The environmental damage is all over the coin. That's possibly why you don't see it. Look at the purple-black colored patch up the left side of the obverse starting near the "1." It is also above the head. PCGS made the right call.
I'll try to post some brighter photos tomorrow, though the coin itself is fairly dark. This is the coin on Heritage: https://coins.ha.com/itm/early-dimes/1798-97-10c-16-stars-reverse-jr-1-r3-au55-ngc/a/1367-3251.s Also, @TomB any tips on numismatic photography? I'm still super new to it.