Environmental groups are welcoming Meridian Energy's decision to can plans for a large hydro dam north of Westport, but the Buller district's mayor is lamenting its demise.

The state-owned power company on Tuesday said it had dropped plans to build a $300-million, 85-metre high dam on the Mokihinui River because of the high costs and risks to the project getting resource consents and access across conservation land.

The project had been granted resource consent in April 2010, but it was appealed to the Environment Court by opponents, including the Department of Conservation and Forest & Bird.

Forest & Bird said the decision to drop the project was the right one.

"This is a great victory for conservation, and a courageous decision by Meridian," Forest & Bird advocacy manager Kevin Hackwell said.

He says the economic benefit to the region would have been only short term and its future lay in tourism opportunities.

The Green Party also welcomed Meridian's decision, saying the dam would have resulted in the inundation of conservation land destroying 300 hectares of irreplaceable river gorge habitat.

"The dam would have caused irreplaceable losses of our treasured native species," said party co-leader Russel Norman.

Parliamentary Commissioner for the Environment Dr Jan Wright backed the move saying she had reservations about the plan.

She releases a report looking at wild rivers and hydroelectricity later this month.

Last week TrustPower shelved its plans for another West Coast hydro scheme, on the Arnold River in the Grey District.

Buller Mayor Pat McManus told NZ Newswire Meridian's decision was disappointing for the region.

Meridian's project had majority support in the district, even from the Mokihinui Ratepayers Association, those who would have been most affected by it.

It was "ridiculous and sad" that the risk of it being stopped had forced Meridian to can the entire project, he said.