The court ruled 5-2 in favor of the developers of Cumberland Harbour, a 1,014-acre gated subdivision being built on a peninsula near the Georgia-Florida border. It was the first time the court has considered whether upland development is covered by the state Coastal Marshlands Protection Act.

The developer, Land Resource Companies, was granted a state permit in 2005 to build two marinas and three community docks at Cumberland Harbour in St. Marys. They would make up the largest marina complex in Georgia with more than 17,500 linear feet of floating docks.

The Center for a Sustainable Coast and other environmental groups challenged the project in court, arguing state regulators granted the marina permit without considering potential harm to the marsh from polluting stormwater runoff from the entire development - including homes on the peninsula's uplands.

The Supreme Court ruled the 1970 Coastal Marshlands Protection Act wasn't intended to cover developments on dry land, which justices argued would grossly extend the power of state regulators.

"It would require that any project, even an upland project located miles from the marshland, would have to undergo the permitting process if it could be shown that stormwater runoff from the project would affect the marshlands," Justice Harris Hines wrote for the majority.

The marina permit still has to go back before state regulators, who were ordered by an administrative law judge in 2006 to also consider whether the marina posed a threat to endangered right whales and other protected species. That issue wasn't considered by the Supreme Court.

Though Land Resource filed for federal bankruptcy protection last month, company spokesman Will Hurst said the developer still plans to pursue the marina permit.

In their dissent, Chief Justice Leah Ward Sears and Justice Carol Hunstein argued that decisions by the lower courts should be thrown out on procedural grounds because other issues, such as the effect on endangered marine species, had not been finalized.

Patricia Barmeyer, the attorney for Land Resource, said the court's ruling Monday was a major victory.

"This is really the big issue that was holding it up," Barmeyer said. "We're hopeful that at this point it can move forward. It's spent a long time in the works already."

Chris DeScherer, an attorney for the environmental groups challenging the marina permit, said the court's ruling could have impacts far beyond the battle over Cumberland Harbour.

"I think the fate of the marsh is on shakier ground," DeScherer said. "I don't think all is lost, but this is certainly a blow for folks who care about the marsh."

However, DeScherer noted the court's ruling said the marshlands act does apply to developments that produce stormwater runoff that "alters the marshlands in a direct physical manner akin to removing, filling, dredging or draining the marshlands."

"I think the court left open a door under which stormwater still is regulated," said DeScherer, though he added the court's specific meaning was confusing. "Where else does stormwater come from except the uplands?"

Land Resource filed a Chapter 11 petition for reorganization last month in U.S. Bankruptcy Court in Orlando, Fla. The company cited the declining economy, credit freeze and a "challenging real estate market."

Company spokesman Will Hurst said that, under Chapter 11, Cumberland Harbour will be sold. The marina permit, which would boost the value of the property, would go to the new owner.

"The bank basically is the owner right now," Hurst said. "Not being in the development business, they will want to sell it."