An Bord Pleanála has indicated that compensatory environmental protection measures would be needed if a major extension of Galway Harbour is to proceed.
The Harbour Company is seeking approval for a €126m expansion, which would involve the reclamation of 24 hectares from the sea bed and extensive development to expand the port.
It is now been invited to outline steps that could be taken to offset any permanent damage.
After considering this application for several months, An Bord Pleanála has now said certain elements of the proposed development at Galway Harbour would have a significant adverse impact on Galway Bay.
The planning authority said the expansion would result in the permanent loss of reef, mud and sand habitats in the candidate Special Area of Conservation.
Galway Harbour Company now has the option of setting out measures that would counter-balance such damage.
An Bord Pleanála will then decide whether the application should be referred to Europe under a rarely-used Derogation of the Habitats Directive.
This allows certain projects to proceed for "Imperative Reasons of Overriding Public Interest".
Ireland has never made such an IROPI application, but Galway Harbour Company had already indicated an EU designation would be needed to complete the expansion plan.
