It cites preliminary results from samples taken by independent researchers indicating mercury from the Churchill River is already flowing into Lake Melville, a key food source for about 2,000 Inuit.
Thousands more non-native residents in the region also eat salmon, trout and seal that could be affected.
The provincial government and its Crown corporation Nalcor Energy have so far ignored such concerns, Nunatsiavut President Sarah Leo told a news conference Wednesday.
"The risks for Labrador Inuit are high. That's why it's extremely important that Nalcor and indeed the government of Newfoundland and Labrador — as per recommendations from the independent environmental assessment panel — enter into discussions with us to ensure steps are taken to mitigate adverse effects of this project.
"The biggest reason why we're here today is we understand, we know through experts, through some of our own research, that Labrador Inuit will be impacted by this project. We need that acknowledged by the province and by Nalcor."
Mercury results from flooding of lands from hydro dams such as the one built in the 1960s for the Upper Churchill project in Labrador.
As it mixes with bacteria, it becomes the more toxic and persistent methylmercury which is linked to heart issues and intellectual problems in children.
Nalcor has said that any mercury contamination will be diluted to "no measurable effects" by the time it reaches Lake Melville.
But Tom Sheldon, Nunatsiavut's director of environment, said Nalcor's assumptions are based on flawed science and inadequate sampling.
Nunatsiavut launched its own effort last summer to collect baseline mercury readings and assess dozens of samples with help from an international network of independent researchers. They include Elsie Sunderland of the Harvard School of Public Health, a leading expert on mercury and its effects.
In its presentation Wednesday, Nunatsiavut said Sunderland has concluded that Nalcor's "modelling and data supporting the Lower Churchill hydroelectric development are insufficient to demonstrate methylmercury concentrations in Lake Melville will not increase."
Sheldon said the goal is to publish an analysis of its Lake Melville samples in a peer-reviewed scientific journal next spring.
Natural Resources Minister Jerome Kennedy said in the legislature that mercury is an unfortunate result of hydro flooding. But he said Nalcor has repeatedly consulted with Nunatsiavut and has committed to do a human health risk assessment and monitor effects on fish.
Kennedy stressed that the Muskrat Falls dam and power station are outside territory covered by the Labrador Inuit land claim agreement.
And he said the project is expected to flood about 120 square kilometres compared to 5,000 square kilometres inundated by the Upper Churchill dam.
Leo said that while mercury levels in Lake Melville can be traced with certainty back to the Churchill River, it's less clear what, if any, health risks may result.
What is clear, she said, is that Labrador Inuit have recognized aboriginal rights and title downstream from Muskrat Falls.
The project, if it proceeds, will negatively affect communities in central Labrador, Rigolet "as well as the entire Lake Melville ecosystem," she said.
Gilbert Bennett, vice-president of Nalcor responsible for hydro development on the lower Churchill River, said the corporation recognizes the importance of tracking mercury levels.
"We've captured samples throughout this year and we'll continue to do that each year throughout construction," if Muskrat Falls is approved by the province later this year, as expected.
Those baseline samples will extend past Muskrat Falls east to Goose Bay and Lake Melville, Bennett said.
In response to Sunderland, Bennett said Nalcor used qualified professionals to create the methylmercury modelling presented to the federal-provincial environmental panel on Muskrat Falls.
Monitoring after the dam and powerhouse are built "will be as extensive as necessary in order to demonstrate the effects of the project," he said.
The joint review panel in its August 2011 report recommended that Ottawa require Nalcor, if Muskrat Falls is approved and before the river is dammed, to complete "a comprehensive assessment of downstream effects." This would include "identifying all possible pathways for mercury throughout the food web" along with lessons learned from the Upper Churchill project and baseline mercury levels in water, sediments, plants and wildlife.
The panel said that assessment should be reviewed by Fisheries and Oceans Canada and by an independent expert, then discussed at a forum that would include input from affected aboriginal groups.
Nunatsiavut says that recommendation has not been fulfilled.