Minutes after the Supreme Court ruled against plans for a huge dam in the Hawke's Bay, Prime Minister Bill English said his Government would change the law to allow such projects to go ahead.
In a major victory for conservation group Forest & Bird, the court dismissed an appeal by the Department of Conservation to swap 22ha of conservation land for 170ha of private farmland.
The land swap would have allowed the Ruahine Forest Park land to be flooded to create the country's largest irrigation project.
English, speaking to NewstalkZB, immediately said Parliament would have to consider a law change.
"This will become a matter now for whether we change the legislation.
"Everyone thought the legislation meant that you could trade a lower conservation piece of land in return for higher conservation piece of land.
"The Supreme Court apparently, on the face of it, is telling us that that's not what the legislation lets you do.
"But It is eminently sensible to increase the net conservation value by trading away higher value for lower value conservation land.
Asked whether Parliament would change the law, he said: "Yes. Because it wouldn't make sense to take this flexibility out of the system."
Forest & Bird's win in the Supreme Court came after a five-year legal battle.
Chief executive Kevin Hague urged the Government to respect the Supreme Court's decision.
"Any attempt to change the law will be met with the same determination from Forest & Bird as the Minister of Conservation's illegal land-swap was."
The court's ruling set an important precedent, he said.
"Thanks to this ruling, all of New Zealand's forest parks are protected from development. That is up to one million hectares of conservation land that have been rescued from commercial interests by this precedent-setting decision."
The $275m irrigation scheme, which was backed by the Hawkes Bay Regional Council's investment arm, is now in serious doubt. It was predicted that once in place, it could have increased the region's GDP by up to $380m and created between 1100 and 3500 jobs.
However, there were also concerns that it would put further pressure on water quality in the region's rivers and streams, and affected native species. The Ruahine Forest Park is home to several precious species, including longtail bats, fernbirds, and New Zealand falcons.