Glencore's Hail Creek mine expansion project in central Queensland was granted state government approval on Wednesday, but still needs to be greenlit by the Commonwealth to go ahead.
The planned footprint expansion will disrupt nearly 680 hectares, including "ecologically significant" koala habitat.
An aerial survey done by environmental groups spotted 13 of the threatened marsupials on-site in one evening.
Criticism has also been levelled at the project's fugitive methane that escapes during operations.
An aerial survey by the United Nations Environment Programme found methane emissions at the existing mine site were multiples higher than Glencore was reporting.
In granting approval, the Queensland government said the extension's impact on climate change was "low" compared to global emissions and targets.
Greenhouse gas emissions, including methane, would be managed under the company's abatement plan and reporting rules, the government said.
Glencore has promised to investigate "pre-mine drainage", which would involve extracting the gas from coal seams before mining begins to stop it escaping during digging.
The coal producer has committed to a study of the method within two years of project approval, but Lock the Gate Central Queensland co-ordinator Claire Gronow says that is too late.
"Pre-mine drainage of harmful methane gas needs to occur pre-mining, not two years after mining commences."
Dr Gronow says no genuine conditions have been placed on Glencore to reduce and mitigate methane pollution.
Aerial surveys and a pre-drainage trial before mining begins were recommended by Institute for Energy Economics and Financial Analysis ahead of the decision.
The company was abiding by its emissions reduction obligations under the Safeguard Mechanism, a federal scheme targeted at big emitters, Glencore said in a statement.
The resources giant highlighted the climate commitments specific to the proposed Hail Creek extension, including the gas pre-drainage study.
The importance of accurately measuring methane emissions was recognised. Glencore said it was using the most accurate regulated method used for open-cut mines in Australia.
"We continue to raise concerns about the shortfalls of satellite or remote sensing methods for emissions measurement and their unsuitability for annual inventory reporting," the statement said.
Australian Conservation Foundation climate campaigner Freja Leonard described Hail Creek as a "carbon bomb" and urged federal Environment Minister Murray Watt to reject the proposal.
"The climate and environmental damage from Hail Creek isn't worth the relatively small quantity of coal it produces," she said.
An additional 29 million tonnes of thermal and metallurgical coal will be mined under the expansion, with operations to continue for another three years.
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