The Late Permian Newcastle Coal Measures of the northern Sydney Basin, Australia, contain numerous volcanic ash deposits occurring as both interseam tuffs and intraseam tonsteins. These tuffaceous units have been used to correlate seams of the Newcastle Coal Measures with the stratigraphically equivalent Wollombi Coal Measures in the adjacent Hunter Coalfield. Such correlations across the width of the northern Sydney Basin are based not on only tufflaceous markers, but also on chemical and maceral profiles within individual coal plies and carbonaceous shales. These correlations imply a lateral continuity of the peat-forming environment previously unrecognised in the Sydney Basin, and have led directly to the discovery of a new open-cut coal resource in the Hunter Coalfield. The uniform distribution of tonsteins and coal plies also challenges many existing concepts of peat formation. It is proposed that the peat surface was predominantly below the water table, and the term "lowered mire" is proposed to describe this environment. A subaqueous peat surface would protect thin volcanic ash deposits from subsequent redistribution by rainfall and surface runoff, and is consistent with a lack of tree preservation within the intraseam tonsteins. It is envisaged that trees were generally restricted to the peat margins, and to specific horizons where the peat surface was exposed by a fall in the water table. Long-distance correlations of tonstems also contradict models of coal formation incorporating lateral peat migration, where time constant horizons such as tonsteins should transgress the coal seam profile over large distances. (C) 2002 Elsevier Science B.V. All rights reserved.