Ms Bligh has told State Parliament the site near Gympie would need significant environmental mitigation work before federal approval could be gained and construction could begin.

"It has been identified that the Mary River catchment, including the dam location, has suffered significant disturbance as result of clearing and cultivation practices over many, many years," Ms Bligh said.

"The Coordinator-General has raised concerns about the impact on habitat and achieving necessary rehabilitation and offsets for threatened species including the Australian lungfish, the Mary River cod, the Mary River turtle and the southern barred frog.

"While no decision has yet been made the Coordinator General has formally advised Queensland Water Infrastructure that he believes a number of mitigation measures to minimise impact on flora and fauna should be undertaken prior to construction of the dam.

"However, the Government remains committed to Traveston Crossing Dam and will do everything in our power to see it built."

However, Federal Environment Minister Peter Garrett has today given a conditional green light to the Queensland Government's other dam development, that of Wyaralong Dam in the South East.

The 103,000 megalitre dam will be located on the Teviot Brook within the Logan River catchment about 14 kilometres northwest of Beaudesert.

But on top of the environmental protection requirements placed on the project by the Queensland Coordinator-General, Mr Garrett has added extra conditions to ensure the commitments to protect matters of national environmental significance were implemented and monitored.

"My additional conditions require the proponent to carry out extensive monitoring of the downstream environment, to ensure that the operation of the dam does not impact on the Moreton Bay wetlands," Mr Garrett said.