The Williamtown Special Activation Precinct has been scrapped after a State Government review found the project was "undeliverable, unfair and outrageously expensive".
Former Deputy Premier John Barilaro launched the economic development project in 2020. At the time it was touted as having the potential to unlock hundreds of millions of dollars of private sector investment and create 4300 new jobs over the next 40 years in the defence, aerospace, advanced manufacturing, commercial, freight and logistics industries.
But a Minns government review has found the project would have cost a minimum of half a billion dollars before any development of the 135 hectare site could be undertaken and in excess of one billion dollars to complete.
Tuesday's budget will confirm the project is among a raft of Coalition projects that have been cut or substantially wound back.
Government employees have already spent thousands of hours working on the project over the past three years.
A final precinct master plan was due to be released in the second half of this year.
But the review found a combination of extremely complex hydrology, significant flooding risks and PFAS contamination made the project unviable.
This included significant risks regarding potential flooding impacts of the development on surrounding properties.
Also, there was an extreme risk of impact on the existing PFAS plume, potentially pushing it further south towards residential properties, important waterways, fishing grounds and RAMSAR listed wetlands.
Port Stephens MP Kate Washington compared the Williamtown SAP saga to an episode of television program Utopia.
"The Liberal government's claim that the SAP would be a 'positive permanent solution for the PFAS situation' has proven, as predicted by many, to be a cruel hoax," she said.
"More than four years on, not one job has been created, not one sod has been turned and there's still no solution for PFAS affected residents because the project was never capable of being progressed.
"Instead of turbo charging the local economy, taxpayers have paid millions for a whole lot of spin and stress for local residents."
She said the Coalition government's promised funding to develop the SAP never existed. This was confirmed by a review of the last three state budgets, which showed zero funding had been allocated for the project.
"Worse still, had the project proceeded to rezoning the land. The only beneficiaries of any uplift in land value would have been the developers, not local residents," Ms Washington said.
"Going forward, our government wants to see Newcastle Airport's Astra Aerolab take off."
SAP advocate and Port Stephens mayor Ryan Palmer said news of the SAP's demise was devastating for Williamtown, Port Stephens and NSW.
"There was a lot of hope put into the development of this SAP. We knew the development was difficult but we knew it was worth the investment to make Williamtown work as a special activation precinct," he said.
"We know there will be a lot of great things happening around the airport precinct with the Astra Aerolab, but I don't know what this means for adjoining land owners. They have been put on hold as far as development of those sites waiting for the SAP."
It's going to fall back to Port Stephens Council to take over the planning of Williamtown after the state has taken a lead role over the last five or six years.
Newcastle Lord Mayor Nuatali Nelmes backed the decision to scrap the SAP.
"It makes a lot of sense given that the precinct started out very large and was shrunk over time to only really include the land that the airport already has master planned and is actively remediating and getting tenancies for," she said.
"What is really important in the future is a coalition between the airport, Port Stephens Council, City of Newcastle, and the NSW government and federal government because they are all quite heavily invested in that asset."
Williamtown was among six Special Activation Precincts in the state that have been under review in recent months.
The fate of the other precincts is expected to be revealed on Tuesday.
