AGL has played down the impact community opposition may have had on its decision to scrap a controversial coal seam gas (CSG) project near the New South Wales town of Gloucester.

The company is pulling out of CSG exploration and production across Australia, including the $1 billion investment in the Gloucester project.

It comes after a sustained five-year campaign by local residents against CSG.

CEO Andy Vesey said the company would hold a public meeting in the town this month to detail its decomissioning plans.

He insisted it was purely a business decision.

"So, quite honestly, it's one of the things I've been very clear about ever since I've been talking about this," he said.

"That we would make a business decision, we would be very transparent about it, and that's what we've done."

The NSW Opposition said there was no evidence there would be a looming gas shortage and price hikes, in the wake of AGL's decision.

In the past, industry groups have raised fears about a critical gas shortage if CSG projects did not get off the ground.

The opposition's energy and resources spokesman Adam Searle has rubbished those claims.

"First of all, there is no real evidence about a looming gas shortage," he said.

"The reality is that for almost all of New South Wales gas supplies have been imported from other states; just as many goods and services are traded in Australia across state boundaries.

"There is nothing new or different about this."

MP urges community to work together

Upper Hunter MP Michael Johnsen was worried Gloucester could fall into a slump.

He believed local business morale may suffer, similar to Dungog when plans for the Tillegra Dam were scrapped.

He said a $2 million fund, set up by the company, must be used to develop new industries, such as intensive agriculture or manufacturing, to secure local jobs.

Mr Johnsen said the area could not rely on tourism alone.

"Tourism is a wonderful thing, there's no doubt about that, but how far the investment fund will go I don't know," he said.

"I am looking to leverage off that.

"The more funds that are available [the better], and I am looking forward to making that the focus.

"It is all about job creation, providing for the future, and giving confidence to the town."

Mr Johnsen urged the community to now work together, to heal the bitter rift caused by the proposal.

"I think it's important that community members, regardless of their views, come together," he said.

"People have principal objections to certain aspects of life, I get that, I accept that, but you need to put those principal objections aside and actually start thinking about your town."

Aerial view of AGL's Waukivory pilot coal seam gas project near Gloucester, NSW. ( Lock The Gate )

Concerns AGL decision will lead to town's demise

Stuart Redman is a fourth-generation Gloucester businessmen, and said AGL's decision was the death knell for the town.

"Our business was pinning its forward planning hopes on this gas project going ahead," he said.

"It's the only form of any sort of construction that might generate employment and growth for the economy in the town."

Mr Redman said he was worried the project could be revived by a foreign operator.

"I'm sure if AGL have handed it back the State Government, it's going to sell it to somebody else," he said.

"The most likely purchaser for anything mineral in Australia is a Chinese-based company."