Bushfire Survivors for Climate Action says the Land and Environment Court judgment in favour of Whitehaven's Narrabri coal mine expansion in NSW was "out of step with community expectations".
"Approving high-emitting projects is exposing communities to more extreme impacts from climate change," spokeswoman Fiona Lee said on Wednesday.
"We have a moral obligation as climate survivors to challenge dangerous and polluting planning decisions that are not in the public interest, to try and prevent other people from going through what we've endured."
Including Scope 3 emissions - greenhouse gases generated when the coal is burned in other countries - the expansion is anticipated to produce 480 metric tonnes of CO2 equivalent, roughly equal to Australia's total greenhouse gas emissions in 2022.
Justice Sandra Duggan threw out the applicant's claim that the Independent Planning Commission's approval was legally unreasonable, finding it was "within the bounds of the IPC's decision-making power".
Elaine Johnson, director of legal strategy at the Environmental Defenders Office which represented the climate action group, said the case demonstrates planning laws need urgent amendment.
"The IPC heard that more than 30 people died during the Black Summer bushfires, some 3000 people lost their homes, and more than 400 people lost their lives in the immediate aftermath due to smoke inhalation," she said.
"Yet the commission still made the very dangerous decision to approve a further coal expansion in NSW on the basis that the mine was in the 'public interest'."
The group says it is carefully considering the court's judgment.
Whitehaven welcomed the judgment in a statement filed with the Australian Stock Exchange.
"Our consistent position has been that this legal claim was without merit," it said.
"High-quality thermal coal has an important role to play in providing energy security during the decarbonisation transition."
Conservation group Environment Council of Central Queensland has mounted a legal challenge in the Federal Court to the federal environment minister's approval of the project.
Whitehaven has joined the proceedings in support of Environment Minister Tanya Plibersek's case, which is due to be heard in September.
Shares in Whitehaven Coal were trading down 1.2 per cent at 3.30pm AEST on Wednesday.
