The development of a sustainable water supply for South Australia's north will be examined in a "once-in-a-lifetime" opportunity to support economic growth across the region.
The state and federal governments will spend $15 million to develop a business case for the Northern Water Supply project, which could include a desalination plant in Spencer Gulf to reduce reliance on the Great Artesian Basin and the River Murray.
Deputy Prime Minister Barnaby Joyce said delivering a secure and sustainable water source would drive the growth of regional communities and industries.
"A safe, reliable and sustainable water source will improve water security, create jobs and help unlock the economic potential of new and expanded opportunities for businesses in the state's north," Mr Joyce said.
To support the business case, the SA Government has entered into an agreement with SA Water, BHP and Oz Minerals to address the region's water needs.
South Australian Premier Steven Marshall said it was important for the government to play a coordinating role to bring together a range of potential customers.
"This project is a once-in-a-lifetime opportunity to secure a brighter future for South Australia and create jobs in an environmentally sustainable way," Mr Marshall said.
"We are always looking for ways to ensure we are using water efficiently because ongoing and secure access to water is integral to economic growth."
BHP Asset President Jennifer Purdie said BHP said the project had the potential to support industry and agriculture in rural and regional South Australia by improving water stewardship and creating opportunities for future investment and jobs.
"This is a positive step forward in BHP's commitment to make our Olympic Dam operations more sustainable," she said.
Conservation SA said environmental and Aboriginal groups had for years been concerned and critical of BHP's "unsustainable" use of water from the Great Artesian Basin.
It also called for any proposal for a desalination plant in Spencer Gulf to be robustly assessed and not rapidly embraced without substantial investigation.
"Scientists and marine experts have previously raised concerns about the level of ocean flushing in the gulf and the flow-on impact that would occur to marine life," Chief Executive Craig Wilkins said.
OZ Minerals Chief Executive Andrew Cole said the company was keen to play a part in collectively exploring a sustainable way forward.
"Water is an essential consumable for our operations and a critical resource for our stakeholders, particularly for the communities in which we operate, so we recognise the need to responsibly consume this water," he said.
"One of our aspirations as a modern mining company is to strive to minimise water use and add value when we do."
SA Water Chief Executive David Ryan in the face of a changing climate it was critical to be thinking ahead to ensure fit for purpose water was secured for the long term.
