AGL has suspended its south western Sydney coal seam gas project due to community concerns, but a residents' group believes it is a stalling tactic because the work would not win regulatory approval.
The energy company said it has requested that the NSW Department of Planning and Infrastructure suspend its assessment of its proposed expansion of the Camden Gas Project.
"The reason that we've taken this action is that there have been a lot of community concerns raised with us from across the broad spectrum of local community - residents, business groups and politicians - and we feel that we need to take the time to more adequately address those and take a fresh look at our project," an AGL spokeswoman said.
But residents' group Scenic Hills Association said AGL's call for a suspension was merely a delaying tactic because the company knew it would not gain approval for the expansion.
"The fact is they want to suspend it because they know they haven't made their case," spokeswoman Jacqui Kirkby told AAP.
"We want this to go ahead. We want the planning assessment commission to take all the work that we've done and make the decision.
"We believe if the planning assessment commission does its job then it will knock this on the head once and for all."
NSW Greens mining spokesman Jeremy Buckingham agreed that the department should go ahead with the assessment and pull the pin on the expansion.
"AGL have pulled this development because they recognise the overwhelming community opposition and that the planning assessment commission, if it was doing its job, would knock it back," Mr Buckingham said.
"This development should be knocked back and (NSW Premier) Barry O'Farrell should cancel the petroleum exploration licence across Sydney."
Both Ms Kirkby and Mr Buckingham said AGL would also want to suspend the project as it would be a contentious issue during the federal election campaign.
"The Greens believe that this is a cynical PR stunt by a company desperate to get their contentious development out of the spotlight of a federal election campaign in the marginal electorates of western Sydney," Mr Buckingham said.
But Mr O'Farrell said he was also concerned with CSG exploration leases and that it was the previous Labor state government that had approved them.
"But I say again what I've said before - I am concerned that under the former government leases for exploration on CSG extended across 40 per cent of the state, including under residential areas in cities and in country areas," Mr O'Farrell told reporters in Sydney.
"The minister for planning has been looking at ways in which we can deal with that."
AGL shares were down 19 cents, or 1.24 per cent, to $15.13 at 1527.