The $36bn project would cause too much damage to wetlands, coastal regions and critical habitat for migratory birds, minister Sussan Ley said.
The 15,000MW Asian Renewable Energy Hub (AREH) has already been approved for development, but this smaller project included an underwater transmission cable to Indonesia or Singapore rather than a hydrogen or ammonia export facility.
The larger 26,000MW AREH was granted major project status by Canberra in October as part of a wider policy to support the development of a hydrogen export industry in Australia. It is likely that the project will be revised again to address some of the environmental concerns raised by Ley, before being resubmitted for approval.
The AREH consortium includes Danish wind turbine manufacturer Vestas, Australian private-sector energy firm CWP Renewables and Hong Kong-based energy firm InterContinental Energy.
The AREH project partners plan to make a final investment decision (FID) on the venture by 2025 and intend to sign supply agreements with consumers before the FID.