SPE is seeking to add 7,161 acres to its existing mining permit. The additional acreage would add 176 million tons of coal in place, or 110 million tons of mineable coal, enough to continue longwall operations for another decade. The amended permit also would enable the company to expand the mine from five to 14 longwall panels, but would not result in the installation of any additional longwalls.

The Montana Environmental Information Center and the Sierra Club appealed the Montana Department of Environmental Quality’s (DEQ) approval of the amended permit to the state review board, claiming DEQ’s material damage assessment and determination “employed the incorrect legal standard” and that the case record before the agency did not “affirmatively demonstrate” the “mine expansion was designed to prevent material damage to the hydrologic balance.”

In a 4:1 vote, the review board agreed to send SPE’s permit application back to the DEQ for further consideration.

The mine’s proposed expansion “is a considerable undertaking,” the board said. “It promises sizeable economic benefits in the short term. However, as the Montana Department of State Lands determined years ago, it also threatens significant economic harm in the long term.”

The Bull Mountains are an arid landscape, the board noted, and existing ranching operations and ecosystems are wholly dependent on the area’s limited water resources. This is where the board committed two errors, the board added.

“First, DEQ’s material damage determination failed to consider whether the mine expansion would lead to violations of water quality standards,” the board said. “Second, the record evidence did not affirmatively demonstrate that the mine expansion is designed to prevent material damage to the hydrologic balance outside the permit area.”

Instead, the board continued, “it demonstrated only that the mine expansion, as currently designed, may or may not cause material damage outside the permit area in the next 50 years and that there may or may not be water resources available for mitigation.”

As a result, the board said, DEQ’s permit decision must be set aside and the matter returned to the agency “to complete a lawful cumulative hydrologic impact assessment.”

Mike Dawson, a SPE spokesman, said in a statement the company was reviewing the board’s decision “to determine the impact” on the mine. He also said Signal Peak continues to operate normally.

The mine, owned by FirstEnergy Corp. and Boich Cos., both of Ohio, and Pinesdale LLC, a wholly owned subsidiary of Swiss commodities trader Gunvor Group Ltd., produced 4.8 million tons of coal through the first three quarters of 2015, down from a high of 8.6 million tons in 2014. Most of the coal is shipped overseas.