The council has now announced it has cancelled that abatement notice, allowing work on the irrigation upgrade to resume.
However, it has issued a new notice directing the company to reach project milestones and achieve full compliance by September 2020.
Complex engineering solutions would be needed to rectify the breach, possibly involving further applications for resource consent, the council said in a statement.
Those works were still being planned and could not start until council requirements were met, it said.
The council did not want to "unduly affect" irrigation users.
It would allow the project to continue so the irrigation company could meet its goal of delivering water to landowners in the 2019-20 growing season.
The company must also correct another resource consent breach at the Little Awakino River crossing, where screening vegetation was removed.
The council would monitor all compliance with the new abatement notice throughout its duration, it said.
If any of the milestones were not met, the council would go to the Environment Court, an officer said at last week's council meeting in Oamaru.
The irrigation project was replacing about 44km of open canal with 37km of underground pipes, taking irrigation water from Lake Waitaki rather than from tributaries further down.
It also increased irrigation coverage from 1983ha to a potential 5500ha.
Irrigation company chairman Geoff Keeling said the council's deadline was achievable.
The company would work through the process with its contractor "in the most timely manner for its shareholders".
Keeling said he expected the delayed section would be completed within the next month.
The scheme's existing infrastructure from below Kurow would be used to supply irrigation water this summer, he said.
The new part above Kurow was not due to be up and running until the autumn.
"We're using a hybrid this season."
Extra costs incurred by the breach of consent and delays would be decided with the contractor, Keeling said.
"We've got a good team working with us."
