Xstrata's $3 billon Wandoan open-cut coal project in southern Queensland won the conditional approval of the state authorities on Friday, paving the way for a federal review which would eventually give the last say on whether the exploration is a go.

Poised to be the largest open-cut coal mining in the whole of Australia, the Wandoan project was given the nod but not without environmental safeguards that call for the establishment of a two-kilometre buffer zone surrounding the town's project site.

That and a host of up to 332 conditions were set by Queensland's Coordinator General for compliance in issuing the approval, which according to Queensland Resources Council head Michael Roche could prove to be the making of a new Surat Basin.

Mr Roche said once all the conditions have been met and the federal government gives its stamp of approval for the giant project, all the uncertainties currently shrouding would be removed and "signal for the Surat Basin to realise its potential, alongside the gas sector, as Queensland's next major energy province."

Yet other stakeholders in the area are voicing out their reservations on the Wandoan project as local farmer Richard Golden stressed that Xstrata must deal first with the project's social, economic and environmental questions prior to its actual realisation and full operation.

On the other hand, local mayor Ray Brown lauded the Coordinator General's decision to allow for the significant buffer zone, calling the conditions imposed as great benefit for the community which also signified that state government gave premium on the welfare of Wandoan residents.

Following the issuance of the state approval, Xstrata Coal said in a statement that the Wandoan project is now on the last stage of acquiring its mining lease application, which is described by company chief executive Peter Freyberg as a significant component of Xstrata's organic growth strategy.

Once fully-operational, Mr Freyberg said that the Wandoan coal project could jumpstart and bolster the company's coal productions capability in Queensland, also projecting that "the project would open up the Surat Basin as an internationally competitive coal export region."

Earlier this year, Xstrata considered pulling out from the project as it cited uncertainty of investment prospects due to the impending imposition of the proposed mining tax.