Commissioners Ian Munro, Glyn Lewers and Wendy Baker said the lodge would be "particularly" and "frequently visible" from the nearby Glendhu Bay track.
"All members were quite shocked at the frequency at which substantial parts of the proposal would be in plain, direct view ... and in a way that would reinforce a scale of development at odds with the ONL," they said in a decision released yesterday.
Views of the lodge from the lake would also be large and in plain view, but not to the point that the ONL was compromised, they said.
Mr Thiel’s company, Second Star Ltd, offered to vary the public track easement but that would not address the adverse effects as experienced from the track, they said.
Second Star can still develop the 193ha Damper Bay farm block and a luxury lodge could still be legally possible.
Alpha Burn Station farmers Don and Vicky McRae obtained resource consent for a building platform on another part of the farm block before Mr Thiel bought the land in 2015 for a reported $13.5 million.
The commissioners said in their decision released yesterday the district plan provided for limited development in areas of outstanding natural landscapes.
They also said the site had the capacity to accommodate a "very small-scale" development.
However, Second Star’s proposal had a "distinctive visual appearance that will from many viewpoints be plainly visible but not incompatible with the natural landscape qualities", they said.
"The commission also observes that the site is well-suited to a high-end visitor accommodation activity ... provided it is of a scale and built form that remains subordinate to the qualities of the Mt Alpha ONL and the rural environment," they said.
The Otago Daily Times has approached Second Star Ltd’s legal representatives in New Zealand for comment on what the applicant intends to do now with the site, but has not yet receive a reply.
Upper Clutha Environmental Society president Julian Haworth, who opposed the lodge, was delighted with the decision.
"The only capacity for development on the Second Star subject site is within the already approved building platform that permits a large dwelling with excellent views in a tucked-away location," Mr Haworth said.
The society agreed to that platform during consent negotiations with the McRaes before the land was sold. The commissioners said they had issues with the curvilinear green roof design, the scale and length of the buildings, the one- to two-storey components of the primary accommodation buildings and the length and extent of horizontal glazing.
Luxury lodge: basement floor area 1165sq m, 330m long
Owners pod: 565sq m
Meditation pod: 40sq m (withdrawn, not considered)