Subdivision of the site - which is directly behind Binalong Bay Beach - has been the subject of fierce debate between green groups, residents and the government since 1978.

The area was discovered to be home to a number of threatened species, prompting the state and federal governments to list the area as a conservation covenant in 2002.

Last year, an application to have the conservation covenant amended was submitted to Break O'Day Council.

The applicant has proposed to build holiday units on the site because the covenant extends onto their property.

If the proposed amendment goes ahead, 8600 square metres will be lopped from the conservation area.

North-East Bioregional Network president Todd Dudley says the site should be left untouched.

"It would be gross breach of trust and undermine the integrity of conservation covenants if a landowner can vary the agreement purely for economic self interest reasons," he said.

"This ecologically sensitive land directly behind Binalong Bay beach is too important to allow any more development on it."

A spokesman for federal Environment Minister Greg Hunt said the changes to the site were deemed unlikely to have an impact on threatened species.

"The Tasmanian state assessment was that the variation (to vary the boundary of the covenanted area by .86 of a hectare) would not have a significant impact on the natural values of the property," he said. "In providing the consent, Minister Hunt noted that further Commonwealth approval would be required under federal legislation if any future use of the land (associated with the covenant) would be likely to have a significant impact on any federally protected matter."

The state government will have the final say on the covenant variation.