A line-up of high-powered opponents has failed to stop a composting operation winning the right to set up shop on a Manukau Harbour island.

A judge cleared the way for Living Earth to turn 75,000 tonnes of green waste a year into compost on Puketutu Island, saying the benefits of recycling garden waste overrode worries over smells, insects and stretching the Metropolitan Urban Limit.

The hearing even considered results of a "sniff test" carried out by two scientists. They took 14 people to the company's current Onehunga operation and asked them to rate it on a scale of "not annoying" to "unbearable". A majority of sniffers thought the smell was only "annoying".

Auckland Regional and Manukau City Councils led the fight against the company's plans, refusing resource consent then defending their position in the Environment Court after the company appealed.

During the hearing, the councils waved their weightiest planning documents and the ARC even went to the trouble of looking for another site for the plant because it did not think the composter had tried hard enough.

Backing the councils were local residents, Villa Maria wines, Watercare Services - which operates the wastewater treatment plant across the water from the island - and tangata whenua.

Environment Court Judge David Sheppard said there was no evidence to suggest Living Earth's search had been a "sham", as ARC implied, and the council didn't need to be so "adversarial".

ARC chair Mike Lee said the composting facility was an industrial activity in a rural zone and the council would almost certainly appeal.

"All the neighbours were opposed," he said.

Once shunned by Aucklanders as the site of the old sewage ponds, the area around Puketutu has been given a major clean-up by Watercare as part of its multi-million-dollar Project Manukau treatment plant which has allowed the ponds to be returned to the sea.

Trees have been planted, beaches re-created and a coastal walkway is due to open this month. Mangere Bridge Residents and Ratepayers Association spokesman Roger Baldwin said the court's decision was disappointing.