Planning Minister Tony Kelly yesterday said the decision heralded "a more strategic approach" to planning in the region and the interests of the thoroughbred industry would be put first in any future decisions on mining.

For the time being at least, the Upper Hunter Shire will remain a coalmine-free zone.

Speaking at Arrowfield horse stud yesterday, Mr Kelly and Premier Kristina Keneally said the Government had accepted the advice of a Planning Assessment Commission panel that the Bickham project be rejected. They said the Government would amend the relevant State Environmental Planning Policy to ban open-cut mining at the Bickham site.

This is the same process the Government used in the run-up to the 2007 election to stop new open-cut mines being opened in Lake Macquarie.

Ms Keneally said any future application for mining in the shire would have to be treated on its merits but the Government would not jeopardise the growth of the thoroughbred export industry.

"The [Bickham] mine is simply not compatible with the unique rural characteristics of this locality, including the horse-breeding industry," Ms Keneally said.

"It is also clear from the [Planning Assessment Commission] report that potential impacts on local water resources would far outweigh any benefits of proceeding with the project."

While yesterday's announcement would not stop Bickham's owners from applying to mine the coal by underground methods, Bickham director John Richards said there were no plans at this stage to look at underground mining.

An underground mine, the Scone Colliery, operated in the same area west of the Pages River in the 1920s and 1930s.

Mr Richards said Bickham was disappointed the project did not get the full "merit-based" assessment under Part 3A of the Environmental Planning and Assessment Act.

"We remain of the view that full merit-based assessment was the most appropriate course for this project, as it is for all other mining projects," Mr Richards said.

"However, we subsequently accepted the matter being referred to an independent panel for preliminary review. Our priority now is to undertake a detailed review of the independent panel's findings."

The decision is a major win for the world's second-largest thoroughbred industry, which injects $2.4 billion a year in to the NSW economy.

President of Thoroughbred Breeders Australia and Arrowfield proprietor John Messara said he was delighted with the announcement.

"Even in the end if [the mine] hadn't affected us, the sheer perception that our water might have been polluted would have been [used against the industry]," he said.