Dungowan Dam's $1.3 billion price tag more than three times economic benefit, Greens MP says

The Dungowan Dam was announced at the height of the last drought in 2019, but construction is yet to begin. (Supplied: Tamworth Regional Council)

A new dam slated for north-west NSW would cost more than three times the economic benefit it would produce, according to a NSW Greens MP. 

Cate Faehrmann said she had seen a summary of the business case for the proposed Dungowan Dam near Tamworth, which the government has refused to release publicly.

Ms Faehrmann said the document showed the dam would only produce 27 cents of benefit for every dollar invested.

"The business case that the government has produced just shows it doesn't stack up," she said.

"They cannot show there is enough benefit to the community to justify what is going to be upwards of $1.3 billion."

The cost of the dam has blown out from $484 million when it was first announced at the height of the last drought in 2019.

The previous federal government committed to fund half the project's costs, but the new Labor government has not yet announced a position.

Cate Faehrmann chaired an inquiry into new dam projects across NSW, and was critical of the Dungowan project. (Supplied: David Lowe)

Ms Faehrmann said the business case revealed the government considered, but decided against, other options to improve water security.

They include an increased reserve in the city's main water storage, Chaffey Dam, for critical town needs, and a pipeline to Tamworth from the nearby Keepit Dam.

"To be honest, I feel it was very cursory. I don't think a full options analysis has been undertaken," Ms Faehrmann said.

Government undeterred

Water Minister and Member for Tamworth Kevin Anderson disputed the claims, and said it was impossible to put a price on water security for Tamworth and the wider region.

"The summary business case clearly shows that this city would run out of water again if we would go back to a 2019-2020 drought," he said.

NSW Water Minister Kevin Anderson argues the dam is the best option for town, agricultural, and industry needs. (ABC New England North West: Patrick Bell)

"They're putting a cost on that, and I think back to 2019 when we were on level-five water restrictions."

"I think it's disgraceful."

He also rebuffed claims the dam was the best option for irrigators, rather than for human needs.

"This rubbish that this dam is for irrigators only is exactly that," he said.

"It clearly says it needs water for the city, it needs water for agriculture and it needs water for industry."

Ms Faehrmann said she would continue to push for the release of the full business case.

Extracts are expected to be made publicly available in the project's Environment Impact Statement, which is due for release by the end of the year.