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The federal government has refused a controversial oil and gas drilling permit off the NSW coast, saying a "methodical process" was undertaken before arriving at a decision. The federal government has knocked back a controversial oil and gas drilling permit off the NSW coast in a move hailed a win by environment groups. The Petroleum Exploration Permit 11 (PEP11) between Newcastle and Wollongong had been the subject of vocal community opposition. Prime Minister Scott Morrison on Thursday confirmed the government would refuse the application.