A massive lodge could be built on what is now Crown land, just 40 metres from the shore of pristine Lake Pukaki.

In March last year, the Overseas Investment Office gave Blue Lake Investment (NZ) Ltd approval to spend $16.5 million buying the 3550-hectare Guide Hill Station, which is on the eastern shores of the lake, near Tekapo.

The company has now lodged a resource consent application to build an 805 square metre lodge, with an indoor swimming pool containing 152,000 litres of water, and a separate two-winged gatehouse building that would cover 294 square metres.

The proposal's a perfect storm of two high-profile issues – overseas ownership of land and the changing landscape of South Island high country stations, especially in the Mackenzie district, where irrigation is turning traditional tussock-land into green pastures.

Blue Lake's consent documents suggest the $3 million lodge, built on sensitive lakeside land, will be the personal domain of Hong Kong billionaire Ka Kit "Peter" Lee, one of Blue Lake's directors, as well as his guests and staff.

As a trade-off, Blue Lake has offered to put a protective covenant over 1400 hectares – almost 40 per cent of Guide Hill – an area larger than what was agreed to through the OIO process.

The proposed lodge breaches several planning rules of the Mackenzie District Council. Public submissions close today.

Blue Lake told Mackenzie's council that Guide Hill Station is "contracted to buy back some land from the Crown". However, Acting Commissioner of Crown Lands Craig Harris says that's not the case.

Harris's November 29 letter to the council, released to Newsroom by Land Information New Zealand, says there is no contract with Guide Hill Station Ltd or Blue Lake Investment (NZ) Ltd.

"No decision has been made on the alienation of this land to Guide Hill Station Ltd or any other party," the letter said.

Linz spokeswoman Joanna Carr confirms her department has not given approval for the buildings proposed by Blue Lake or a planned access track.

But the Crown's position on the lakeside land is opaque.

The Government took the land from the station in 1976 for electricity generation. The Overseas Investment Office decision, issued in March last year, gave Blue Lake consent to buy freehold 28ha of "former Crown land" which was to be "returned by the Crown to the vendor".

And Linz confirmed that last year it applied for consent, on behalf of the Crown, to subdivide 47.8 hectares of Crown Land "to repatriate it to Guide Hill Station Ltd".

(Carr describes that as "preparatory work" after Guide Hill Station applied to buy the land.)

'MORAL DUTY'

Why a sale's even being considered isn't clear.

Linz's consent says "there are no applicable offer-back provisions" and Blue Lake "is not entitled to the benefit of any offer back".

But the Crown considered it had a "moral duty" to offer the land back to Guide Hill's former owners, the Gould family, and the new allotment should "logically" be amalgamated with the rest of the station.

Forest & Bird's Canterbury/West Coast regional manager Jen Miller says the whole situation "stinks" and appears murky.

She also believes a neighbouring landowner might be disputing the potential sale.

Blue Lake lawyer Graeme Todd, of Queenstown, is bemused by the Linz letter and says the process has been frustratingly slow for his clients.

"Nobody's ever said to us that it's not going to be offered back. As I see it, it's just simply taking time to go through a process."

As for the "enormous" lodge, Miller believes it's inappropriate to build it so close to Lake Pukaki.

The proposal breaches Mackenzie District Council rules on building within 100m of a lake and building within a lakeside protection area.

The land is designated as an outstanding natural landscape.

Miller: "It's clearly inappropriate and it's somewhat concerning that they may be attempting to undermine the plan provisions that have been really hard-fought, where the council has spent, for a very tiny council, over $1 million trying to get proper landscape and biodiversity protection in this really vulnerable landscape."

Another opponent of the proposal, Mackenzie Guardians, point out further development is planned at Guide Hill.

The Overseas Investment Office decision says $2 million will be spent on building four cottages and six accommodation units, a café, dining areas, a museum, a non-denominational chapel, "as well as boatsheds and jetties on Lake Pukaki".

Todd confirms a second consent application is being worked on. But he says the proposed development will be "on the balance of the property, not on the lakeside land".

Blue Lake's plans for Guide Hill include an impressive array of philanthropic projects. It has agreed to pay Lincoln University $180,000, Mackenzie Trust $200,000 and Tourism Waitaki $30,000 to be used for various projects, including the Alps 2 Ocean cycleway. That's on top of shelling out $300,000 for a new research facility and $200,000 on ecological restoration and enhancements.

SIGNIFICANT ECOLOGICAL BENEFITS

Key to Blue Lake's lodge proposal is the plan to covenant 1400 hectares – an area 23 per cent greater than was protected under the OIO approval.

The consent application's assessment of environmental effects report says the mooted protected area contains significant areas of indigenous vegetation and habitat "that support multiple populations of threatened and at-risk indigenous plants, birds and fish".

Protection of that land would have a "significant positive ecological effect".

Todd says the landmark Mackenzie Agreement, launched in 2013 but never implemented, envisioned trade-offs would be part and parcel of future land use on Mackenzie stations.

"There'll always be groups that don't want to see something happen in a certain location. But if it's going to be freehold land then the person's entitled to make the application."

Miller says Forest & Bird doesn't want to see the lodge built.

"The mitigation in itself is actually a bit disingenuous as far as we're concerned. If there had been a useful ecological assessment at the time of purchase, all those things would have needed to be protected anyway."

She says the OIO "has rubberstamped high country purchases for boltholes for rich people or for agricultural intensification for overseas investment companies".

"This can't be how we want to see our unique landscapes being used."

What if the Crown land isn't offered to Guide Hill? Todd says there's no written agreement and there'd be no grievance from his clients.

Blue Lake would re-position the lodge elsewhere on the property.

Meanwhile, Todd's client Lee waits. The Hong Kong businessman has young boys and wants to spend more time in New Zealand.

Todd: "He's concerned about the delays it's taking in getting some accommodation for him on the property because you often simply can't accommodation [in the area] at certain times of the year."