Glamorgan Power had sought permission to extract 256,000 tonnes of coal at Varteg Hill over a four-year period, but its proposals were rejected by Torfaen County Borough Council.
In 2011, the Planning Inspectorate issued a direction calling on the then minister for the environment and sustainable development John Griffiths to decide the matter, following a public inquiry presided over by planning inspector Clive Neild that resulted in a recommendation in favour of Glamorgan Power's scheme.
Earlier this year, Grifiths wrote to Glamorgan Power and the council indicating that he was minded to allow the application, subject to the agreement of a Section 106 contribution over the site’s restoration to strengthen an existing unilateral agreement.
But in a decision letter last week, current environment minister Carl Sargeant noted that more than six months had passed since the "minded to" letter and the likelihood was that an agreement would not be reached until 2014, resulting in an "unacceptable" delay.
"The Welsh ministers took the view that the relevant parties have been provided with more than sufficient time within which to provide them with a modified section 106 agreement and that it was in the interests of all the parties to the appeal for the Welsh ministers now to proceed to determine it," he said.
Sargeant said that the firm's proposed restoration bond of £2.87 million could not be guaranteed to cover the cost of completing post-extraction work at the site.
"I do not consider that the unilateral undertaking provides me with the assurances I need to be satisfied that, after the cessation of working, the land would be restored and not left in an unacceptable condition," he said.