The state government has acknowledged that coal will deliver increasingly uncertain economic returns and the fossil fuel has an "finite life span" as an energy source.
Deputy Premier Paul Toole made the comments in Budget Estimates while announcing that the government was shifting its focus to the expansion of existing coal operations rather than opening up more exploration zones.
He said the 178 square kilometre Wollombi exploration zone was no longer considered viable because of the environmental and economic implications of greenfield infrastructure.
However the government has given the green light for a new exploration licence at Wollar in the Upper Hunter.
The Wollar community has been fighting a long-running battle against the expansion of Peabody's Wilpinjong coal mine.
The announcement comes less than a week after more than 60 people representing 13 local environment groups protested against further coal exploration in the region.
Nature Conservation Council and Wollar locals slammed the decision as hypocritical.
"While today's announcement will be a tremendous relief for many, the government has effectively sentenced the community of Wollar to 'death by coal mining' by approving an operational release of new areas for the Wilpingong mine," Nature Conservation Council chief executive Chris Gambian said.
"The government must explain why it has abandoned the families of Wollar and treated US mining giant Peabody so favourably.
"The decision is not only cruel and unjust for the families of Wollar, it undermines the NSW and Australian governments' climate commitments.
"There is simply no need for the Wilpinjong coal mine to expand further - it already has approval to extract 16 million tonnes of coal a year until 2033. Mr Toole's decision will potentially let the mine dig coal until 2050.
Lock the Gate Alliance coordinator Georgina Woods said the removal of the coal exploration threat from Wollombi was welcome, but that it was a bitter blow for the government to condemn other communities at the same time.
"This hodge podge approach by the NSW Perrottet Government is a cruel blow for those whose homes and businesses remain under threat from coal mining," she said.
"It is fantastic that the state has abandoned plans to sacrifice these truly special places in the secluded valleys of Wollombi and Ganguddy-Kelgoola but it's hard to celebrate that victory when other communities face the uncertainty and damage of further coal mining.
"There's nothing strategic about the State Government's hodge podge approach to the coal mining expansion.
Releasing greenfield areas for coal exploration condemns rural communities to uncertainty and conflict and is at odds with the Government's own climate change commitments."
