The regulations cover millions of hectares of vital natural habitats in England, with more than 100 rare and threatened animals and plants shielded by the protections.
According to Benwell, this includes hazel dormice, harbour porpoise, otters and bats.
“The rules cover the sites of greatest significance for nature: breeding and resting sites for rare and threatened species, plus precious natural habitats that are at risk,” Benwell said.
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Speaking at the committee, Eustice said: “The more we have looked at this body of law, the more clear it has become that it is quite fundamentally flawed.
“It only engages when an activity is defined as a plan or a project, so if something needs a permit, or a licence or planning permission the habitat regulations engage and start to require an assessment,” he told MPs.
Paul de Zylva, senior sustainability analyst at Friends of the Earth, said the directive and other nature laws protected 1,000 vulnerable plant and animal species as well as habitats.
“Ministers have tried to thwart these important laws in the past, but there’s no evidence to suggest they stunt economic development,” he said. “The real problem is that they are not properly implemented by governments across the EU including our own.
“The UK is already among the world’s most nature-depleted nations. The government has set both national and international targets for nature protection, if it truly intends to meet them then it must uphold existing laws designed to restore our vanishing wild spaces.”
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Dr Richard Benwell, CEO of Wildlife & Countryside Link, said: “If the government is serious about halting the decline of biodiversity by 2030 it has no time to lose.
“The best thing to do would be to protect more of our last remaining pockets of precious wildlife habitat and invest in nature’s recovery. Trying to do away with the habitats regulations would, at best, be a costly delay. At worst, it could leave nature yet more exposed to damaging developments.”
The Department for Environment, Food and Rural Affairs has been contacted for comment.