HALIFAX -- An environmental group says it is cautiously optimistic after a Nova Scotia Supreme Court judge reserved decision on the group's bid to quash a permit to drill for oil and gas near a Cape Breton lake.

The Margaree Environmental Association's judicial appeal, which contends that the province's environment minister erred in approving the drilling near Lake Ainslie, concluded on Tuesday in Halifax.

Neal Livingston, the group's co-chair, said the association is hoping the judge will overthrow the decision that allows Toronto-based Petroworth Resources Inc. to drill a conventional oil and gas well near the freshwater lake in the centre of the island.

"I think our case is quite strong," said Livingston outside the courtroom.

"If our case isn't strong , it would appear to me that the next step the minister could take would be to allow somebody to drill inside somebody's house and inside their drinking water well."

"They can't get any closer than this case."

The group's legal argument centred on environmental restrictions that prohibit drilling within 100 metres of a water course.

Derek Simon, the group's lawyer, told the court there is a brook less than 50 metres from the drill site that empties into a wetland and eventually into Lake Ainslie.

But the government has classified it as a man-made drainage ditch and therefore does not consider it a water course.

A solicitor for the Environment Department argued that if the judge does find fault with the minister's decision, an appropriate decision would be to amend the terms and conditions of the drilling permit.

Simon said he believes it could take months before Judge David MacAdam delivers his ruling.

Livingston also contends the drilling project is too close to homes and drinking water wells and poses a threat to an ecologically sensitive area. He said the well would be 100 metres from one home and about 600 metres from the lake.

"It's completely inappropriate to be giving out a permit this close to homes, this close to water courses and this close to drinking wells," said Livingston.

Last December, Environment Minister Sterling Belliveau rejected an appeal by the Margaree group under the provincial Environment Act. The province had said it responded to public input and believed it has set the necessary conditions to protect the environment and public health.

The group said the permit is widely opposed by local residents and argues it sets a precedent by permitting a drill site in an inappropriate location.

Petroworth applied to drill a 1,200-metre well in September 2010 and received provincial approval last July.