The company might be disappointed but the people of Kingaroy are...

The company might be disappointed but the people of Kingaroy are celebrating the end of Cougar's bid to establish an underground coal gasification (UCG) plant in their region.

The Queensland government announced on Friday it had pulled the plug on Cougar Energy's UCG pilot plant near Kingaroy, northwest of Brisbane, after it failed to prove its operations posed no serious harm to the environment.

A Cougar spokesman said the company was assessing "all aspects" of the government's announcement and associated statutory notices before making any statement to shareholders.

Cougar's UCG trial was suspended in July last year after traces of the cancer-causing chemical benzene and toxic chemical toluene were found in groundwater-monitoring bores on the site.

Kingaroy Concerned Citizens Group (KCCG) had fought the establishment of the plant for four years.

KCCG spokesman John Dalton told AAP they appreciated getting a phone call from the minister Kate Jones informing them of the decision.

"We have always said that that particular trial was in prime farming areas and that it severely threatened our clean air, clean water and clean soils.

"We're an agricultural area and long-term that's where our future is," Mr Dalton said.

South Burnett Regional Council Mayor David Carter also said they were excited about the shelving of the project.

"I suppose UCG wasn't well enough known when the project first happened, but certainly when we researched it and looked into it and had this contamination problem, we just think it was the wrong site, it was always the wrong site for a UCG site," Mr Carter told AAP.

"It was a disaster waiting to happen," he said.

"We're lucky that they only burnt about 20 to 30 tonnes of coal and only had a very small contamination scare, but any contamination is not what we want. We don't want any contamination at all."

He has called on the state government to change the way these kind of projects were imposed on communities, calling for more direct consultation with local people.

Mr Carter said some people had been keen on the project because it would have brought some jobs to the region and the area does need the economic development.

"But our region's also based on agriculture. Our soil, our air and our water are the things that we normally use to make our living and to have that affected is something I don't want to see happen, and the people in our community don't want to see happen either."

Independent state Member for Nanango, Dorothy Pratt, also told AAP she was very happy with the decision, even though she had originally backed it.

She said once she learnt more about the consequences of the UCG project, it wasn't a price she thought the community should pay.

"I don't think any member (of parliament) should sacrifice their community on the chance of a few jobs coming their way."