The state government has been accused of underplaying the impact of raising the Warragamba Dam wall after a leaked report revealed up to 1300 hectares of Blue Mountains bushland could be permanently damaged by the plan.
The Sydney Morning Herald has reported the draft environmental impact statement from September 2018 suggests the 14 metre increase to the dam would result in an "overall high direct impact" to the world heritage area.
The document, seen by the Herald, states that bushland lying within the proposed temporary inundation area would be "permanently" affected in the event of a significant flood
Give A Dam community group organiser Harry Burkitt accused the government of underplaying the impact of the plans following the revelations.
"The world is watching Australia - and the federal government needs to act and stop this developer driven dam project," he said.
"It would be nothing other than a national disgrace if the Australian Government approved the dam and the Blue Mountains lost its world heritage status.
"It is disturbing that thousands more hectares of the world heritage area could be destroyed given previously leaked plans to raise the dam by 17 metres. The environmental assessment has already proven itself defective for both UNESCO and Indigenous communities. The NSW Government needs to now go back to the drawing board on this project."
Blue Mountains mayor Mark Greenhill said he was "incredibly concerned" about the revelations in the leaked report.
"Blue Mountains City Council formally opposes the NSW Government's proposal to raise Warragamba Dam allowing parts of the world heritage listed Blue Mountains National Park to be flooded," he said.
"We need to protect and conserve the world heritage values of the Blue Mountains. We oppose the raising of Warragamba Dam wall. Too much is at stake."
The government says it wants to raise the dam wall to protect 12,000 homes that lie in the floodplains in the Hawkesbury region.
Mr Ayres told the Herald the final decision on whether to raise the wall had not yet been taken, and would only occur after financial, environmental and cultural assessments have finished.
Federal Environment Minister Sussan Ley has also said construction on raising the dam wall would not happen unless all government approvals were in place.