Councils across the North of England bidding to become unitary authorities have received government backing.
The Department of Communities and Local Government said Cumbria, Northumberland and Durham county councils' applications had all been shortlisted.
A final decision will be made in July following consultation. Approval would mean single county-wide councils replacing district authorities.
District councils say people would be better served at a local level.
All three county councils welcomed the news that they had made the shortlist, saying the shake-up of local government would give communities real value for money.
But across the board, districts have either rejected the unitary plans or are calling for alternative arrangements.
In Northumberland, the six district councils have submitted plans for the county to be split into two authorities - rural and urban.
The proposal, by Alnwick, Berwick, Blyth, Castle Morpeth, Tynedale and Wansbeck councils, has been accepted as a bid alongside the county council proposal, and will be considered during the consultation process.
But in County Durham and Cumbria only the county council plans are being considered.
Cumbria's district councils - Allerdale, Copeland, Barrow, Carlisle City, Eden and South Lakeland - say they are hopeful that their input, along with that of the public, will form part of the consultation.
However, Durham's districts, which comprise Chester-le-Street, Derwentside, Easington, Sedgefield, Teesdale, Wear Valley and Durham City - are furious that their bid is not being considered.
Councillor Bob Fleming, chairman of the Durham Districts' Forum, said: "It is extremely disappointing that the government has not seen fit to consult on both the competing bids.
"Together we called for the government to enter into full, fair and transparent consultation on both bids.
"This demand appears to have fallen of deaf ears."
Durham's district councils had submitted a "Pathfinder to Unitary" bid, which called on several development stages and improvement initiatives leading eventually to unitary status.