The Green Party is criticising the Government's intention to change the Resource Management Act in response to Manawatu-Whanganui Regional Council's new regional plan.
The One Plan, backed by the Environment Court, would impose nutrient caps on intensive farming and vegetable growing operations to protect waterways from nitrogen pollution.
Primary Industries Minister David Carter raised concerns after he received advice from his ministry that implementing water quality protection measures in the plan could reduce farm profits by up to 40% or more.
Mr Carter considers the council's own cost-benefit analyst failed to show the full economic impact and he has signalled the Government's intention to toughen up that obligation under the RMA.
But Green Party MP Eugenie Sage has accused the Government of undermining environmental protection by making it more onerous for local councils seeking to safeguard water quality.
"If we want long term profitable farming we need to protect our natural environment on which agriculture depends," she said.
Ms Sage said councils are slowly beginning to implement policies and rules to control non point source discharges to reduce nutrient leaching to waterways.
She said changing the RMA and putting in a stronger cost-benefit test in section 32 potentially discourages councils from taking action to protect waterways.