The alarm was raised at 1.20 pm on Thursday when police received a report that a suspicious object had been left in the Derrychrier Road area.
Following extensive searches, two lethal and viable pipes were found near a home and the security cordon was eventually lifted around 4 pm on Friday once the area was declared safe and a number of residents were allowed to return to their homes.
Mr Dallat said: ““Those behind these alerts have nothing to offer the people of Dungiven or East Derry.
“While the rest of us are trying to create the conditions for investment in communities like this, these individuals are hell bent on dragging us back to hurt and heartbreak.
“They cannot succeed.
“I would encourage local people to give any information they can about this incident to the police.
“I want to see Dungiven operate as a thriving community that people want to live, work and raise a family in.
“We must all resist those who are trying to wreck that,” added the East Derry MLA.