The quarry's owner has appealed against a decision by the Western Planning Panel to knock back a proposal to rehabilitate the site with the help of dirt from Sydney building sites and infrastructure projects.

In April last year the panel ruled the proposal would bring "unacceptable environmental impacts" to the Blue Mountains National Park, the world heritage area and the Wollangambe and Colo river systems.

"The scope of the likely adverse environmental and amenity impacts ... indicates that the site is not suitable for the proposed use," it ruled.

It noted that Lithgow Council, which governs the quarry's location, had received 470 submissions objecting to the DA because of environmental risks, damage to ground water, swamps and the rivers, noise and traffic dangers with all the trucks and loss of amenity for residents on Sandham Road.

At a conciliation hearing in the court last Wednesday, several locals raised their concerns in a phone link.

Ward 1 Cr Kerry Brown said to call the plan a "rehabilitation project I believe is an oxymoron because this is a waste disposal project".

Sarah Hyde from Mt Irvine said the quarry project risked damaging sites of significance to Dharug and Gundungurra people and also posed an "extreme risk" of contaminating the Wollongambe River.

Sean Butler from Clarence said the site was already rehabilitated, citing the hundreds of animals, birds, frogs and insects that it supports.

Blue Mountains Council's City Planning Manager, Kim Barrett, said there were five key issues which remained of concern. These were impacts on the natural environment, the hydrology in the area, bushfire hazards, traffic and residential amenity.

The conciliation was eventually halted by Commissioner Sarah Bish. The parties will reappear in court today to set a date for an appeal hearing.