Some environmentalists believe it is a landmark decision that will change the way coal mines will be approved in the country while NSW's peak mining body has dismissed it as a one-off decision.
Gloucester originally had its development application for the Rocky Hill coal project knocked back by the NSW Planning and Assessment Commission.
The original proposed development was to extract 2.5 million tonnes per annum of run-of-mine coking coal from an open cut mine and build a coal handling and preparation plant at the site. It also included an overland conveyor to transport product coal to a dedicated load-out bin and a rail loop to transport the coal to the Port of Newcastle.
Land and Environment Court chief judge of the court Brian Preston handed down the judgement on Friday in the case between Gloucester Resources and the NSW Planning Minister and dismissed an appeal by the company against the earlier planning rejection.
Preston said the "significant adverse social impacts on the community" from the proposed mine but also pointed to the climate impacts of coal mining.
"The construction and operation of the mine, and the transportation and combustion of the coal from the mine, will result in the emission of greenhouse gases, which will contribute to climate change," he said in his judgement.
Community group Groundswell Gloucester, represented by the Environmental Defenders Office of NSW, joined the proceedings last April.
Environmental Defenders Office CEO David Morris said the judgement was important both within NSW and nationally.
"The judgement is, I think, the first big piece of climate change litigation that this country has seen," he said.
"I think it has important ore broadly than this country and more broadly than just this state.
"This lengthy 200 page judgement from the chief judge of the Land and Environment Court, I would have thought, should be compulsory bed time reading for some senior politicians around the country including the prime minister and the premier of NSW."
Morris said the judge refused the mine on a variety of grounds and those included the project's contribute to global climate change.
"I think this judgement will be profoundly influential," he said.
NSW Minerals Council Stephen Galilee disputed the case was significant and that it would affect for other coal mine approvals in the state.
"We'll take a close look at the judgement, including what appears to be a range of different reasons for the outcome," he said.
"However, we don't believe this is in any way a ‘landmark case' given the Department of Planning had already recommended against the approval of the project."
A spokesman for the Minerals Council of Australia said the MCA continued to support action on climate change.
"The minerals industry acknowledges that sustained global action is required to reduce the risks of human-induced climate change," the MCA says in its energy and climate change policy.
"The Australian minerals sector supports a measured transition to a low emissions global economy.
"This transition will require a policy framework encompassing: Australia's participation in global agreements such as the Paris Agreement with greenhouse gas emission reduction commitments from major emitting nations; and combination of short, medium and long-term market-based policy measures that provide for least cost abatement of greenhouse gas emissions and maintain the international competitiveness of Australian industry."
Lock the Gate spokeswoman Georgina Woods said other coal mine projects such as the proposed Bylong coal mine in NSW should have this additional test applied.
"Lock the Gate is calling on the Independent Planning Commission to immediately commission an independent review of the climate change implications of the Bylong coal mine," she said.
"As a large, greenfields thermal coal mine, which will make a major contribution to global warming, the consequences of this legal decision should trigger a major reconsideration of the Bylong project."