The giant Shenhua Watermark coal mine planned for northern NSW is a step closer after a legal challenge to it was dismissed.
The NSW Land and Environment Court on Friday rejected a community group's challenge, which was based on the mine's threat to local koala populations.
The Upper Mooki Landcare group submitted four grounds of challenge, broadly arguing that state approval of the Chinese-backed Watermark project had failed to properly consider the risk of koala extinction.
However, Land and Environment Court Chief Judge Brian Preston found none of the grounds were established.
Disappointed environmentalists said NSW's planning system was failing to protect threatened species.
"We have lost 40 per cent of koala habitat along the east coast in the last 20 years," Nature Conservation Council chief executive Kate Smolski told reporters.
"We cannot continue to let the planning department and mining companies chip away at important habitats."
Farmers are also opposed to the mine, fearing it will irreparably damage groundwater that feeds the fertile Liverpool Plains farmlands of northern NSW, which are considered some of the country's best cropping land.
Ten million tonnes of coal would be extracted each year during a proposed 30-year lifespan.
However the project has been under a cloud recently amid rumours its owners want to exit it.
Shenhua still needs a NSW mining licence and federal approval for the project's water management plan before it can go ahead.
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