A plan by three companies to create intensive dairy farms in South Canterbury's MacKenzie country has been shelved because the consent process is too costly.

Five Rivers Ltd, Southdown Holdings Ltd and Williamson Holdings Ltd applied to Environment Canterbury (Ecan) for farm developments in the Omarama and Ohau areas that would involve up to 17,850 cows and require the disposal of up to 1.783 million litres of dairy effluent a day.

According to the applications, up to 18,000 cows would be housed in "cubicle stables" 24 hours a day for eight months of the year, and 12 hours a day for the remaining four months.

The group was told yesterday they would have to pay Environment Ministry expenses of at least $2.6 million over resource consent applications "called in" by Environment Minister Nick Smith under the Resource Management Act and handed to a board of inquiry for decisions.

Dr Smith said in January he had called in the discharge consents due to their scale, "the fragile and iconic nature of the Mackenzie Basin environment, the importance of freshwater quality to the Government and the high level of public interest".

The Environment Ministry cost was "absolutely extraordinary", Southdown Holdings and Williamson Holdings director Richard Peacocke told Radio New Zealand.

The applicants had already invested $4 million in clearing the land, on hearings and scientific analysis and expected to have to invest another $500,000.

The applicants had withdrawn 15 applications covering effluent discharge because they did not yet know if their water resource consents would be granted by the regional council panel hearing them, and were "not prepared to fund these further significant costs associated with the call-in that is premature in the overall process", Mr Peacocke told the Otago Daily Times.

Dr Smith told Radio New Zealand the estimated annual turnover of the proposed farms was $30 million, and the cost of calling in the applications needed to be viewed in the context of that turnover.

"I don't think it is unreasonable when you're dealing with public resources which are being used for commercial enterprise for them to meet the cost of the robust process that's required to deal with the very considerable environmental issues."

The applications raised major issues and if the applicants wanted to proceed they needed to meet environmental tests, Dr Smith said.

The applicants could still reapply for their effluent discharge consents if and when their applications on land use and water rights were approved.

Federated Farmers chairman Lachlan McKenzie told Radio New Zealand Dr Smith had "meddled" in the Resource Management Act process.

"This should be based on good science, good economics and good discussion about the benefits ... to New Zealand. That debate in a constructive and efficient manner had not happened."

Mr McKenzie said he took exception to the farming project being described as "intensive".

"This was only about 2-1/2 cows per hectare which is about the same as the average stocking rate in New Zealand dairy farms now.

"So it's not about intensive, it's about a different system and all they were doing was putting the cows in a home for periods of time during the year and these homes are modern, there are hundreds of these already scattered around New Zealand and operating very efficiently and very effectively."

Environment group Environmental Defence (EDS) welcomed the withdrawal of the applications.

The group, along with the Green Party, had praised Dr Smith's decision to call-in the applications, because of animal welfare issues and huge effluent discharges in the fragile environment.

EDS chairman Gary Taylor said the withdrawal was a step in the right direction.

But he noted the applicants had not surrendered their land use consents and still seemed intent on proceeding to seek water use consents for irrigation.