A private water utility's application to pump recycled wastewater into a lagoon leading out to Catherine Hill Bay has been withdrawn.
Solo Water, which provides wastewater services for Rose Group's Beaches estate at Catherine Hill Bay, withdrew its application from IPART to vary its network operator's license late last week.
The application, which proposed sending the recycled water into the lagoon so further stages of the estate could be developed, had been with the Independent Pricing and Regulatory Tribunal since March, 2018.
Close to 200 submissions were made to IPART about the plan, including opposition from Lake Macquarie council and the NSW Environment Protection Authority (EPA).
A protest was held in the town last March by Catherine Hill Bay Boardriders and the local progress association to voice opposition to the plan.
Solo Water confirmed on Friday it had withdrawn its application but said it had done so on the basis of "misinformed perceptions of recycled water".
"As was demonstrated in the Review of Environmental Factors submitted with the application, the proposal would not have resulted in any adverse environmental or public health impacts," Solo Water environmental engineer Brad Irwin said.
"This is due to the very high quality of the recycled water that is produced at our recycled water treatment facility at Catherine Hill Bay.
"Under the proposal this recycled water would also have been polished in a constructed wetland prior to being released during rain events.
"It was however decided to withdraw the application based solely on community concerns predominantly arising from incorrect and misinformed perceptions of recycled water."
The EPA said in its submission the proposal posed "unacceptable risks" and the "appropriate assessment pathway to properly assess and address" certain risks had not been followed.
Mr Irwin said Solo Water's proposal was "not withdrawn due to any concerns relating to public health or environmental impacts".
He said the treatment facility had allowed residents to recycle over five million litres of the water for uses such as irrigation, toilet flushing and outdoor cleaning.
Swansea MP Yasmin Catley, who discussed the company's plan in state parliament, said she was pleased by the decision but wanted clarification on Solo Water's future intentions for its recycled wastewater, given Rose Group is developing land where the water was previously dispersed.
"I have written to [Solo Water] seeking advice from them on what it is they will be putting in place to remove that water in an environmentally safe way," Ms Catley said on Friday.