The Department of Heath and Environmental Control Board agreed to hear the challenge from American Rivers and the Coastal Conservation League at its next meeting July 9.
The environmental groups opposed DHEC offering Duke the water quality permit the company needs because they say the utility hasn't done enough to make sure the 225-long Catawba and Wateree rivers in North and South Carolina remain safe for wildlife and drinking water.
Duke Energy officials are asking federal officials to allow them to continue to operate 11 hydroelectric dams along the rivers for the next 50 years, but the utility will need water quality permits from both Carolinas before the dams are relicensed.
North Carolina has already issued permits for the six dams in that state, Duke spokesman Andy Thompson said.
The river system provides drinking water and electricity for at least 1 million people, according to the Charlotte, N.C., utility.
Duke is preparing for next month's hearing and will give DHEC whatever information it needs to make a decision.
"We recognized there would be this possibility," Thompson said. "We certainly feel we have met all of the requirements."
The environmental groups don't think Duke has done enough to ensure the river will remain clean enough for drinking water and enough water flowing through to make sure fish and wildlife can thrive.
They also said the permit conflicts with an ongoing lawsuit regarding equitable use of the river. In 2007, South Carolina Attorney General Henry McMaster sued to stop North Carolina from draining the Catawba River basin. Under the permit, South Carolina is guaranteed about 25 percent of the water that flows from North Carolina.
A special master appointed to hear the case has allowed several interveners including Duke Energy and the city of Charlotte to enter the case, a decision McMaster has contested. The U.S. Supreme Court has ruled that South Carolina may present arguments why those parties should stay out of the dispute over the watershed, but that hearing has not been held.