Mining firm H.J. Banks and Company Limited wants to mine up to three million tonnes of coal from 325 hectares of farmland near the village of Widdrington.
But the then communities secretary, Sajid Javid, called in the planning application for his own determination.
Following a public inquiry, a planning inspector recommended that consent for the plans be granted.
But in March, Javid rejected the inspector's recommendation and refused planning permission.
Now, however, the applicant is asking judge, Mr Justice Ouseley, to overturn the "irrational" decision.
The company says that Javid misinterpreted national planning policies and gave too much weight to concerns about climate change.
Nathalie Lieven QC, for the company, said the plan was to extract coal, fireclay and sandstone from the site over a seven-year period.
The project would lend a valuable boost to the local economy, providing many jobs, and the land would be carefully restored when mining ceased, the court heard.
In return for planning permission, the company had, among other things, agreed to contribute £400,000 to the County Durham Community Foundation.
A partnership with local people would be set up to protect neareby Druridge Bay and the historic nearby ruins of Chibburn Perceptory.
And, once the mining was complete, steps would be taken to turn the site into a wildlife habitat.
In his March decision, Javid accepted that the benefits of coal extraction and local employment deserved "great weight".
But, against that, the project would have "a considerable adverse impact on the landscape character" of the area.
And, crucially, he also took into account, "the very considerable negative impact" of greenhouse gases and climate change.
He said that "overall, the scheme would have an adverse effect on greenhouse emissions and climate change of very considerable significance."
And, refusing planning permission, he said the national, local and community benefits of the scheme were outweighed by environmental objections.
Challenging the decision yesterday, Lieven argued it was "plainly wrong" to say that the mine would have any impact on climate change.
The only way that nationwide coal consumption would be increased by the mine was if it had an impact on the price of the commodity.
And she told the judge that there was no "even minimal prospect of increasing greenhouse gas emissions from the end user".
The QC added that Javid's "erroneous" ruling flew in the face of a "clear line" of previous planning decisions.
The environmental impact of the burning of fuel, such as gas or oil, by end users had up to now been "discounted" by planners in mining cases, she told the judge.
David Elvin QC, for the Ministry for Housing, Communities and Local Government, is defending Javid's decision.
Lawyers representing campaign group Friends of the Earth and local campaign group, Save Druridge, are also in court.
The hearing is due to last up to two days and Mr Justice Ouseley is expected to reserve his decision until a later date.
More details on H.J. Banks' grounds for the challenge can be found here.
H.J Banks & Company Limited v Secretary of State for Communities and Local Government. Case Number: CO/1731/2018