A report by Hawke's Bay Regional Council says the habitat for several endangered species will be destroyed if the proposed Ruataniwha water storage project goes ahead.
The report says 182 hectares of ecologically significant indigenous vegetation and habitats will be destroyed by the dam reservoir, including habitat for the long-tailed bat.
Te Taiao Hawke's Bay Environment Forum, a conservation umbrella group, says it fears for the future of the bat.
But dam project manager Graeme Hansen said significant populations of long tailed bats have been discovered elsewhere.
But the Department of Conservation says it's happy with an $8.7 million mitigation package to offset the environmental impact of the $600 million dam.