A decree signed Monday awarded the "Bleue Lorraine" concession to La Francaise de l'Energie, which plans to tap natural gas trapped in coal seams in the eastern Moselle region.
This will be the first time coal seams will be tapped for natural gas in France although the practice has been used in other countries.
National authorities had initially rejected the project on technical grounds but a court overturned that decision. The authorisation was granted even though national authorities are appealing the ruling.
Local environmental groups also oppose the project, as well as a number of local lawmakers and mayors.
The International Energy Agency has said that if nations are serious about meeting a 2050 net-zero carbon target that no new oil and natural gas projects are needed.
La Francaise de l'Energie earlier this year also reported having made a major discovery of hydrogen in the region and said Thursday it is continuing to study developing the field.
Hydrogen, which produces water when burned, is seen as a promising alternative that will help reduce the use of polluting fuels.
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