(Adds David Cameron spokesman comment, background)
By Karolin Schaps and Susanna Twidale
LONDON, June 29 (Reuters) - British local governmentofficials rejected a fracking project in northwest England onMonday, dealing a blow to Britain's shale gas sector that issupported by Prime Minister David Cameron's government.
Officials at Lancashire County Council spurned a planningapplication lodged by Cuadrilla Resources, saying the projectwould have an unacceptable visual and noise impact.
The unexpected refusal came four days after the sameofficials rejected another Cuadrilla shale gas application,showing the strength of local opposition to unconventional gasproduction.
"We are surprised and disappointed," Cuadrilla said in astatement, adding it was considering whether to appeal.
The application had largely been expected to go throughafter the council's advisors had recommended approval.
"This decision is a serious setback for shale gas in the UKand many must be wondering if it can ever reach productionphase," said John Williams, senior principal consultant at PoyryManagement Consulting.
The refusal is a direct rebuff to Cameron's pledge to go"all out" for shale in a bid to replicate some of the successthe Unites States have had in tapping shale gas resources tobring down energy prices.
"We respect the planning process," Cameron's officialspokeswoman told reporters on Monday. "We will keep looking athow we can continue to develop this industry in the UK."
The government has already promised 100,000 pounds incompensation funding for local communities as well as a share ofrevenue raised from shale gas sales.
Only one shale gas well in Britain has been hydraulicallyfractured. The Cuadrilla project near Blackpool, northwestEngland, was abandoned after it triggered an earth tremor thatresulted in an 18-month ban on fracking, lifted in 2012.
Since then, only three shale gas fracking applications havebeen made, two by Cuadrilla, which have now been refused, andone by energy company Third Energy.
Britain is estimated to have substantial amounts of shalegas trapped in underground rocks and the national government hassupported developing these reserves to counter declining NorthSea oil and gas output.
The country is seen as Europe's main driver for shale gasdevelopment after other countries with large resources, such asFrance and Germany, have banned the technology.
Environmental campaigners, who are concerned about hydraulicfracturing, or fracking, contaminating groundwater resources andtriggering earth tremors, welcomed the decision.
"This decision is a Waterloo for the fracking industry and atriumph for local democracy," said Daisy Sands, Greenpeace UKenergy and climate campaigner.
The decision weighed on shares of rival IGas whichsaw its stock trade down 9 percent at 1120 GMT. Shares in EgdonResources, which has growing shale gas ambitions, weredown 4 percent. (Additional reporting by William James; Editing by MarkHeinrich and David Evans)