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Meridian Energy says a Landcare Research report it commissioned on its proposed Mokihinui dam, north of Westport, is a "real disappointment" and "lacks commonsense".
Meridian said the report's recommendations included removing an existing dam from a similar West Coast river to offset the Mokihinui dam's environmental impact.
"This would mean that nothing could be built without removing a similar structure somewhere else," said Meridian's external relations manager, Claire Shaw.
"This suggestion lacks common sense and Meridian does not intend to progress the report beyond the draft stage. It will not be considered as part of the resource consent process for the Mokihinui hydro proposal."
Ms Shaw said the report was intended to be an "innovative look" at how to achieve the best ecological outcome at Mokihinui.
The report used a relatively untested methodology which had never been used in New Zealand.
"We hoped it would provide guidance on how to deliver an overall biodiversity gain.
"It was a real disappointment, however, when the biodiversity offset model was fully applied, it turned out to be unsuitable for a real-world hydro proposal and of academic interest only."
The proposed dam offered a "real and viable option" for providing renewable power generation on the West Coast, which had limited existing power generation, she said.
It would also provide much greater security of supply.
Meridian had engaged experts to ensure the environmental impact of building and operating the project would be avoided, remedied or mitigated.
In some instances, such as implementing a predator control programme, Meridian hoped to benefit many native species -- particularly the blue duck.
Ms Shaw denied that Meridian had canned the report because it did not suit Meridian's case.
"We did not proceed because the draft report's conclusions were based on untested methodology that has no practical application -- it was purely academic.
"We acknowledge through other independent studies the potential effects but believe the RMA (Resource Management Act) process is robust and will ensure all potential issues will be addressed."
Meridian released the draft report yesterday in response to an Official Information Act request from the Green Party, which then tabled the report in Parliament.
The report said the project had "substantial biodiversity impacts" which would have to be offset.
Green MP Metiria Turei said Meridian had commissioned the report -- which she described as "secret" -- to find ways to deal with the environmental impact of the dam.
"In lay terms, the report unequivocally says that there is no way to mitigate the impact of this dam on our native species, but this is exactly what the Resource Management Act requires," she said.
"Meridian wants to fell large swatches of native rimu forest, and drown an area of 330ha of conservation land."
Meridian is seeking 34 resource consents to build, operate and maintain the proposed scheme, including a dam 3km upstream from Seddonville, a 337ha lake and a 110kv transmission line.
The proposed 85Mw dam would produce enough power for up to 45,000 homes. Meridian hopes to start building in 2010 and start operating the scheme three years later.
A social impact report prepared for the company said the dam would treble coastal erosion south of the Mokihinui River and any building within 75m of the shoreline would be at risk.