Fish and Game hired a helicopter last week to investigate reports the Lundy Marsh (formerly the Cairns wetland) had been drained and the peat bog and tussock vegetation destroyed.
"You'd hardly recognise it, it's been drained, the vegetation is gone, and from the helicopter it looks like grass on top," Fish and Game Otago officer Morgan Trotter said.
Any draining or "puggage" by stock in the headwaters affected the water quality of the rest of the river, he said.
It was assumed the wetland had been drained to be grazed by stock.
On a scale of one to 10, he described the destruction of the wetland as a seven or eight.
"It's bad news for water quality and yield. It's not just trout values [under threat] but farmers needing stock water further down and those wanting to go swimming."
Wetlands acted as a sponge, absorbing water in winter and releasing it during dry conditions in summer, keeping rivers flowing, he said.
Mr Trotter said he had laid a complaint with the Otago Regional Council about the damage to the wetland, which he believed had taken place in the past year, although drainage of the area had been an ongoing issue.
He had also made an Official Information Act request to the council for all information it had on file regarding the wetland.
Fish and Game had similar concerns about damage done to the Cairns Rd Swamp wetland, at the head of the Waipahi.
The regional council was reviewing its wetland provisions in its water plan and had included the Lundy wetland in its consultation draft as a regionally significant wetland.
Otago Regional Council resource policy director Fraser McRae said the damage done to the swamp was of concern and the council would be making inquiries to see whether the work was done legally or illegally.
If the wetland was not listed in the current plan, it was possible the work had been done legally without consent, he said.
If it was illegally drained, then a case could be made to have it restored.
It was hoped under the proposed water plan changes that this sort of situation could not occur again for wetlands listed, Mr McRae said.
"The current plan does not protect all wetlands, nor will it in the future stop people from draining everything people might see as a wetland."
The council was reviewing feedback on the Plan change 2: wetlands consultation document and hoped to publicly notify it by the end of the year.
