The U.S. Supreme Court on Monday dealt a setback to Arch Coal Inc., ACI +1.32% refusing to consider whether the Environmental Protection Agency exceeded its powers when it retroactively withdrew parts of a permit the company had secured for a large mountaintop coal mine in West Virginia.

The high court said it wouldn't review a 2013 appeals court decision that found the EPA had authority to remove Clean Water Act permits after they were already granted by the U.S. Army Corps of Engineers. Mining operators often need such permits to dump rock and soil into surrounding watersheds.

At issue was the Spruce No. 1 mine in central Appalachia, which in 2007 received a permit from the Corps of Engineers to discharge material at nearby streams and tributaries. But the EPA under the Obama administration in 2009 began efforts to modify or suspend the permit, saying new information showed that dumping mining waste would impose unacceptable harms on water quality and wildlife.

The EPA's actions, completed in 2011, prohibited Arch Coal's Mingo Logan subsidiary from discharging material into two of the streams that had previously been approved as disposal areas. EPA's move will curtail activities at the mine by 88%, Mingo Logan said in a petition to the Supreme Court.

The company said it spent several years and millions of dollars working with state and federal officials to obtain the permit. EPA's move to invalidate the permit terms retroactively was unprecedented and would create uncertainty in industries that have invested billions of dollars in reliance on permits issued by the Corps of Engineers, Mingo Logan said.

It said Congress never meant to give EPA "a retroactive trump card" over the corps. The EPA had urged the Supreme Court to stay out of the case, saying the language of the Clean Water Act was clear in giving the agency the power to withdraw permit terms even after a permit is issued.

The agency said its action wasn't a threat to private investment because it took such steps only on extremely rare occasions. Even with Monday's high-court action, other issues remain pending in the case. Lower courts haven't yet ruled on parts of Mingo Logan's lawsuit against the EPA.