A company that had wanted to build a work camp for construction workers attached to the pending Lower Churchill megaproject has walked away from the controversial proposal.

Residents who crammed into Happy Valley-Goose Bay's council chambers for a public meeting on Thursday night were told that Clayton Developments has withdrawn a plan to house several hundred workers at Kelland Drive, near a school and a residential area.

Mayor Leo Abbass read from the letter at the meeting.

With the Muskrat Falls project on the horizon, council had wanted to change its development rules so that work camps could be built in commercial areas.

Some residents spoke out against those plans.

"If they want a construction camp in order to do this development, take it outside our community. We don't want it," resident Pat Loder said.

Sterling Peyton, president of the Labrador North Chamber of Commerce, said he worries that the town will be seen as anti-development.

"I just think we need to be careful about the kind of messages we send to developers," Peyton said.

However, Abbass said that council will likely not follow through on plans to change development rules.