The $US800 million ($A1.05 billion) floating plant, unveiled in August 2003, was expected to start operating next year, with first production due in 2009, and would have provided a market for ExxonMobil/BHP-held Scarborough gas field, offshore Western Australia.

But Associated Press reports that in a two-one vote, the commission turned down the proposal.

The decision was reportedly met with loud cheers by an estimated 900 people who packed the auditorium for Monday’s commission hearing.

The proposed project received widespread criticism from residents in California, including celebrities Pierce Brosnan, Halle Berry and Martin Sheen, who led a campaign to block the terminal.

They argued the 14 storey-high terminal, to be set about 22.5km off Malibu and about 30km off Oxnard, could pose a serious threat in the event of an accident.

State Lands Commission commissioner John Chiang, who is also the state controller, California’s elected chief financial officer, said he did not believe the project would be in the best interests of the state or its residents.

As an elected Democrat politician, Chiang was endorsed for the state controller’s office by the Sierra Club and the California League of Conservation Voters.

Under the Cabrillo Port project, LNG would have been shipped by tanker then reheated at the floating facility and piped ashore through two 24-inch diameter lines.

It was expected to process 800 million cubic feet of natural gas daily, to supply about 12% of California’s daily gas needs.

The terminal would have been one of Australia’s most lucrative export deals.

Woodside Petroleum’s OceanWay LNG import proposal is still awaiting approval by Californian authorities.

It is intended to use delivery buoys more than 32km offshore from Los Angeles International Airport with dual undersea pipelines to deliver natural gas to shore.

Two similar developments were recently approved in Massachusetts.