Labor leader Bill Shorten admits he and the party are growing "increasingly sceptical" of the Adani coal mine in Queensland, even though the state's Labor government supports the project.
Adani and its subsidiary Abbot Point Bulk Coal had been accused of fudging information provided to regulators about spilling coal-laden water onto a beach after Cyclone Debbie.
Mr Shorten hardened his stance against the Indian-backed mine while announcing former ACTU president Ged Kearney as Labor's candidate for a by-election in the Melbourne seat of Batman.
"Adani does not deserve a licence to operate a coal mine if they are relying upon false statements and false facts," Mr Shorten told reporters on Friday.
"Labor is increasingly sceptical and today's revelation, if true, is incredibly disturbing. If Adani is relying on false information, that mine does not deserve to go ahead."
In a statement, Adani and Abbot Point Bulk Coal categorically denied any wrongdoing.
"We at all times operate transparently and in accordance with the highest standards expected by the community," the company said.
The Adani mine is emerging as a key election issue as Labor tries to stop the Australian Greens from snatching its once-safe seat in Melbourne's north east following the resignation of David Feeney.
Resources Minister Matt Canavan accused Labor of selling out mining jobs in pursuit of green votes.
"Is it just a coincidence that Shorten is pulling support for a Queensland mining project because he now faces a by-election against the Greens in Melbourne?" Senator Canavan asked.
The Queensland Labor government, which supports the mine but insists it won't provide taxpayer money to back the project, provided a cautious response to the contamination controversy.
"Any matters relating to court proceedings require expert legal consideration. It would be inappropriate to publicly discuss such matters," a government spokesman said.
However, Mr Shorten significantly ratcheted up his rhetoric against the mine, outlining a range of economic and environmental issues clouding the development.
"The world coal market doesn't appear to be great economics for opening up the newest, biggest mine in the southern hemisphere," he said.
"There's concerns expressed from other mining regions that this will actually, if developed, threaten their job security."
Ms Kearney believes the Carmichael mine will fall over.
"Personally, I really can't see Adani going ahead," she told reporters.
"I know that Adani are not good employers. They don't treat their employees very well. They don't care about the impact on communities around the world where they work."
Ms Kearney said federal Labor would soon land on a position about whether to support or oppose the mine.
"I think people can get a fairly good understanding of maybe where that position will be," she said
