Holiday home owners at a new multimillion dollar subdivision in Mahia have been told they will not have drinking water by Christmas - for the second year in a row.

Thirty-five sections across a 2.9ha area of the waterfront Blue Bay subdivision were sold last year for about $3.5 million, but buyers who expected water supplies to be connected last Christmas have been told a planned drinking water upgrade has been halted because of rising costs.

The Blue Bay Opoutama drinking water upgrade has been put on hold following an intervention by the Hawke's Bay District Health Board Medical Officer of Health.

A statement from Wairoa District Council said the decision by Dr Nick Jones to become an official interested party means the process would incur long delays and an alternative supply site was likely to be needed which will significantly increase costs - potentially up to a total of $678,000.

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A meeting of the Wairoa District Council Infrastructure Committee heard the necessary upgrade could now cost significantly above the budgeted $215,000.

The process has been halted while councillors review the options and costings and continue to consult the affected property owners.

Council staff have spent most of the year working towards a suitable water supply for the Blue Bay subdivision, and a solution had been reached and recommended as appropriate by the Ministry of Health's Drinking Water Assessor.

The request by the Medical Officer of Health is based on concerns around taking raw water from an area that is influenced by a treated wastewater effluent discharge, despite the proposed treatment process exceeding the requirements of the Drinking Water Standards.

The council had planned to use the existing bore and treat the water through a process that exceeded the requirements of the Drinking Water Standards and incorporated a series of multiple barriers.

A Water Safety Plan was prepared by OPUS and approved by the Drinking Water Assessor.

The Medical Officer of Health's intervention effectively shut down the proposal that, until that time, was recommended by the DWA as appropriate.

The new status of the application meant a hearing would be required and regardless of the outcome, the process could cost around $100,000.

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The subdivision was formerly the Blue Bay Camping Ground.

The site was previously landscaped into the genesis of an exclusive residential enclave, complete with paved avenues and installing infrastructure, including street lighting, sewerage, drainage and a water supply system in 2005.

Wairoa District Council chief executive Steven May said the Blue Bay application was the first new water supply in the Hawke's Bay region since the Havelock North incident with everyone very aware of the consequences of not meeting the most stringent requirements.

"For us, it is unfortunate timing as it is a new playing field, even for a supply as small as Blue Bay.

"Council believed it was on the right track and it is disappointing to now have to start again, but equally there is no room for error, we must err on the side of caution, and we must get this right.

"A safe water supply, for now, and into the future, is paramount.

"It needs to be remembered the original Blue Bay water supply was built by a private contractor to meet the requirements at the time.

"Council inherited the water supply, and it does not comply with today's standards.

"Council's expectation was that the water supply upgrade would be completed in time for the summer holidays and we apologise that this will now not happen.

"There is a broad range of options we need to consider in order to ensure a safe water supply that is future proofed.

"We aim to consult residents as soon as possible to discuss all possibilities regarding a new water supply along with options of rates remissions and the use of water tankers."

However, Medical Officer of Health Nick Jones denied he had registered as an affected party in the consent process - something confirmed by HBRC.

Dr Jones said Hawke's Bay Regional Council, the Drinking Water Assessor and himself as Medical Officer of Health had all been consistent with recommendations to Wairoa District Council that an alternative source was recommended for the Blue Bay water upgrade because its preferred bore was inside an area influenced by the treated wastewater plume.

Dr Jones said clarity was also required regarding the Drinking Water Assessor's approval of a water safety plan for the upgrade.

"Approval was granted because the proposed supply would have technically complied under section 10 of the drinking water standards, but the assessor clearly stated using the affected bore was not recommended and an alternative source should be found," said Dr Jones.

"An alternative would have been to move the location of the wastewater discharge away from the drinking water.

"Ensuring communities have safe drinking water is a responsibility I take very seriously and I support Wairoa District Council's ultimate decision to seek consent for a different water source."

Hawke's Bay Regional Council consents manager Malcolm Miller said the council received an application from the Wairoa District Council for the Blue Bay/Opoutama community water supply take.

"In discussion with the Wairoa District Council and knowing there was an alternative, WDC was encouraged to look at the alternative as the original bore is inside an area influenced by the treated wastewater plume. The regional council was mindful of the multiple barrier approach, which emphasis avoiding environmental risks, followed by treatment. There was a preferable alternative and WDC applied for consent for the second bore, which is what the Regional Council consented and the original consent application is on hold.

"The regional council has been in communication with the WDC's consultant and also received advice from the Regional Council's groundwater experts who advise taking water from the original bore is not good practise and not to be advised."