The sea has eaten out a chunk of the reserve north of Holmes Wharf at the Oamaru harbour. A portion of the fence, built earlier this year, has been removed so it does not end up in the sea.
The issue is being investigated by the Waitaki District Council's harbour and heritage sub-committee.
Sub-committee chairman Gary Kircher said a report was being prepared for the area of the foreshore from Holmes Wharf to the historic old freezer building, just north of Oamaru Creek. That stretch of foreshore has suffered major erosion during the past 18 months.
"We can't look at replacing the fence until we know how to solve the erosion problem," he said.
The penguin reserve is administered by the Department of Conservation.