At a meeting yesterday the Wanaka-Upper Clutha Community Board recommended council grant Mr Thiel’s company Second Star Ltd a water supply easement in Damper Bay.
The board recommended Queenstown Lakes District Council grant consent for a 3m-3.29m-wide underground water supply easement over part of Damper Bay Lakeside Recreation Reserve.
Mr Thiel had plans to build a 330m-long, hidden, luxury lodge overlooking Lake Wanaka.
The PayPal co-founder and prominent Donald Trump supporter had hoped to build a private residential estate set against mountains.
But the council’s independent resource consent panel declined consent for the buildings.
It said the "large, very long building" would be too visible from a public walking track, that the 1165sq m lodge was inappropriately dominant in the outstanding natural landscape and deemed the design details lacked clarity.
The decision has been appealed to the Environment Court by Second Star Ltd.
At yesterday’s board meeting, chairman Simon Telfer questioned the development of the land.
"This land is with the Environment Court at the moment.
"How does that sit when we are running an easement or supply water into a development that is before the Environment Court?
"Is there anything we should be aware of when making this decision?"
Queenstown Lakes District Council senior parks and reserves planner Aaron Burt said he did not believe there was any complexity.
"We are talking about an easement that can convey water between two points; it doesn't necessarily factor in what may or may not transpire, be it the case, at one of those other points ... in the structure of the defined area," Mr Burt said.
