But planners say development should be limited so the area does not become an eyesore.

The land must not be turned into a small industrial estate, they stress.

The declaration has nipped a planning fight in the bud.

Watlington and the Planning Department had clashed over land off Parsons Lane.

The site is made up of marshes, woodland, and an embankment.

And under the draft Bermuda Plan 1992 -- a blueprint for future development of the Island -- it is declared Open Space.

Watlington had initially called for the site to be zoned for industrial use.

But a tribunal yesterday hearing objections to the draft Bermuda Plan was told the company had withdrawn its protest.

Mr. Ian Waddington, a surveyor acting for Watlington, said the move had been agreed following the assurance the company could still expand at the site.

He urged the Planning Department to "honour'' its commitment.

Mr. Waddington said Watlington was a long-established company which was "environmentally conscious''.

"The company feel they recognise what the Planning Department is trying to do, and are prepared to back off.'' Planner Mr. David Moore said the department wanted to ensure the site was not turned into a "small industrial estate''.

In a written statement to the tribunal, the Planning Department said it accepted Watlington was of significant national importance.

And it stated it would not want to "restrict the necessary expansion of the facility''.

"The Department does not however wish to promote the development, of what could become, a small industrial estate in a rural area.

"This could quite easily materialise if an Industrial zoning was applied to this site.

"At the moment, Watlington Waterworks is innocuous and unobtrusive, having little impact on its immediate surroundings.

"If however an Industrial zoning was permitted other industrial uses could be developed which could have a significant environmental impact on the area...'' The department described Parsons Lane as an "extremely attractive'' stretch of road.

If the Watlington site was over-developed it would "require substantial improvement'' to cope with the traffic.

The department added, however, planners would allow "appropriate extensions and expansion of existing uses within Open Space zonings''.

"The Department therefore sees no reason to amend the zoning from Open Space to Industrial.''