A $13.25 million contract to grow up to 1400 hectares of Indian sandalwood outside Katherine is awaiting assurances from the NT Government that enough water will be available.
Tropical Forestry Services (TFS) announced late last month it had entered into a contract to purchase the Taylor's Park, Eagle Park and Florina Road properties owned by the Peanut Company of Australia (PCA).
TFS said the sale would depend on the draft water allocation plan for property water source Olloo Dolostone Aquifer being released to the public within 90 days of signing the contract.
Therefore, PCA confirmed if the plan was not released by March 19, TFS could dump the deal.
The NTG told media the plan should be released by the end of this month.
Water allocation in the region has been a contentious issue for some time.
TFS said the PCA properties had up to $7 million worth of irrigation infrastructure, which PCA said would be sold separately.
The watering requirements of the parasitic sandalwood trees, which are grown alongside a host plant, have sparked concern from environmental groups.
Environment Centre Northern Territory director Stuart Blanch said waterway conservation should be at the top of the list.
"The Daly River and its tributaries should be managed primarily to protect their high conservation values, hence any large increase in water extraction poses a risk if there is a run of dry years," Mr Blanch said.
He said the Murray-Darling situation should be a red flag to developers.
"Once irrigation areas are established, it is very hard politically to claw back over-allocation. We should not repeat these mistakes in the north."
The government did promise to protect water sources but it had gone back on its word, Mr Blanch said.
"The NT Government promised in 2005 to manage the Daly as a Living River, but is allowing a massive increase in water use near Katherine and further downstream."
Katherine is the latest string to be added to TFS' bow.
It operates about 5000 hectares of Indian Sandalwood trees in the Kimberley region based outside the rich Ord River Irrigation Area, and has recently spread into North Queensland.
The new Katherine plantation coupled with the spread of mahogany plantations in the region represents a shift in agriculture's future, Mr Blanch said.
"The move by TFS, together with the dominance of trees on the Ord Irrigation Area and recent rapid spread of mahogany plantations at the expense of cattle grazing in the Douglas Daly area shows the economic reality is trees not food crops are dominating the growth in the north's few agricultural areas."
PCA said it could not comment further until the government released the water plan.
Indian sandalwood is marketed as an expensive tropical hardwood with a trading price of more than $110,000 per tonne and strong markets in India and China.
Sandalwood oil is used in fragrances, cosmetics, and carvings.
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