its ineffective detection, "there is a risk that the EPA may not be applying regulatory actions for many breaches and non-compliances", it said.

"The risk-based framework and over-reliance on self-reporting leaves our environment and in particular our drinking water vulnerable to pollution incidents that go unnoticed or are inadequately prosecuted and cleaned up," Mr Field said.