The project was expected to co-fuel the Shannonbride power station with biomass.
This has thrown the future of Shannonbride power station into serious doubt, with over 300 direct jobs at risk.
Calling for the decision by an Bord Pleanála to be appealed, local Fianna Fáil representative, Barry Cowen said: "We have known for a long time that Bord na Móna will be diversifying over the coming years, but there must be time to transition. You can't shut up shop on an entire industry which has provided employment for successive generations without first putting in place tangible alternatives and safeguarding the local economy.
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"The Government have been very lethargic in dealing with the matter. They dragged their heels on establishing a transition forum and the delay in their application for EU funding was nothing short of disgraceful. The existing carbon tax, which they use to prop up their balance sheet, is not reinvested into the areas impacted hardest."
He continued: "Councillor Eamon Dooley and I travelled to the European Commission back in November to meet with officials and discuss the European Globalisation Adjustment Fund which we knew would be pivotal for the region. Clearly not recognising its importance, the Government took their time in applying for this fund.
"At the end of the day, the speed at which plants are closing and jobs are being lost is completely disproportionate to any investment in the region and the midlands will be left behind. I am calling on the ESB to immediately appeal the decision."
