An Auckland company hoping to mine peat soils from wetlands north of Kaitaia has surrendered its resource consents.
Resin and Wax Holdings was granted consent by the Northland Regional Council in March to dig up iwi land at Kaimaumau and extract industrial compounds.
But Forest and Bird and the Department of Conservation (DOC) took the council to judicial review in the High Court, partly because the resource consents weren't notified.
The council has now conceded it made a mistake in processing the consents and won't be defending the court action.
The regional council was not willing to comment on its blunder.
But Forest and Bird lawyer Sally Gepp said the council had admitted it used the wrong version of the Resource Management Act rules to process the consents.
Forest and Bird was reluctantly pulling out of the court action as well, because the council had threatened to sue for legal costs if it didn't, she said.
It was disappointing and Forest and Bird would have liked a ruling on some of the other mistakes it believes the council made - such as ignoring the National Coastal Policy statement, she said.
Resin and Wax company director John Cunningham said it cost the company around $250,000 to do the work needed for resource consent.
"We put in all the effort into getting the consent, which is a lot of work and a lot of cost, and then to have them not supporting the process six months down the track is disappointing or devastating."
After years of research and development, and backing from the government's Callaghan fund, the peat extraction pilot plant is up and running.
The company was on the verge of seeking investors for a commercial-scale operation.
The company has been sending samples of its products around the world, with favourable reactions from the industry.
Mr Cunningham said if there was going to be a delay in getting new resource consents for the Kaimaumau site he'll be looking for other land to dig in the meantime.
With the company, the council and Forest and Bird all pulling out of the court case - DOC is left as the last man standing.
It expects to announce later today if it will withdraw as well - or go it alone and seek a ruling.