The Kermadec Trench and archipelago were set to become New Zealand's largest marine sanctuary.

New Zealand's biggest ocean sanctuary is dead in the water, in a Winston Peters deal that has blindsided the Greens.

﻿The 620,000 sq km Kermadec Ocean Sanctuary, announced by John Key at the United Nations in 2015, was hailed around the world and passed its first reading in Parliament unopposed.

But fishing companies and iwi bodies filed legal action opposing it, saying the sanctuary would deny them fishing rights agreed in Treaty settlements.

ROSS GIBLIN/STUFF The Green Party wants it, NZ First doesn't. Jacinda Ardern's new Labour-led government has chosen to axe the Kermadec Marine Sanctuary.

NZ First, whose senior MPs are close to the fishing industry and whose campaign was partly bankrolled by players in the fishing industry, demanded Labour stop the sanctuary.

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And it is understood Jacinda Ardern agreed a Labour-NZ First government would not progress legislation to establish the sanctuary in this three-year Parliamentary term. That will disappoint some of her MPs and supporters, but will win favour among her Maori MPs who argued it undermined iwi commercial fishing rights.

The Kermadec sanctuary was one of the dealbreakers that swung negotiations in Labour's favour.

But Labour's agreement that it will not progress the ocean sanctuary has created the first real friction between the three parties as they try to form a government.

Green Party environment spokeswoman Eugenie Sage was yesterday named a minister outside Cabinet.

HANNAH PETERS/GETTY IMAGES NZ First leader Winston Peters. left and party MP Shane Jones are closely involved with the fishing industry.

She told Stuff she was not aware of the Kermadec sanctuary being killed off. "We have yet to see the coalition agreement between Labour and New Zealand First," she said. "I'm not going to comment on speculation and rumour."

But fishing industry spokesman Charles Hufflett, a shareholder in family fishing company Solander, said the industry had lobbied NZ First to stop the sanctuary.

Creating it was futile as the "fast moving, highly migratory" tuna are already being caught by hovering deep sea fishing boats outside the zone, he claimed. Hufflett estimated the foreign fleet was taking up to 16,000 tons of tuna worth $70 million each year.

JOHN HAWKINS/STUFF Green Party minister Eugenie Sage said she knew nothing of the deal to stop the Kermadecs sanctuary, which she described as a "simply incredible" area and deserving protection.

"The fish are going to get caught anyway, we think they should be caught by New Zealand vessels rather than Chinese."

Hufflett believed the Key government had been currying favour with overseas governments and "deliberately did not go through the normal consultation process" before declaring the sanctuary.

The sanctuary was initially championed by Green MP Gareth Hughes. His private member's bill would have created a no-take, fully protected zone preventing all fishing and mining in the area, adding to protections already in place.

ROMEO RANOCO New Zealand's fishing industry estimates foreign tuna boat fleets take up to 16,000 tons of tuna worth $70 million each year near the Kermadecs.

In 2015, to much fanfare at the United Nations, John Key promised it would "be one of the world's largest and most significant fully-protected areas, preserving important habitats for seabirds, whales and dolphins, endangered marine turtles and thousands of species of fish and other marine life" before the UN General Assembly in New York, which had been focused on sustainable development.

The eventual bill to create a sanctuary was on its second reading, "still before Parliament", Sage insisted.

NZ First leader Winston Peters and senior MP Shane Jones are intimately involved with the fishing industry. Fishing industry players associated with Talley's, Sealord, Simunovich and Vela Fishing have all donated to their campaigns, either this election or previously.

MICHAEL BURT NZ First's MPs have received donations from major fishing companies Talleys, Sealord, Simunovich and Vela Fishing.

Recognising that it would be a bad look to allow NZ First too close to marine environment and fishing policy, it is understood Labour has told them Jones will not hold the fisheries ministerial portfolio. Yesterday, he refused to comment on killing the bill, stating he'd "have to taihoa", or stop, until the coalition's eventual policy announcements.

A Labour spokesman said: "There will not be any announcement on final policy from the coalition negotiations until next week."

Eugenie Sage said:

MALCOLM FRANCIS/STUFF In 2015, then PM John Key said the Kermadecs sanctuary would offer "fully-protected areas for seabirds, whales and dolphins, endangered marine turtles and thousands of species of fish and other marine life".

"We've got the third largest exclusive economic zone in the world, we are bound by the international convention on the law of the sea, that gives us a responsibility to preserve and protect our marine environment, we have no deep sea marine reserves, the Kermadecs would be the first deep sea marine reserve."

She rejected Hufflett's assertion the sanctuary was futile, saying New Zealand had to boost the navy's offshore enforcement capability.

NIWA underseas footage shows the Kermadecs archipelago is "simply incredible", Sage said. It's well recognised the Kermadecs deserve protection."

DELWYN DICKEY/STUFF Eugenie Sage said underwater footage shows the Kermadecs are "simply incredible, it's well recognised they deserve protection".

The Kermadecs sanctuary is understood to have been a deal-breaker for NZ First. Other areas in which Labour is understood to have agreed to Winston Peters' demands while National refused to concede ground were:

* Cutting property sales to foreigners: National said no, warning that it would send an unfortunate message to our neighbours and be in breach of trade agreements, but Labour was happy to agree.

* Immigration: National would accept only continued incremental reductions, concerned about creating a labour shortage for business, but Labour agreed to slash about 30,000 off the numbers of arrivals coming through the international airports each year;

* Northland railways and port: Labour has agreed to a $500 million rail upgrade to kick off an investigation into moving the Auckland port to Whangarei;

* Reserve Bank Act: Labour's David Parker and Grant Robertson were willing to shift the measure from inflation to include foreign exchange rates and protecting jobs.