The proposed Shenhua Watermark coal mine in northern New South Wales will be allowed to relocate 262 koalas and destroy their natural habitat, the Land and Environment Court has ruled.

The decision upholds the development approval of a mine that Nationals leader and Agriculture Minister Barnaby Joyce labelled "ridiculous" because of its proximity to prime agricultural land.

New deputy prime Joyce says banks will be worry about a fall in house prices.

The court case was brought by local environment group Upper Mooki Landcare, who claimed the Planning Assessment Commission failed to properly assess the danger of the $1.2 billion project to the koala population.

Sue Higginson of the NSW Environment Defender's Office, who represented the case against Shenhua and the NSW Minister for Planning, said the law doesn't adequately protect or consider wildlife populations.