Federal Environment Minister Greg Hunt has ruled out selling off the Malabar Headland saying the "magnificent" piece of land will stay in public hands forever.

Mr Hunt's declaration came just hours after Fairfax Media revealed the findings of a report commissioned by the Abbott government, which said the Commonwealth-owned land was "surplus to requirements" and would generate a "significant return" if sold.

Mr Hunt appeared on 2GB radio on Thursday to "categorically rule out, on behalf of the government, any proposal or plan to sell, divest or develop Malabar Headland or any part of Malabar Headland".

"It won't be sold, it will be kept in public hands in perpetuity," he said, adding that the government was working to return a disabled horse riding group that was evicted from the land under the former Labor government.

Despite the federal Department of Finance having commissioned the consultants' report, Mr Hunt claimed "I haven't seen it, the Prime Minister hasn't seen it. It's not government policy".

He later released a statement saying the land was "one of Sydney's last undeveloped headlands ... I am passionate about ensuring this magnificent headland is retained in public hands forever".

However Mr Hunt's definitive remarks contradict the government's unresolved position a day earlier. When asked about the potential sale on Wednesday, Michael McCormack, the parliamentary secretary to the Minister for Finance, said the government had "not yet made a decision in relation to the future of Malabar headland".

The consultants' findings were criticised by Randwick Council, which wants the land returned to public ownership. State and federal Labor MPs called the document an "appalling breach of trust", saying the government had concealed its development intentions for the headland.

NSW Environment Minister Rob Stokes on Thursday welcomed Mr Hunt's statement, which defuses a potentially toxic issue ahead of the March state election.

"The NSW Government declared almost 18 hectares of the headland a new National Park in 2012," Mr Stokes said.

"We remain committed to protecting the headland and ensuring that the largest remaining stretch of untouched bushland between Botany Bay and South Head remains in public ownership."

The former federal Labor government had planned to transform the entire headland, just 12 kilometres from central Sydney, into national park and public open space.

However the consultants' report suggested that selling at least part of the headland for development was required to meet the government's aim of maximising a return to the Commonwealth within four years. The document was obtained by Fairfax Media under freedom-of-information laws,

"The site is both surplus to Commonwealth requirements and ideal for improvement through co-operation with the private sector," the business case said, estimating future development would generate an investment of "up to $1 billion" during the construction phase alone.

"Divestment of the site will relieve the Commonwealth of an ongoing financial liability associated with the maintenance and decontamination of the site," it said.

As much as 48 hectares, or a third of the 160-hectare headland separating Malabar and Maroubra beaches, had been earmarked in the document as suitable for possible mixed-use development following remediation.

"The development could be a mix of land uses such as residential, commercial, special aged care, retail, community/government facilities such as childcare centres and libraries," it said.

By contrast, handing over the entire headland for public open space, as had been proposed by the former government, "does little to improve the economic capital of the site" and "provides limited opportunity for the private sector to contribute".

"This option is unlikely to provide any return to the Commonwealth within the 3-4 year timeframe," the September document, obtained by Fairfax Media under freedom of information laws, said.

Labor Member for Kingsford Smith, Matt Thistlethwaite, said on Wednesday the government made no mention of development of the headland before the last election.

"This is the sacred green shoulder of Maroubra beach, the last remaining tract of native bushland between the harbour and Botany Bay," he said.

The former Labor government's conservation plans for the heavily contaminated headland, parts of which once served as landfill, stalled in 2012 when the NSW Rife Association successfully fought its eviction from a 100-hectare central part of the site.

But any move to transform the Anzac Rifle Range and parts of nearby bushland into one of the report's proposed "development portions" of either 15, 30 or 48 hectares would no longer face such an obstacle.

Liberal Democrat senator David Leyonhjelm last month announced he had secured a deal to move the recreational shooters to an upgraded facility in western Sydney, allowing the government to "free up" $3 billion in land at the headland.

Resistance would instead likely come from local MPs, Randwick City Council and community groups, who have all called for the headland to be protected from any future development.

"Trying to make money out of it just doesn't wash with the community," said the Friends of Malabar Headland's Claire Bettington.

"It's something that has to be looked after, not flogged to death," she said.

Nation Partners, consultants appointed by the government to lead "a strategic assessment on the site's potential", inadvertently revealed the existence of the business case in a since-deleted statement published on the company's website last year.

Nation Partners managing director Matthew Nation directed questions to the Department of Finance on Wednesday. "We don't have any comment to make," he said.

A spokeswoman for Michael McCormack, the parliamentary secretary to the Minister for Finance, said "the government has not yet made a decision in relation to the future of Malabar headland".

"With the level of expenditure required to remediate the site it is prudent to understand land use scenarios to develop potential remediation options and cost estimates to ensure value for money outcomes for the Commonwealth," the spokeswoman said.

Although most of the costings - along with the business case's final recommendation - have been redacted from the document, the department has previously put the cost of remediating the headland at between $95 million and $150 million.