The chief judge of the NSW Land and Environment Court on Friday dismissed Gloucester Resources Ltd's appeal of the Department of Planning and Environment's 2017 decision to not approve the mine in the NSW Hunter.

Justice Brian Preston said the Rocky Hill project would increase global greenhouse gas emissions "at a time when what is now urgently needed ... is a rapid and deep decrease in GHG emission".

"In short, an open cut coal mine in this part of the Gloucester Valley would be in the wrong place at the wrong time," he said in his judgment.

"All of the direct and indirect GHG emissions of the Rocky Hill Coal Project will impact on the environment."

People in the packed courtroom quietly celebrated, hugging and shaking hands with each other as Justice Preston delivered his judgment, with one opponent to the mine breaking down in tears.

GRL had argued the increase in gas emissions associated with the project would not necessarily cause the carbon budget to be exceeded.

However, Justice Preston said the reasons they used to justify that claim were "speculative and hypothetical".

"A consent authority cannot rationally approve a development that is likely to have some identified environmental impact on the theoretical possibility that the environmental impact will be mitigated or offset by some unspecified and uncertain action at some unspecified and uncertain time in the future," he said.

The company also suggested greenhouse gas emissions would occur regardless of whether the Rocky Hill project went ahead, because if coal demand was not met by Australian mines "investment will flow to other large coal producers and mines".

Justice Preston said that argument was "flawed" because there was no certainty the market substitution would be in the form of coal.

"Countries around the world are increasingly taking action to reduce greenhouse gas emissions in their countries, not only to meet their nationally determined contributions but also to reduce air pollution," he said.

Justice Preston also pointed to the visual impacts the mine would have on the local community, the noise and dust it would create.

He said these issues outweighed the economic and other public benefits of the coal mine.

Gloucester Resources said it was disappointed with Friday's ruling given its application "had met all non-discretionary criteria".

"Gloucester Resources will assess the implications of today's decision and consider its next steps," it said in a statement.

The ruling was lauded by Climate Council chief executive Amanda McKenzie.

"The NSW Land and Environment court has effectively ruled that coal - just like tobacco and asbestos - is bad for us," Ms McKenzie said in a statement.

"I'm thrilled to see the law catching up with the science."

The chief executive of community legal centre Environmental Defenders Office, David Morris, said the judgment would be "profoundly influential".

"The judgment is, I think, the first big piece of climate change litigation that this country has seen," he told reporters.

"Any decision-maker on fossil fuel projects would bear (Justice Preston's) reasoning closely in mind in determining whether or not a new fossil fuel project should be approved in this country."

Australian Associated Press