Forest and Bird has told a court the Department of Conservation's decision to grant the Ruataniwha Dam land swap in Hawke's Bay is unlawful.
But the department says it allowed for broader conservation of the Ruahine Forest Park.
A judicial review of the land deal between the department and the Hawke's Bay Regional Council's investment company HBRIC is before the High Court in Wellington today.
The Department of Conservation agreed to deregister 22 hectares of the park and swap it for 170 hectares of nearby private land.
The move would allow the Hawke's Bay Regional Council to use the land for the $600 million dam project.
Forest and Bird lawyer Isaac Hikaka told the court the Conservation Act had been misinterpreted and the act only enabled the exchange of stewardship land.
Mr Hikaka said it was classed as specially protected land and could only be swapped if it no longer held those values.
DOC lawyer Jeremy Prebble said the increase of land it would acquire from the swap would allow for a broader conservation of the park.