Stop CSG Illawarra members have described PAC's decision to refuse Apex Energy's drilling application as a win in the battle against CSG exploration, but not the end of the war.
Spokeswoman Jess Moore said the region's anti-CSG movement would celebrate the rejection but would not stop fighting, calling for a complete halt on CSG activities.
"It's definitely a nail in the coffin for Apex Energy's application but it doesn't rule out CSG exploration completely; we can still expect more development applications," she said.
"CSG licences still cover the Illawarra and the fact is [the] legislation still permits CSG exploration and mining in the drinking water catchment.
"This decision means drilling cannot happen at this time but it doesn't rule it out completely."
Stop CSG Illawarra members have been campaigning against Apex's proposal since 2011.
Ms Moore believes the community's vocal opposition to the plan played a part in the commission's decision.
"It's the result of a powerful community campaign that has brought people together to stand up for what's right," she said.
"It has been years of work to get this outcome but the community has made it very clear, that under no circumstances, would they let this go ahead.
"We've doorknocked and surveyed all the residents in four suburbs near the [proposal site] and 98 per cent of residents are opposed to CSG exploration in drinking water catchments; they've made their position explicitly clear."
While the group was buoyed by the Sydney Catchment Authority's statement, strongly opposing CSG activities in "special areas", Ms Moore said they held concerns about a NSW government-ordered review into the effects of CSG exploration on drinking water.
"We're not hopeful of the outcome of the report," she said.
"Its terms of reference are problematic; they seem to want to know what 'best practice' [for exploration] would look like rather than determining whether CSG mining should go ahead.
"They seem to be 'how' questions, not 'if'."
Stop CSG Illawarra had been planning a blockade against the proposal.
Greens MP Jeremy Buckingham also welcomed the decision.
"[It] is a victory for common sense," he said.
"Sydney's drinking catchment should be protected from a toxic heavy industry like CSG.
"Coal seam gas is unsafe, unnecessary and unwanted anywhere in NSW, so the idea of drilling and fracking in our special drinking water catchment area was always ludicrous."
• September 2009: Apex Energy got permission to drill and operate 15 CSG exploration boreholes in an area of the Illawarra escarpment between Stanwell Tops and Bulli Tops.
• 2011: Apex was given approval to drill an additional exploratory borehole, bringing the total number of boreholes proposed to 16.
• August 2012: Apex applied to extend the expiry date of the approval to three years from the date the first borehole was drilled, rather than three years from the original approval in 2009.
• July 10, 2013: The Planning and Assessment Commission rejected Apex’s application to extend the expiry date, preventing the company from drilling any of the approved boreholes.