The High Court on Wednesday delivered a 3-2 split ruling in favour of community environmentalists who challenged a major open-cut mine expansion in NSW's Hunter region.
It upheld a ruling from the state appeals court, which found planning authorities must consider climate impacts of downstream emissions when reviewing projects.
On one scientist's estimate, the expansion of the Mount Pleasant coal mine, owned by one of Indonesia's largest conglomerates, would be one of the 650 largest greenhouse gas-emitting projects worldwide.
The mining industry feared the judgment's wider implications.
"Mines may have to work out how to reduce emissions from their export customers, or Scope 3 emissions," Minerals Council chief executive Tania Constable said.
"Investors in Australia's resource sector will carefully review the outcome from today's High Court judgment and the potential ramifications for other projects."
The mining body called on the NSW government - overseeing some of the nation's richest coal deposits - to further protect planning approvals.
Muswellbrook landowner Wendy Wales led the case against the planned expansion of the Mount Pleasant mine.
The retired science teacher dubbed the decision a win for Hunter communities.
"We have experienced the change from a country town with a mine over the hill, to a town that is now encircled by mines," she said.
"Especially when the temperature rises, that town bears that burden straight up.
"We're grateful to be in that position to actually be part of this today."
Deputy federal Greens leader Steph Hodgins-May noted Ms Wales and partner Tony Lonergan, also a retired science teacher, had punched above their weight.
"(They) spent four years challenging this massive fossil fuel company owned by a billionaire in a Virgin Islands tax haven," she said.
A spokesman for MACH Energy said the mine's workers had lived with fear and uncertainty for too long.
"While we are disappointed with the outcome ... (we) will carefully review the judgment to understand its implications for future project assessments and environmental approvals," he said.
Lawyers involved in the case said the court's decision would be groundbreaking for climate litigation in Australia.
"This decision is one that will be studied around the world," Elaine Johnson said.
Greenpeace Australia Pacific climate and energy head Joe Rafalowicz said the High Court sided with common sense and scientific evidence.
The ruling comes after MACH Energy sought to extend the life of Mount Pleasant coal mine in the Hunter by 22 years and nearly double its yearly output.
The state planning commission in 2022 approved the plans before local Hunter Valley residents launched a legal challenge.
They failed on their first attempt, before NSW's highest court unanimously ruled the approval unlawful in 2025.
The appeal court found planning authorities are legally required to consider the climate impact of Scope 3 emissions - caused when the coal is eventually burnt, including when exported overseas - on local communities.
The court suggested that could involve conditions to refine the coal before export, only export to signatories of the Paris Agreement or require expected Scope 3 emissions to be offset.
MACH Energy took the finding to the High Court, which struck down the appeal on Wednesday morning.
"By majority, the High Court held the (planning) commission had failed to consider imposing conditions to minimise to the greatest extent practicable all greenhouse gas emissions, specifically 'scope three' emissions as required (by law)," the court said in a summary.
In his reasons, Justice James Edelman cited expert Professor Penny Sackett's estimate that the project would be one of the 650 largest greenhouse gas-emitting projects worldwide.
As a stop-gap measure, NSW in August allowed the mine - employing about 500 full-time equivalent jobs - to operate until 2032, and slightly increase yearly production.
The 22-year expansion proposal will return to the NSW Land and Environment Court, which will consider whether the matter must return to the Independent Planning Commission.
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