Queensland farmers in the grip of drought have lost a legal fight against a coal project.

A decision by the Brisbane Court of Appeal leaves the fate of the New Acland coal mine's expansion plans in the hands of Mines Minister Anthony Lynham.

Twelve years ago, New Acland sought approval for a $900 million expansion of the mine on the Darling Downs, near Toowoomba.

Graziers in the Oakey Coal Action Alliance say the court's decision will further add to the crippling effects of drought.

“There is still a massive question mark about groundwater impacts to be considered in relation to this mine,” alliance secretary Paul King told reporters.

“Farmers can't afford to see groundwater drained away.

“The mine still doesn't have an associated water licence or planning interest approvals, and we don't believe they should be granted either given the severe impacts it will cause.”