A group opposed to the North East Rail Trail has vowed to appeal the project should it be approved by Dorset and the City of Launceston councils, arguing against the removal and sale of rail infrastructure.
The federal government recommitted $1.47 million to the project from the Community Development Grants program this week, replacing the federal funding that expired last year.
Dorset Council plans to have a development application ready within weeks.
North East Residents and Farmers Inc has reaffirmed its opposition to the proposal, claiming it had the funds to fight the project through the appeals process.
Chairman Stuart Bryce said their grounds for appeal would likely centre on the Strategic Infrastructure Corridors Act and whether the removal of rail infrastructure fell foul of these laws.
"The bill is clear: that any rail infrastructure removed from that link is to be banked and made available to other heritage railway users in Tasmania," he said.
"So the council isn't selling a bloody thing."
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The new funding does not require an equal council co-contribution, however Dorset mayor Greg Howard said the remainder of the project could be funded through the sail of rail infrastructure.
The rail trail proposal would also require the approval of the City of Launceston, as areas to the west of Wyena fall within its area.
The council has previously stated its preference for the heritage railway to run from Turners Marsh to Wyena, rather than ending at Lilydale.
The City of Launceston outlined its position in regards to the rail trail and heritage rail projects in its agenda from September 2018.
"The council believes that a successful heritage rail operation should run through to Wyena to provide maximise scenic value and appeal and to provide linkages to nearby tourism attraction," the report reads.
"It is recommended that these alterations form part of an agreed outcome between the Dorset Council and the Launceston and the North-East Railway organisation."
City of Launceston councillor Paul Spencer said he was unlikely to support any project that resulted in the removal of rail infrastructure.
"We shouldn't be removing it," he said.
"It's great history, it probably needs a bit of maintenance and doing up, but from what I've heard it's not in bad order."