Scottish Coal could create more than 50 jobs if plans to extend a huge opencast site near Kelty are given the go-ahead.
The company wants to extract 3.5 million tonnes of coal from beneath Loch Fitty, by draining the former fishery.
Surrounding communities would lose the loch for several years while mining is carried out.
Scottish Coal has now submitted a formal planning application to Fife Council seeking consent for the development.
Work could start early next year if proposals are approved.
Objections have been lodged by three neighbours who say draining the loch would devastate its fragile ecology and destroy views from the village of Kingseat.
One resident, June Simpson, said, “Scottish Coal told us that it has not tried to drain any loch for coal before.
“In fact, we were led to believe it has never been tried in the UK before.
“We do not know what expertise they have and whom they have contacted to ensure grave errors are not made.”
Norman Woolley (70), who lives at Loch Fitty Cottages, added there would be a “horrendous visual impact.”
He said, “Nobody around here wants the loch drained, but I can’t see it not happening unless people on the planning committee think otherwise.
“It will cause a horrendous visual impact, but in planning terms that doesn’t count for anything.”Loch will be “significantly improved”The 170-acre loch became a key venue for fly-fishers when it opened in 1970.
At its peak it hosted 30 boats, stocking ponds, a lodge, tackle shop and cafe and was used for angling competitions.
However, it closed suddenly in 2007.
Councillor Alex Rowley, who represents the Lochs, will be on the committee that makes the decision on the project.
He said, “The application will result in further coaling in this area for a much greater extended period than what people thought.
“I will make my views known once I’ve given proper consideration to all the features.”
In documents submitted to the council, Scottish Coal said St Ninian’s employed 89 people full-time.
If its proposals for new shift patterns at the mine are approved 52 new jobs would be created.
It said, “It is evident that coal can only be worked where it is found and, as such, it is not possible to look outside the coalfield for alternatives.”
A study said there was no practical way of getting at the coal beneath Loch Fitty by underground means.
A Scottish Coal spokesman said, “Following the completion of mining operations, the loch will be restored to its full extent, and the water quality and ecological conditions will be significantly improved.”