A European Commission official says Duchas is failing to assess the impact of fish farming on environmentally sensitive areas before licences are granted.
The commission has formally warned Ireland about the development of aquaculture on Lough Swilly, saying it has not respected its obligations under EU Directives on Birds and Habitats.
The Commission's intervention, prompted by a local preservation group's complaint, centres on the possible impact of aquaculture on migratory birds - the lough is one of the most important estuaries in Ireland for wintering birds.
This is one argument in a campaign led by an umbrella organisation, Save the Swilly, which has 30 member groups and has collected 8,700 signatures in a petition. Some highprofile personalities with links to the area, including Barney Eastwood, Paul Brady and Phil Coulter, have supported the campaign.
Save the Swilly rejects claims that it is not representative of local people. A recent editorial in the Donegal Democrat backed its demands and said the campaign had "succeeded in drawing together a broad band of people right around the lough, from fishermen to tourism interests to people who love the Swilly and don't want to see it harmed".
Mr Liam Cashman, principal administrator of the commission's Directorate-General Environment, said money had been provided some years ago to enable Duchas to prepare management plans for sensitive coastal areas where aquaculture is being developed. These should have examined the likely impact on birds and habitats.
"Unfortunately, it doesn't appear that all of the required research has been carried out," Mr Cashman said. The areas concerned are inter-tidal mudflats used as feeding grounds by migratory birds. In other EU countries aquaculture had caused serious damage to such habitats, he said.
Management plans drawn up by Duchas for some areas were good but in others the research was inadequate. Mr Cashman added that Irish authorities appeared to take the attitude that you "put something in and worry about it later". The impact and cumulative effects of aquaculture developments should be assessed before licences were granted.
He said the European Commission had a generally favourable attitude to shellfish farming, regarding it as a clean industry. The commission's warning relates to parts of Lough Swilly inside and outside a designated Special Protection Area. Irish authorities were given two months to respond to the warning. The Commission could take Ireland to the European Court if it believes legal obligations are not being met.
Another issue raised by Mr Cashman is the potential conflict of interest in the Department of Marine and Natural Resources, which has a policy of actively promoting aquaculture while also being the licensing body.
A Department spokesman rejected criticisms levelled by Save the Swilly, saying the system for granting licences was transparent and public concerns were always taken into account. Licence applications have to be publicly advertised but environmental impact statements are only required for salmon farms.
A range of Government Departments and State agencies are consulted on applications, including Bord Failte and regional fisheries boards. An Taisce is also consulted. The Department also pointed out that the Aquaculture Licences Appeals Board is totally independent.
The Department said that on Lough Swilly "many applications have been rejected because of unacceptable impacts and interference with seashore or other activities". The Government is committed to promoting aquaculture and the National Development Plan predicts total investment in the industry of £57 million up to 2006. It is seen as an industry that can provide jobs in peripheral areas.
Save the Swilly spokesman Mr John Mulcahy said it believed the consultation process was a "rubber-stamping" exercise. The group had been told by people in Bord Failte it could not consider every licence application in detail because of staff shortages.
The appeals board has upheld only one appeal relating to Lough Swilly and, to date, it has not been required to give reasons for its decisions, although this will be changed by new legislation.
The Buncrana Anglers Association had appeals against two new salmon farming licences rejected in May and it has asked the appeals board to give reasons for its decision. These licences, for farms at Callagh and Binnawheelmore, provide for an extra 500 tonnes a year on Lough Swilly. The association, which runs the Crana River, maintains that existing salmon farms are "decimating" wild salmon and sea trout in Lough Swilly and it says there should be no salmon farming allowed within 20 kilometres of a wild fish run.
Save the Swilly wants a moratorium on further licensing until independent environmental assessment is finished. It argues against aquaculture on grounds of water quality, food safety, tourism, wild fish stocks and visual beauty.
Mr Mulcahy said an initiative by the Department called CLAMS - Co-ordinated Local Aquaculture Management Systems - was "a mechanism for appeasing other users of the lough" as it could not be objective because it is committed to expanding the industry.
Save the Swilly says the beauty of the nearest estuary, Mulroy Bay, on the other side of Fanad Head, has been destroyed by fish farming. It says an environmental assessment should be carried out there before Lough Swilly is developed in the same way.
The group believes 150 fish farming jobs in Fanad could be offset by the damage to tourism. A number of hotel owners in the Lough Swilly area have been vocal in the campaign.
Mr Richie Flynn of the Irish Salmon Growers Association rejected suggestions that fish farming damages tourism, believing it actually brings visitors to an area. Visits to fish farms were extremely popular and visitors preferred to see activity and people using resources rather than "dead bays".
"No one can show any proof that there is any effect on tourism - it is all supposition dressed up as fact," he said.
He said there would not be any equipment or visual impact on a large part of the 1,000 acres of Lough Swilly licensed for fish farming. The industry provided year-round jobs and 360 people were involved in fish farming in Donegal in 1998.
But Mr Mulcahy said Save the Swilly wanted to know if there was any overall plan for Lough Swilly or if a capacity for aquaculture on the lough is going to be set.