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Willowridge Developments, owned by Allan Dippie, applied to develop a 118ha area in Kane Rd near the Red Bridge into 13 residential lots.
The application was rejected in March by a Queenstown Lakes District Council panel of independent commissioners, who noted the scale of the development was too large to be adequately absorbed into the landscape, despite plans to remove all wilding pines and make large-scale plantings of kanuka.
That decision was appealed by Willowridge, and the appeal was heard in Wanaka last week by Environment Court judge Jon Jackson and commissioners John Mills and David Bunting.
Willowridge's lawyer, Graeme Todd, told the hearing the number of residential lots had been nearly halved to seven, in response to the council's decision.
Mr Todd said the council's experts had erred in their assessment of the environmental effects of the proposal and had exaggerated the adverse effects without giving sufficient weight to the positive effects.
He argued the positive effects of the wilding pine removal and effective planting of kanuka would outweigh the adverse effects of the development.
However, the council's counsel, Alice Balme and Katharine Hockly, said the pine removal did not rely on the proposed subdivision being carried out and limited weight should be given to it.
They argued the positive effects of the proposal would not ``outweigh the major, long-term and irreversible adverse effects on the landscape associated with the proposed subdivision and development''.
They also submitted the proposal relied heavily on mitigation planting and evidence provided by ecologist Dawn Palmer said there was a risk natural factors would result in the planting not performing as suggested.
Ms Palmer and other council experts expressed concern about the absence of both a comprehensive ecological restoration plan and of any mechanism of ensuring positive ecological effects would be maintained in the long term.
When cross-examined by Mr Todd, Ms Palmer said revegetation projects in the Upper Clutha required significant effort and stressed the importance of irrigation and mulching.
The hearing has been adjourned.