The review of the company's upstream gas business will examine the management structure and practices to ensure AGL can "deliver on its goals of safely exploring for and producing gas resources for AGL's customers", AGL said in a statement on Wednesday.

The announcement came as the Gloucester Shire Council voted on Wednesday to expel AGL from its monthly "Gloucester Dialogue" on the CSG pilot program near the town after a series of problems with the fracking operations and handling of waste water.

As a result of the changes, Mike Moraza, AGL's group general manager who has led the upstream operations, will bring forward his retirement and exit the company on Wednesday, AGL said.

"The gas business has the potential to provide vital gas resources for our NSW customers and is set to contribute significantly to our balance sheet and deliver solid returns for our shareholders,"  Andy Vesey, AGL's new managing director, said. "It is important that we get the structure right."

Mr Vesey took control of AGL last week from outgoing chief executive Michael Fraser. Scott Thomas, general manager of coal-fired power unit AGL Macquarie, will replace Mr Moraza in an acting capacity from Monday.

"The review is long overdue and can only lead to one conclusion," said John Watts, a spokesman for anti-CSG group Groundswell Gloucester. "The CSG operations are not appropriate, not viable and should never have started in the first place."

Mr Watts said Mr Vesey had a chance to start anew and cut the losses of his predecessor: "With all the problems they've got [in Gloucester], it's impossible to see how they can decide to go ahead."

The review is expected to take three months, an AGL spokeswoman said.

Dialogue ditched

Earlier on Wednesday, AGL's efforts to build local support for its coal seam gas operations in northern NSW were dealt a fresh blow with Gloucester Shire Council voting to expel the company from its community dialogue.

Gloucester mayor John Rosenbaum said the last straw was AGL's belated revelation that it had detected toxic BTEX chemicals in its flowback water but did not disclose this discovery to either had failed to disclose to either a meeting of the dialogue group or the Environment Protection Authority for 12 days.

"It was a slap in the face," Mr Rosenbaum told Fairfax Media. "AGL was saying, 'we'll tell you so much, what we think you need to know'.

"It seems ridiculous that you have this multinational that doesn't get the fundamentals of the operations right," he said. "It just beggars belief."

The council also supported motions to have AGL halt its operations until the company resolved problems of disposing waste water from the pilot CSG project near Gloucester.

The decisions reflect the "lack of truth and lack of trust" in AGL, said Julie Lyford, a former shire mayor and a spokeswoman for anti-CSG group, Groundswell Gloucester.

"The only option AGL has is to make a good board decision and leave the Gloucester Valley," Ms Lyford said.

AGL said it was disappointed with the council's decision to exclude it from the regular meetings.

"We believe in the work of the Dialogue, and we think that our role over the last 18 months has been worthwhile," an AGL spokeswoman said, citing its move to install two groundwater monitoring bores and to conduct a fugitive methane emissions air monitoring program.

"Our door will always be open to the council and the Dialogue, should they ask us to re-join this important roundtable meeting," she said.

Suspension

The NSW government and the Environment Protection Agency suspended AGL's operations in the valley last month after the company revealed it had detected banned BTEX chemicals in water produced during the hydraulic fracturing – or fracking – of two of its four wells in the project.

AGL has attributed the presence of the toxic chemicals – benzene, toluene, ethylbenzene and xylenes – to natural sources, saying it had not used them in its own fracking operations.

AGL has struggled to find a disposal outlet for the waste, known as flowback water. It initially ran afoul of Hunter Water when the state agency found a contractor was disposing of the treated effluent into its sewage network, despite being told not to ship it to Newcastle.

The fallback destination – Worth Recycling, based in the Hawkesbury region near Windsor – has also decided to stop taking any more of AGL's flowback water from either Gloucester or the energy company's operating gas field in Camden, on Sydney's south-western edge.

"While it is disappointing to not treat waters that we are licenced licensed to receive, we understand and appreciate the level of concern raised by the [Hawkesbury City] Council and the community, so until a greater understanding and acceptance by all parties is achieved, Worth Recycling will not receive these waters at our South Windsor facility," Steve Matthews, general manager of Worth Recycling, told Fairfax Media.

"We have not received [AGL's] Camden waters for quite some time now and we will not receive them," Mr Matthews said. "I expect that the business will need to go somewhere once the project is up and running again."

An AGL spokesman said Worth was not AGL's current contractor for produced water from Camden, and the recycler's announcement "makes no difference" to those operations.