The New Zealand Rugby Union said, after a meeting in Wellington on Saturday, it had resolved to introduce yet another new domestic competition structure.
It will include a 10-team premier division, a division one competition and a Heartland Championship, and may be introduced as early as next year.
Palenski said there was agreement in principle about the changes among the unions, but question marks remained over issues such as how to fill up division one, the tier below the premier division.
Palenski said there was a suggestion to include B teams of some of the bigger unions, or even include Australian teams, but he felt this would be too difficult.
There was a possibility eight teams would be placed in each of the lower two divisions, and the competition would return to the way it was before it was changed in 2006.
Palenski, who attended the meeting, said progress was being made but it was a very complex issue and could not be rushed.
"Every decision made has an adverse impact on someone.
So you've got to be careful and there are complications such as player payments," Palenski said.
Palenski said Otago, which finished a lowly 10th in last year's Air New Zealand Cup, should be secure in the new premier competition in the short term.
Over the past 18 months, Otago had been cutting costs and now had the "minimum number of players and the minimum number we can afford."
Palenski said playing performance would not be the sole criteria for teams to stay in the top division.
Financial performance, ground status, playing history, population and playing numbers would also be taken into account.
"We have got a ground and we are getting a new stadium, on the way.
We have also got a pretty good playing record and history."
He said B teams playing in division one had far from unanimous support while Australian teams had not been approached, but he wondered if they could be accommodated in a domestic competition.
There was no discussion at the meeting of which teams would be dropped from the top division, he said.
It was hoped to start the new competition next year, as 2011 had the added complication of New Zealand hosting the Rugby World Cup.
The IRB does not allow a domestic competition to be played at the same time as the World Cup.
Palenski said the national union had to be cautious as the domestic competition had changed many times in the past four to five years and there was a feeling they had to get it right for a reasonably long time.
He said the Otago union got no sense of satisfaction in the failure of the 14-team top division.
Otago did not want 14 teams in the top division when it was first mooted because of the sheer cost, the imbalance between the top and bottom teams, and there not being enough players available for all professional teams, he said.
The 14-team competition had cost a lot of unions a lot of money, Otago included, Palenski said.
