The NSW government has ruled out approving new coal projects in two parts of the state, but environmental groups have called for greater action to phase out fossil fuel projects if the government is to achieve its emission reduction targets.

NSW Deputy Premier Paul Toole told budget estimates on Wednesday that coal exploration licences would not be able to proceed in the Ganguddy-Kelgoola region, near Rylstone, and Wollombi in the Hunter Valley region due to “environmental and cultural constraints” and “uncertain economic prospects”.

The areas were slated for coal mines in the government’s Strategic Statement on Coal Exploration and Mining which was released last year, and identified 14 areas near existing developed coalfields that should be considered for future development.

“This strategic approach strikes the balance between supporting responsible coal production in areas suitable for mining and recognising that some areas across the state may no longer be suitable for greenfield sites,” Toole said.

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“The mining sector is critical here in NSW, it is still critical in relation to providing cheap power and sufficient power in this state, but it is also critical in providing a lot of jobs in communities across NSW and it is certainly an economic driver of those communities.

“In some cases, it is a finite resource and it is absolutely critical we ensure that those communities are supported as well, as they move away from coal mining.”

Toole added that most coal mines in the state will now be looking to expand their operations rather than seeking to start new projects.

In November last year, Toole ruled out projects in two areas in the Hawkins and Rumker areas, north of Rylstone near Mudgee, due to financial and social issues around the project.