The approval for a large dam project proposal these days predominantly involves satisfying broadly the criteria of economic development, social equity, and environmental sustainability. It is justified that the criterion of economic development seeks full project cost recovery as well as significant contribution to economic growth of a region. Cost–benefit analysis is normally used as the yardstick for economic development but it has limitations and a better method is warranted. Social equity considerations should embody the need to address the concerns of all sections in communities to be impacted by a project and involve them in the decision-making process. The lapse of this aspect in project planning of the past has led, at least as being partly responsible, to disastrous consequences. Environmental sustainability should seek to ensure that the vital components of the environment are preserved such that the future generation can use the natural resources to their benefit at least as much as the current generation. Environmental sustainability is arguably the most contentious criteria among these. The vagueness in the concept of environmental sustainability and the tendency of the society to err on the safe side have caused many large dam project proposals not reach their fruition. An attempt is made in this paper to define environmental sustainability in a more meaningful way from an analytic viewpoint. The case of Traveston Crossing Dam project in southeast Queensland, Australia is presented as an illustrative example and to evaluate the performance and relevance of the three broad criteria in a real-world application. The case study is also an example of the fact that environmental awareness can lead to enormous level of socio-political forces which can create many hurdles to cross by a democratic government.