The federal environment department wrongly skipped a key assessment when approving a water pipeline for Adani's massive Carmichael coal mine, a court has ruled.
The North Galilee Water Scheme would extend a dam and pump water 110 kilometres to the coal mine in central Queensland, to suppress dust and wash coal.
A department official in 2019 decided the project wasn't a coal mining activity or involving a large coal mining development.
Deeming it so would have mandated an assessment of whether the pipeline and other infrastructure had or was likely to have a "significant impact" on water resources.
In the Federal Court on Tuesday, Justice Melissa Perry ruled the delegate made an error of law by finding the harvesting and supply of water for decades was not integral to the conduct of mining operations at the Carmichael mine.
As a result, the project's approval was set aside and will be sent back to the department to restart the approval process.
Australian Conservation Foundation, which launched the legal challenge, said the court's decision was a win for the protection of water and farmers.
"It's a win for regional communities and farmers who depend on reliable flows of river water in our drought-prone landscape," ACF chief executive Kelly O'Shanassy said in a statement.
"It will set a new precedent that essential infrastructure for coal seam gas and large coal mining projects must be assessed under our national environment law."
Adani, which recently rebranded its Australian operation to Bravus, said it was considering its options on the progression of the water scheme.
But the decision won't impact the mine's construction or operation, it said.
"Regardless of today's court judgment, construction on the Carmichael mine and rail project is well underway, and importantly, the North Galilee Water Scheme project is not required for these construction activities," the company said in a statement.
"We have also secured water for the operational phase that does not require the North Galilee Water Scheme."
The federal government and Adani were ordered to pay costs.
