Allowing a 80-metre high hydro dam to be built on the Mokihinui River north of Westport is wrong, the Green Party says.
Meridian Energy today received resource consent for the dam.
The state-owned power company planned to spend about $300 million building the dam and power station, 3km upstream of the settlement of Seddonville.
The dam would create a 14km-long lake.
"The hearing committee decided two-to-one to grant the consents - it was a particularly difficult and finely balanced decision," West Coast Regional Council compliance and consents manager Colin Dall said.
Meridian chief executive Tim Lusk said its hydro project had the "overwhelming support" of locals, and security of supply would be significantly improved.
"For a long time the West Coast has been dependent on a long and vulnerable transmission line transporting power to the region from the Waitaki.
"Mokihinui will allow the region to use its own natural resources to provide a source of clean, renewable power."
Meridian would carry out coastal erosion control works.
"Clearly we are aware that there will be some environmental impact from the project," Mr Lusk said.
"The decision contains a large number of conditions aimed at ensuring that environmental effects are kept to a minimum."
Green Party MP Kevin Hague said the dam would cause a permanent loss of environmental and biodiversity value.
"The Mokihinui is one of the most environmentally significant and biodiverse rivers in the country. Damming it would permanently reverse this."
There was no way to offset the environmental impact, Mr Hague said.
The river was home to the endangered long-finned eel and the dam would reduce their habitat and "drown" 330 hectares of native rainforest, he said.
"There is nothing to recommend this dam."
Meridian must still obtain concessions for the project from the Department of Conservation.
Mr Hague called on Conservation Minister Kate Wilkinson to "do the right thing" and refuse these concessions.
United Future leader Peter Dunne said the decision to grant consent was "narrow-minded and backward".
"As well as being an area of outstanding natural beauty and abundant in native flora and fauna the Mokihinui is a top fly-fishing river and one of New Zealand's premier wilderness fishing experiences."
Wind, solar and tidal energy sources would allow more flexibility and save "not only our natural heritage but the huge costs associated with transmission", Mr Dunne said.
Energy Minister Gerry Brownlee today refused to comment on the dam's resource consent.
He previously said reports of him saying the dam would not go ahead were taken out of context, and he would not interfere with the planning process.
Forest and Bird South Island manager Chris Todd said today the group was considering lodging an appeal with the Environment Court.
"We're pretty outraged by this decision. This will be the biggest inundation of conservation land ever in New Zealand," he said.
Another dam was "completely unnecessary and highly destructive".
"If we are now damming pristine rivers, then nothing is safe...It's a huge backward step for conservation," Mr Todd said.
Mokihinui's river gorge and forest contained rare species including native ducks, giant land snails and long-finned eels.
Buller Mayor Pat McManus said the district needed a reliable source of energy if it was going to grow.
However, the large number of conditions imposed could be a challenge to the scheme proceeding, he said.
Commissioners have imposed a raft of requirements including: mitigation measures, management plans and monitoring programmes, `adaptive management' conditions, habitat enhancement and predator control (over 3000ha), an initial bond of $500,000, plus $500,000 to the Buller District Council for `community purposes' in the Mokihinui Catchment.
Meridian has previously said the scheme would produce between 310 and 360 gigawatt hours per year of electricity and power about 45,000 homes on the West Coast.
Construction was expected to take three years and employ more than 300 workers, dropping to six once the dam was up and running.