Strips of land allowing public access are the latest issue in the ongoing legal battle over the proposed Ruataniwha Dam in Hawke's Bay.
Hawke's Bay Regional Council's investment company HBRIC is appealing part of a High Court ruling that would allow protected land to be exchanged for farmland.
Under the plan, the Department of Conservation (DoC) would exchange 22 hectares of the Ruahine Forest Park in Hawke's Bay for 170 hectares of farmland.
The High Court ruled the exchange could go ahead but found that marginal strips were to be reserved when land was disposed by exchange.
Marginal strips are 20m wide strips of land down the margins of rivers and streams which allow the public to have access.
Forest and Bird lawyer Sally Gepp said the issue of marginal strips was a tricky one for HBRIC.
"This creates a significant hurdle for them because there are only a number of ways in which they could get authorisation to flood those marginal strip areas."
She said the finding on marginal strips suggested it was a much bigger deal than how it was first presented.
"Both the Department of Conservation and the dam company were arguing that provisions about marginal strips simply didn't apply.
"They could get a concession but that's unlikely to be granted given the criteria that apply. Same with getting an exemption - unlikely to be granted. There is provision for [the] exchange of marginal strips but I don't see how that would apply in this case."
She said Forest and Bird had always thought the marginal strip issue would be a problem for the dam company, and it had proved to be a real hurdle.
"So we do have that security from the High Court case saying that marginal strips are reserved in these circumstances - but that's the finding that the dam company is now challenging."
HBRIC did not respond to requests for comment.