Save Radley Lakes campaigners have been dealt a near-fatal blow in their two-year struggle to prevent spent fuel ash being dumped in an old gravel pit.

The Secretary of State for Communities and Local Government, Ruth Kelly, says she will not "call in" the planning application from the owners of Didcot power station.

The decision rules out a public inquiry and, once conditions and legal agreements have been finalised, planning permission will be issued by Oxfordshire County Council. Planning permission was granted in July, but SRL wrote to Mrs Kelly asking her to examine the issues in detail through a public inquiry.

But opponents have pledged they will not give in. Leading campaigner Marjorie White insisted: "We will be exploring other options to save Thrupp lake from destruction. Save Radley Lakes has made a complaint of maladministration against the council over their handling of the planning application and this will now be investigated by the Local Government Ombudsman.

"Environmental problems such as CO2 emissions and waste dumping caused by coal fired power stations are clearly of national importance."

Half a million tons of ash will be pumped into the lake until Didcot A, the coal-fired station, closes in 2015. Then it will be designated as a wildlife area and maintained by a trust.

The county councillors for the area, Bob Johnston from Radley and Lesley Legge from Abingdon, said they were disappointed at the Secretary of State's decision. Mr Johnston said: "Lesley and I spoke against the application at the planning committee and have written independently to the Secretary of State."

Mrs Legge said she was surprised that nature conservancy, the green belt and the application being against the county's Local Plan had not been rated as meriting an inquiry.

John Rainford, the manager of Didcot A, said RWE npower welcomed Mrs Kelly's statement.

The plan to use Thrupp lake was the only option for the 24-hour, seven-days-a-week disposal of the power station's surplus ash, he said.

He added: "We submitted a full environmental statement with our application.

"We have done everything that has been expected including developing an ecological restoration plan which will encourage a diverse range of wildlife over the long term.

"With a secure solution for ash disposal now in place, the power station can continue to provide electricity for two million homes in southern England, helping to guarantee a secure supply."