Britain's fracking industry suffered a major setback on Monday after plans to explore for shale gas in Lancashire were thrown out by councillors.

Cuadrilla's application to frack at Preston New Road, near Blackpool, was rejected despite the backing of the council's planning officer and official legal advice saying refusal would be "unreasonable".

The decision was hailed as a major victory for green campaigners and paves the way for months of appeals that could still see the council overruled and fracking proceed at the site.

Government and industry vowed the setback would not prove fatal for the nascent industry, which has not seen a single well fracked since 2011 despite David Cameron's pledge to go "all out for shale".

Andrea Leadsom, the energy minister, insisted she remained "confident" that the UK would realise its shale gas potential despite the "disappointing" decision.

Francis Egan, Cuadrilla chief executive, said: "It's not the end of the shale gas industry. It will happen - it's too important not to."

The company said it was "surprised and disappointed" by the decision and was considering an appeal.

Mr Egan said he believed it had "very strong grounds" to do so adding: "It's beyond me why they would vote against it."

He also criticised council officers' "frankly unacceptable" decision to admit legal opinions procured by green group Friends of the Earth, which advised councillors there were valid grounds for refusal, but then refuse to hear contrary legal advice obtained by the fracking industry.

Fracking plans rejected: Lancashire council throws out Cuadrilla proposal - at it happened

Councillors had last week been told by the council's own legal adviser that if they refused the application they would be likely to lose at appeal stage and would incur financial penalties for the "unreasonable" refusal. The advice supplied by Friends of the Earth appeared to sway some of the councillors to vote against the decision.

Councillors justified their refusal on the grounds that the proposal would have "an unacceptable adverse impact on the landscape" including "urbanising" its rural character, and would have an "unacceptable noise impact" for local residents.

The vote cut across party lines, with the majority of both Labour and Conservative councillors rejecting the proposal.

Of the nine councillors who voted to throw it out, five were Labour, three Conservative and one Independent. Two Labour councillors and one Conservative voted not to throw it out, while two Conservatives abstained.

Shale gas industry body the UK Onshore Operators Group called on ministers to redraw planning procedures.

Ken Cronin, its chief executive, said: "An important plank of the Government’s energy policy and manifesto commitment has been reduced to a position that, despite all the advice, a rejection has been given.

"This after 15 months of a long drawn out process cannot be right and I urge the government to urgently review the process of decision making."

Government guidelines suggest a decision should take just 16 weeks, he pointed out.

British Gas owner Centrica, which has a 25 per cent stake in the Cuadrilla plans, said it was "very disappointed" by the decision and it had taken "a significant amount of investment" to get to this stage.

The British Chambers of Commerce attacked the decision as "perverse, short-sighted and timid" while Greenpeace hailed it as "a triumph for local democracy".

John Williams, senior principal consultant at consultants Poyry, said the vote was a "a serious setback for shale gas in the UK", adding that "many must be wondering if it can ever reach production phase".

Robbie Owen at law firm Pinsent Masons said the decision highlighted "a difficult relationship between localism on the one hand and the need to keep the lights on on the other".

If Cuadrilla appeals, the matter will go to planning inspectors but could be recovered for a decision by Greg Clark, the communities secretary if he decides it is a particularly significant or controversial case.

A spokesman for the Department of Communities and Local Government said: “If an appeal is made we will consider recovering these cases against our criteria.”

Furqan Naeem, Friends of the Earth north west campaigner, said: "Both Cuadrilla and the Government must respect Lancashire’s decision and not try to force unpopular fracking on these communities."