Victoria's Environmental Protection Authority was notified of AGL's decision on April 9, it emerged on Thursday, after the state government rejected the proposal late last month.

Planning Minister Richard Wynne said the plan for a terminal at Crib Point in Western Port would have had "unacceptable effects" on the local environment, including a nearby Ramsar-listed wetland of international significance.

AGL had been planning the project since 2018, arguing the terminal was necessary to keep the price of gas low and address a potential shortage in the state.

But Environment Victoria's Rai Miralles said a recent Australian Energy Market Operator forecast showed gas supply concerns had eased following the approval of new terminal at Port Kembla in NSW.

"This leaves two floating gas terminals proposed for Geelong, and both of those are likely to be located in or near Ramsar-listed wetlands, triggering some of the same environmental concerns," the climate and energy analyst said on Thursday.

"This means the Victorian government has time to focus on implementing policies that reduce gas consumption, so we don't need to build terminals to import gas."

The 300m-long floating terminal was planned for a site 10km north of tourist hotspot Phillip Island, and would have been 12km from the nearest marine park.

The project also involved building a 60km gas pipeline from Crib Point to Pakenham.

Jane Carnegie from the Save Westernport group said hundreds of millions of dollars had been wasted in the four-year fight against AGL's "inappropriate" plan.

"State and federal governments must improve permanent protections for Ramsar wetlands and Western Port Bay so this doesn't happen again," she said.

But an AGL spokeswoman hinted the Crib Point plan may not be completely dead in the water.

"The Victorian Minister for Planning found AGL's proposed project to have unacceptable environmental effects," she said in a statement to AAP.

"As a result, AGL has taken the step of withdrawing the works approval application while it considers its options."

Australian Associated Press