Central Hawke's Bay district councillor Terry Story has admitted forwarding a "private" email from Mayor Peter Butler that criticised Ngati Kahungunu Iwi Incorporated chairman Ngahiwi Tomoana.

But he says he did not send it to anyone involved with the iwi and has been shocked by the fallout from the leak.

In the email, Mr Butler suggested Mr Tomoana "and his mates" should be banned from any employment resulting from the Ruataniwha dam because of their opposition to the project.

Mr Tomoana said yesterday it was the "whole mindset" that disturbed him, and that Hawke's Bay was "very racist".

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Mr Story's admission came on the same day Mr Butler owned up to telling "white lies" over what he knew about the leak earlier in the week.

Ngati Kahungunu [NKII] have lodged a strong legal challenge to the $265 million Ruataniwha water storage and irrigation scheme proposed for Central Hawke's Bay on the grounds they have concerns over the impact it will have on the environment, particularly in the lower Tukituki River Catchment. Mr Butler and Mr Story are strong supporters of the project because of the economic boost it promises to bring to the Central Hawke's Bay District and the wider region.

Mr Butler's criticism of Mr Tomoana was written in what he described as a "private" email sent only to the district's eight councillors. It was obtained by Mr Tomoana who issued a media statement last Friday expressing his disappointment over the comments and outlining the iwi's focus on economic and social initiatives in the region.

The same day Mr Butler responded by saying he was angry that "some slimeball councillor" had leaked the email.

When Hawke's Bay Today asked him about the email on Sunday, Mr Story denied being the source of the leak and Mr Butler told the paper on Monday he did not know which councillor was responsible.

Mr Story yesterday stood by the answer he gave reporters on Sunday, saying he had responded truthfully that he had not leaked the email because he had not sent it to anyone involved with the iwi.

Mr Butler admitted yesterday that he had known since Saturday that Mr Story had forwarded the email.

Mr Story said yesterday that he forwarded the email to "a friend and colleague" from where he suspected "it could have then been forwarded on to a third party".

Mr Butler said he asked him on Saturday not to comment until yesterday because at that point it was not clear if any other councillors had also forwarded the email, and therefore it had not been established he was the source of the leak to Ngati Kahungunu.

"There might have been one or two white lies but he told me about it on Saturday when he first found out [that NKII had been sent the email]," Mr Butler said.

"It was my call that nothing was said until the full council were around the table [yesterday]."

Mr Butler and Mr Story have apologised.

"I am devastated by the turn of events and the embarrassment it has caused," Mr Story said.

"I remain committed to the Ruataniwha project and am convinced it will bring innumerable benefits to our community and the wider Hawke's Bay region, whilst ensuring all concerns around ecological, environmental and cultural issues are discussed and resolved.

"As a council we have all been under the spotlight and this is taking attention away from more important issues.

"I hope this will end the matter and we can now move forward.

"I would like to offer my apologies to Ngati Kahungunu, Mayor Peter Butler and my fellow councillors."

Mr Butler said he left a message on Mr Tomoana's cellphone yesterday and was seeking a face-to-face meeting with him to apologise.

"I'm sorry if it has offended him. That's not my way of doing things. I don't like offending people, maybe I shoot from the hip a bit quick."

He said he and Mr Story were "back doing council work ... Every councillor is backing Terry. It is a silly mistake that has happened. I feel deeply for him."

Mr Butler said he also regretted his "slimeball" comment: "That was absolutely stupid. I was wild. I regret it. Councillor Story is definitely not a slimeball."

Mr Tomoana told Hawke's Bay Today he didn't know who the councillor was. "My concern is that it is a whole mindset and not just individual councillors who believe that Maori should not benefit from economic development," he said.

"We are seen as a bit player. Hawke's Bay is very racist. No one has questioned the opposition to the project by Forest & Bird or Fish & Game or other environmental groups.

"My concern is that ratepayers are going to have to support this project for the benefit of the privileged few.

It is all too little, too late."