The decision was immediately welcomed by aboriginal groups who use the area located 280 kilometres west of Edmonton.
The $458-million Coalspur project is to cover about 6,000 hectares and provide about 500 jobs during its 20-year life.
It would produce about five million tonnes of coal per year for export — mostly to be burned for power generation in Asia.
The Ermineskin and Whitefish River bands say the mine would destroy wilderness areas vital for hunting and traditional practices.
They say the area, which contains the headwaters of the Athabasca River, is some of the most pristine country left on the eastern slopes of the Rockies.
They believe expansion plans not part of the current application could eventually affect almost 500 square kilometres.
The energy regulator will accept submissions from the public until Sept. 10.