Former Labor minister Ian Macdonald has denied instructing senior staff to create a mining tenement over land owned by the Obeid family in the NSW Upper Hunter, a corruption inquiry has heard.

Mr Macdonald is giving evidence at an Independent Commission Against Corruption (ICAC) inquiry into the opening up of coal mining in the Bylong Valley in 2008.

It's been alleged that Mr Macdonald rigged a tender process for coal exploration licences in the area for his former Labor colleague Eddie Obeid, whose family owned land in the Bylong Valley.

It is claimed the Obeids stood to make $100 million from tainted coal deals there.

Mr Macdonald on Tuesday rejected suggestions from counsel assisting commissioner, Geoffrey Watson SC, that he directed departmental officer Brad Mullard to create the Mt Penny tenement in June 2008.

"I did not instruct the department to create a Mt Penny tenement," Mr Macdonald told the inquiry.

Mr Macdonald's denial came after Mr Watson suggested that such a direction could have had "a bit of a smell about it".

Mr Mullard has previously told the ICAC he was "clear" that Mr Macdonald wanted a Mt Penny tenement created in the eastern part of the Bylong area.

"(Mr Mullard) is an honest man of great integrity," Mr Watson put to Mr Macdonald.

"So am I," Mr Macdonald replied.

"I won't comment," Mr Watson quipped, to laughter from the public gallery.

Mr Macdonald is being grilled about 40 pieces of evidence that the ICAC alleges ties him to a corrupt coal deal involving the Obeids.

At one point, he was asked: "Doesn't it seem like it's stacking up here that you had a very, very, very particular interest just in this one tenement, Mt Penny?"

Mr Macdonald also said he could not explain how a confidential government map ended up with the Obeids, but he admitted he had requested the map from the department and received it in June 2008.

"It looks like it's in the possession of the Obeids, doesn't it?" Mr Watson asked.

"It appears so, yes," Mr Macdonald replied.

Mr Macdonald's evidence continues.