The Central Otago District Council's hearings panel yesterday heard arguments for and against changing the zoning of the 645ha area, 6km northwest of Alexandra.
The panel reserved its decision.
In 2008, a plan change sought by Melview (McArthur Ridge) Ltd to rezone the land as the McArthur Ridge Resource Area was approved.
The change was to pave the way for the development, which was to include visitor accommodation, an 18-hole golf course, hotel lodge, a 200ha pinot noir vineyard, luxury spa complex and up to 1376 residential units.
The project stalled and an application was received recently for a plan change to rezone the site back to a rural resource area.
The application is opposed by the company that sought the original plan change.
That company is now called the McArthur Ridge Investment Group Ltd (MRIGL) and owns 23% of the area.
The rest is owned by Central Otago Pinot Noir Estates Ltd (COPNEL) and Thyme Field Ltd.
All three companies are insolvent.
The Canterbury Mortgage Trust holds the first mortgage over all properties owned by COPNEL and Thyme Field.
The trust, which is in the process of being wound up, has applied for the district plan change.
On behalf of the trust, Paterson Pitts Group director Peter Dymock told the hearings panel the McArthur Ridge project was ''dead in the water''.
''The dream is over and it's time to move on,'' he said.
The trust was unable to sell the 15 titles it controlled within the site because its present zoning was proving to be a ''severe marketing impediment''.
Under the zoning, any activity other than the planned resort development required a resource consent and that made the properties virtually impossible to sell.
The trust wanted to sell the properties to be used for normal rural purposes, including viticulture, or for cropping or dairy grazing, Mr Dymock said.
MRIGL consultant Warwick Goldsmith denied the project was ''dead in the water''. He said a ''slimmed-down'' version was possible, developing a nine-hole golf course, hotel and golf clubroom.
While the company could not promise or guarantee it would happen, its properties had been signed up conditionally by a person who was ''really interested'' in continuing the vineyard lifestyle blocks and golf course, so the development ''remained alive'', he said.
The trust was not the landowner, only the mortgagee, so its interest was in maximising the sale value of its land, Mr Goldsmith said.
The trust had not provided any ''shred'' of evidence to prove its statement about the project being a lost cause and in fact, a potential purchaser was ''trying to put the whole lot back together''.
People who had built homes on the site and next to it were alarmed it might be used in the future for intensive farming.
He said the council should keep the door open for the original development or some form of it.
Several of the parties connected with the site were involved in legal action over water-related issues and the litigation had spanned several years, he said.
Mount Dunstan Estates Ltd also opposed the plan change. The company managed vineyards and represented the interests of 14 property owners in the area.
Director John Rasmussen said the residents wanted to protect their surroundings and views.
