The matter is before the Environment Court, which will hold an inquiry and make recommendations to the Minister for the Environment.
The New Zealand and Otago fish and game councils sought a change to the Water Conservation Order (WCO) on the river, asking for a prohibition on any damming or diversion. Submissions were sought and a tribunal, appointed by the Ministry for the Environment, heard evidence in 2009 and 2010.
The tribunal recommended the WCO be amended to ban damming, to protect the habitat of a rare native fish named Gollum galaxiid, found only in the upper Nevis.
That recommendation was last year appealed to the Environment Court by the fish and game councils; Pioneer Generation, which wanted the door left open for potential hydro development on the river and by national recreational kayaking group, Whitewater New Zealand.
The councils wanted the river's wild and scenic characteristics to be recognised as outstanding, and the kayak group wanted the river's "nationally outstanding" kayaking amenity to be recognised.
The parties went into mediation earlier this year to see if they could narrow down the issues for the Environment Court to decide, but the Otago Fish and Game Council has now withdrawn from mediation, its chief executive Niall Watson said yesterday.
The council thought the settlement proposed by Pioneer was not "in the best interests of the river, its trout fishery or its other outstanding natural features", Mr Watson said.
When approached by the Otago Daily Times for comment, Pioneer chief executive Fraser Jonker said although the company had no firm or detailed plans for hydro development on the river, it had offered, during mediation, to opt for the "least impact dam proposal" should it pursue such plans in the future.
"That would be a small weir downstream from the Nevis Crossing; it would have very little impact, with a small footprint; and would not flood the Nevis valley," he said.
The small storage weir would be about the size of Butchers Dam.
Pioneer holds the leases of the two farms on the banks of the Nevis.
Mr Watson said the key objective of Fish and Game was to protect the Nevis River as an outstanding habitat for trout and other aquatic life, including native fish; and as an outstanding recreational fishery.
The Nevis was one of Otago's iconic rivers and its profile had increased markedly in the last five years as local and national understanding of its natural and recreational values had grown, he said.
Pioneer has asked the High Court to decide whether Fish and Game is allowed to present evidence on native fish to the Environment Court.
