A spokesman said this did not imply the Minister was making a referral a condition, nor would any referral necessarily involve looking at the impact of taking water out of the Murray Darling system.

"He is not saying it has to be assessed, but that it may need to be assessed," he said. "The criteria for any referral have not been set."

Mr Garrett appears to have also vetoed the Victorian Government’s plans to raid the Living Murray and Water for Rivers projects to ensure 75 gigalitres flows down the pipe in 2010/11 before full savings from modernization are realized.

A condition of approval is that “no water come from the Living Murray initiative or the Water for Rivers entitlements”.

The Government had said it would use 75 gigalitres saved under the two schemes through the Shepparton Modernisation Project and modernization of the Central Goulburn channels 1,2,3, & 4 to send down the pipe in 2010/11 if it had not achieved sufficient savings.

Mr Garrett's office was today still clarifying if the condition applied to those savings the State Government had earmarked for the first year of the pipe, or was intended as a prohibition on raiding environmental water down the track.

Mr Garrett said in making his decision he had carefully considered the environmental impacts of the project proposed by the Victorian Government on matters protected by the EPBC Act.

“Based on the information and advice I have received, I am confident that this pipeline can be built without adversely affecting nationally listed threatened species,” he said.

“Securing water supply for our urban populations is of fundamental importance. The Victorian Government put this proposal forward on the basis that the water would be sourced primarily from savings from the Foodbowl Modernisation Project which will also go to irrigators and importantly, the environment.

“I have made it a condition of my approval that all savings to be taken for the pipeline could only be taken following the assessment of their potential impact on matters of national environmental significance. These savings must be audited and available before they can be sent down the pipeline.”