There is growing disquiet among Hawke's Bay regional councillors the Board of Inquiry's decision on Tuesday to approve resource consents for the Ruataniwha Dam.
The Board approved resource consents for the scheme that could irrigate 25,000 hectares - but also introduced limits on nitrogen leaching.
Chairman of the Hawkes Bay Regional Council Fenton Wilson says the restrictions around nitrogen levels are less than what is allowed into the catchment today.
He says council staff have got it wrong and he's going to ask questions ahead of the final decision on the scheme in May.
Mr Wilson also says there could be implications for other irrigation and land intensification projects around the country.
He says marrying the environmental impact with economic growth is an issue which New Zealand needs to look at as a country.
Mr Wilson says having a clean river is admirable but the small communities relying on the Ruataniwha scheme will whither and die unless the scheme can viably go ahead.
Important signal to farmers
An agricultural consultant for Headlands Consultancy, in Waikato, Alison Dewes, says the limits on nitrogen leaching are very important as it sends a signal to the farmers who are thinking of investing in water about how the environmental resources will be allocated.
"In order to have a robust business, farms need to know how they're going to design their systems, knowing they've got these environmental limits. But no one likes to be surprised. Farms want to know that they design these systems knowing these limits are there and not have to change at a later date."
Alison Dewes say farmers in the Ruataniwha scheme's footprint need to go into irrigation with their eyes wide open.
She says it will be an expensive area to convert and that if farmers do take water and become more intensive they shouldn't convert to dairy farming as it's the most un-economic use of water.
"We do know from the research that's been done in Australia the best bang for your buck if you like with water use is to horticulture, viticulture and precision crops. And irrigating pasture takes a lot of water for the net profit you get out of it. And in this case in Ruataniwha it's going to be inherently risky."
Alison Dewes says if farmers did convert to dairying they'd need the payout to stay very high to make a buck.
"When we took into account the cost of water which would work out at about $1000 per hectare, per year to get your 400 millimetres to apply to your farm. The cost of your production comes up to around $5.50 per kilo of milk solids and that's before debt servicing," she says.