The Supreme Court has ruled protected conservation land cannot be destroyed for the Ruataniwha Dam.
An artist's impression of the Ruataniwha Dam - before and after. Photo: SUPPLIED / Isthmus Group
Forest & Bird challenged a deal between the Department of Conservation and Hawke's Bay Regional Council to acquire part of the protected Ruahine Forest Park so it could be flooded for the $900 million water storage and irrigation project.
The scheme would dam 22ha of formerly-protected land and give the Department of Conservation 170ha of nearby farmland in return.
The council's investment arm appealed to the Supreme Court after the Court of Appeal last year ruled the process of acquiring the land would be unlawful
In its decision, the Supreme Court said the Conservation Act allowed the responsible minister to revoke protected status "only where its intrinsic conservation values no longer warrant such protection".
"The Court of Appeal was right to conclude that the revocation decision was unlawful because it was driven by the [Department of Conservation] Director General's view that there was net benefit to conservation ends to be obtained from the proposed exchange, which could be implemented only if protected status was revoked.
"That did not justify revocation under [Section 18(7) of the Act]."
Read the Supreme Court's decision (PDF, 638KB)
Forest & Bird chief executive Kevin Hague said the ruling confirmed the Minister of Conservation acted illegally when trying to swap the conservation land to make way for the dam.
"What that means is that conservation land - in this case the Ruahine Forest Park - that the public has always thought was probably protected, really is protected," he said.
Mr Hague said the ruling meant the Ruataniwha Dam could not go ahead.
The conservation group said the Supreme Court decision was a victory for protected conservation land across the country, which would remain unable to be sold or swapped for commercial ventures.
Scheme was already under review
Action on the dam was already on hold as the regional council conducted a review of the scheme.
The council has spent $20m developing the dam to this point without having acquired the land to build it on.
It still has the option of seizing the protected conservation land under the Public Works Act to build the dam.
Hawke's Bay Regional Council chairman Rex Graham said he personally opposed that option.
"Within our council there is a range of views. There are some people passionately for the dam and some people passionately against the dam, and a bunch of people in the middle. So they would have to sit down and consider that."
Regional councillor Peter Beavan earlier told Nine to Noon that he thought seizing land under Public Works Act would be unlikely.
The land swap was required to provide a big enough area to be flooded to form a reservoir and the scheme wouldn't be economically viable without that, he said.
"If the court says you can't do this, it'll be the end of the project" - Peter Beavan
"There is the possibility that you could take the land under the Public Works Act, but I think there's probably a feeling among councillors that they'd rather not go there."
Blair O'Keeffe, head of the council's investment company, HBRIC, said the decision was "a setback for the scheme".
"We will take time to consider it and the next steps including discussing the implications with all our key stakeholders."
Forest & Bird said the government could change the law to push the dam through but it would vigerously oppose this as well.
One of the government's key economic policies is to build irrigation dams up and down the country to intensify agriculture. The Ruataniwha Dam was the biggest.