The then mineral resources minister granted a coal exploration licence in NSW's Hunter Valley in 2008 to Doyles Creek Mining which was chaired by John Maitland at the time.
Macdonald, 73, has pleaded not guilty to misconduct in public office accused of favouring the interests of the mining company by directly allocating the licence without inviting expressions of interests or a competitive tender.
Maitland, 76, has pleaded not guilty with being an accessory to the fact.
Prosecutor Philip Hogan at their retrial on Wednesday in the NSW Supreme Court said Macdonald abused his discretionary powers in showing favouritism to Maitland who is accused of assisting and encouraging the misconduct.
Mr Hogan said the state lost significant financial contributions from other interested companies by not proceeding by way of competitive expression of interest or a tender process.
He said an estimate by the Department of Primary Industries was a loss to NSW "in a range of $50 to $100 million".
"The Crown says that Mr Macdonald favoured the interests of Mr Maitland and the company over the interests of the state, and that there was no reasonable cause or justification," Mr Hogan said.
He pointed to Chinese company Shenhua paying close to an additional $300 million after properly securing a competitive contract at Watermark in 2008.
Maitland, who had been national secretary of the Construction, Forestry, Mining and Energy Union, was appointed by Macdonald as chairman of the Coal Competence Board in 2007.
Witnesses are expected to tell Justice Hament Dhanji that the pair's interactions were "convivial" over the years, and that Macdonald was soon to retire from parliament.
Part of the friends' scheme was to emphasise an "underground training mine" as part of the proposal and downplay the large commercial interests of the site, Mr Hogan submitted.
"In order to create the view that there was a public benefit that would be served by this mine."
Out of some 9.1 million tonnes of coal estimated to be mined over 35 years, only about 150,000 tonnes would be mined via the training ground, showing it was a very small component of a large commercial venture, Mr Hogan said.
And while a previous relevant skills shortage had eased "especially in the Hunter Valley region," steps were taken to make out the mine was justified in addressing this gap, Mr Hogan said.
The trial continues.
