Two threatened mammal species could be wiped out at the site of a proposed industrial development on Darwin harbour backed by $1.5bn in federal funding, according to a leaked environmental assessment.

Conservation advocates say it shows the controversial Middle Arm industrial project “shouldn’t get past the starting gun based on impacts to nature”.

The Middle Arm project is a proposed Northern Territory government development involving the construction of wharves and jetties to be used by industries including liquified natural gas, carbon capture and storage and critical minerals.

Part of the draft environmental impact statement (EIS), not publicly released but seen by Guardian Australia, found the development would likely significantly affect several species, including the black-footed tree-rat – a nocturnal rodent that dens in tree hollows – and the northern brushtail possum.

Both species, which are recognised by the government as at risk of extinction, live in woodlands in the proposed development area.

The assessment found the potential clearing of more than 1,000 hectares could lead to the tree-rat losing 78% and the brushtail possum 70% of their habitat on the peninsula.

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It said this would “likely lead to there being no black-footed tree-rats on Middle Arm peninsula” and that “if the entire development area is cleared the remaining suitable habitat will be so patchy and fragmented that black-footed tree-rats are unlikely to persist on Middle Arm peninsula”.

The draft assessment made the same analysis for the northern brushtail possum and stated the decrease in available habitat would likely lead to an overall decline in both species.

It found a total of 1,22o hectares of clearing was proposed for the Middle Arm development.

If the project goes ahead, the Middle Arm peninsula is expected to also lose: 70% of its old growth woodlands, which provide habitat for threatened fauna; 28% of its rainforest; 61% of its seasonal wetlands; and 12.46% of saltpan roosting habitat for the critically endangered far eastern curlew, according to the draft assessment.

“It’s pretty gobsmacking in terms of the impacts on nature,” said Kirsty Howey, the executive director of the Environment Centre NT.

The environment group called on both major parties to divert the promised Middle Arm subsidy to other proposals in the NT.

“This is the kind of project that shouldn’t get past the starting gun based on impacts to nature,” Howey said.

“What this EIS reveals is that Middle Arm is an ecologically significant hotspot with really important, sensitive vegetation that should be protected.”

A Labor campaign spokesperson said that with environmental impact studies ongoing, the federal government was “yet to provide any approvals” and was “committed to working with the NT government … and the community to ensure the necessary assessments take place before the project proceeds”.

The proposed development would “support the manufacture and export of a range of industries critical to net zero” and “provide significant economic benefits and an estimated 20,000 jobs in the Territory”, the Labor spokesperson said.

A spokesperson for the NT CLP government said the draft assessment was not yet finalised or submitted and the project “continues to be refined based on scientific evidence”.

They said the government was committed to ensuring the development was “subject to the highest level of environmental scrutiny through the strategic environmental assessment process”, and was working to avoid or minimise impacts wherever possible.

“Again, it is premature to make final judgments,” they said.

“Any final proposal will be independently assessed by the NT EPA and must meet rigorous environmental standards before any decision on progression is made.”

But Phil Scott, an independent candidate in the seat of Solomon, said “both levels of government have underestimated community anger about yet another project in the NT with significant impacts on native and migratory species, a raft of other problems and poor community consultation”.

Euan Ritchie, a professor of wildlife ecology and conservation at Deakin University, said destroying most of the available habitat for northern brushtail possums and black-footed tree-rats at Middle Arm would “substantially increase the likelihood of these threatened species’ local extinctions at the site”.

“And more broadly, it could also lead to a significant loss of genetic diversity of these species in the Darwin region,” he said.

The Coalition’s environment spokesperson, Jonno Duniam, said while the Coalition had not seen the draft report, “our longstanding view is that the Middle Arm precinct is incredibly important for the Northern Territory and Australia as a whole”.

He said various Coalition and Labor territory and federal governments had “worked closely together for years in order to ensure that environmental considerations have been paramount” throughout that planning process.