The Iwi Chairs Forum has decided to boycott that group saying there was no consultation over the change and that the terms and membership of the group "does not reflect a relationship of partnership under Te Tiriti o Waitangi."
And Ngai Tahu, one of the most influential iwi with a rohe covering about 80 per cent of the South Island, now says it will be seeking direct engagement with the Crown.
It has also hinted that court action is an option.
Te Runanga of Ngai Tahu chair Lisa Tumahai said: "We are seeking direct engagement regarding freshwater and want to begin a discussion immediately."
She said Ngai Tahu's deed of settlement required that Ngai Tahu and the Crown negotiate in good faith before any court action.
"We understand that the Crown is still looking to progress Te Kahui Wai Maori but want to make it clear that whoever is appointed to the group does not have the support of Te Runanga of Ngai Tahu."
Environment Minister David Parker was questioned in Parliament about the issue today and said the Maori Council and the Federation of Maori Authorities were other Maori leadership bodies that should be consulted.
When National MP Nuk Korako asked Parker what real partnership with Maori meant in relation to freshwater rights, Parker cited the number of Maori MPs involved in the Government.
"The three parties of the Coalition all have Maori in leadership roles. The Labour Party holds all of the Maori electorates and has the highest number of MPs of Maori descent that any party has ever had in New Zealand.
"We also respect the different views of Maoridom outside Parliament and, working together, we will do our best to resolve these complex issues."
New Zealand First MP Shane Jones described the previous Government's approach as "appeasement" of iwi leaders and said the Maori Council and Federation of Maori Authorities had played critical roles in advancing litigation around resources including fisheries and forestry.
When Parker announced he wanted to deal with the new group, he said he wanted to hear more voices from different areas of Maoridom on issues such as the work underway to identify "at-risk" catchments and ensure plans were in place for them.
The at-risk catchment approach was recommended by the Land and Water Forum as a way to ensure rapid progress on preventing further degradation.
"I also expect the Ministry for the Environment to engage with Kahui Wai Maori on proposed amendments to the National Policy Statement on freshwater and other regulatory instruments."
National environment spokesman Scott Simpson said Parker had taken a "bull in a china shop" approach.
"This is only the start of a long, drawn-out legal battle that could put us back a decade or more in terms of progress on fresh water."
