Federal Environment Minister, Sussan Ley, has pushed back a decision on the Brandy Hill quarry expansion proposal until October 13.
The minister's final decision on the controversial project was due to be handed down by Tuesday, after the expansion was approved by the state government in July.
Wildlife researchers and the Brandy Hill and Seaham Action Group have argued the expansion would cut into about 52 hectares of prime koala habitat.
Spokesperson for the action group, Chantal Parslow Redman, welcomed the delay, attributing it to the community grassroots campaign "to save Port Stephens koalas".
"It gives us extra time , it gives us time to gain extra traction and more interest," she said.
Ms Parslow Redman hoped the delay would result in the Minister refusing the quarry expansion project.
"We've already lost a quarter of koala habitat on public land in NSW during the black summer bushfires," Ms Parslow Redman said. "That makes the remaining unburnt habitat - including this habitat here in Port Stephens - that much more crucial.
"Our community won't simply stand by and watch as 52 hectares of critical koala habitat is destroyed in an area where koalas are breeding, at a time when this incredible species is facing extinction in New South Wales."
The action group commissioned a recent report by University of Newcastle wildlife conservation scientist Ryan Witt and conservation biologist John Clulow that indicated the quarry's expansion would create a significant barrier to koalas' movements.
In a written statement, Sussan Ley referred to that report as a reason for extending the statutory deadline for the final decision to October 13.
"The department is still considering the assessment report and other relevant information, including the new report prepared by Dr Witt and Professor Clulow for the Brandy Hill and Seaham Action Group regarding the impact of the proposal on koalas," the minister said.
"The Morrison government is rolling out a $200 million investment in bushfire wildlife and habitat recovery, and I want to ensure that any bushfire impacts are taken into account."
The state's Shadow Minister for the Environment and Member for Port Stephens, Kate Washington said she took the extension on the deadline for a decision as "good news".
"The extension of time gives us more opportunity to prove why it [the expansion] should not go ahead," she said.
Ms Washington said the NSW government used a 2014 environmental impact statement to assess the expansion project, but that information had dramatically changed, particularly after last summer's devastating bushfires.
"Sussan Ley must use this extra time to commission new environmental assessments and update the information she's been given by the NSW government," Ms Washington said in a statement.
Ms Washington said it was "unthinkable we'd be considering bulldozing critical koala habitat" as the impact of the bushfires became clearer.
"The importance of retaining unburnt, pristine, critical koala habitat has been underlined by what's happened across the state, and the decimation of the koala populations elsewhere," Ms Washington said.
Construction materials company Hanson operates the Brandy Hill Quarry. The company has wanted to expand the operation, with a proposal to more than double extraction rates to 1.5 million tonnes of rock a year and almost quadruple the area being quarried.
A spokesperson for Hanson told the Newcastle Herald in June that the company had "thoroughly and carefully assessed biodiversity impacts" associated with the project.
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