Dam expensive: Joyce suspects 'political play' in 'inflated' billion-dollar Dungowan bill

Barnaby Joyce told the Leader that much of the billion-dollar bill for the dam would go into environmental offsets, including fraudulent projects like planting trees in existing forests or paying farmers to not graze cattle in a swamp.

The federal and state governments have always planned to split the bill on the new dam 50-50.

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On Friday, mayor Russell Webb let slip that the Commonwealth would spend more than $600 million on the scheme in Tuesday's budget, revealing that the dam would cost more than $1 billion.

Barnaby Joyce told the Leader on the weekend that he was "skeptical" of the state government's huge price tag.

"I'm skeptical about their numbers to be honest," he said.

"I think they've come up with a massive number to try and force us to say no.

"They're playing the game of 'we don't want to do it so we're going to force a massive number on them for the purpose of paying for our own bureaucracy out of Commonwealth taxpayers' money'.

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"Making sure that we can be the bureaucracy without actually building the dam."

He said there was also a "ridiculous amount" of environmental offsets to be paid for to compensate for the ecological harm of the scheme.

Sydney's new Wyangala Dam will be required to pay for $450 million in environmental offsets.

"It's highway robbery, to be quite frank," he said.

"Where does the money end up? In the NSW Department of Environment."

The Deputy Prime Minister was clear that he was criticising an activist bureaucracy, not Water Minister Kevin Anderson.

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The dam was initially slated to cost just $484 million, when it was announced by Prime Minister Scott Morrison and Premier Gladys Berejiklian in 2019.

Water Minister and Tamworth MP Kevin Anderson rejected the allegation.

He said environmental offsets were part of the "cost of doing business," though he acknowledged they were "horrendously expensive".

"When the initial figure came out some time ago, it was based on some very early assessments," he said.

"The number that the both state and fed governments have landed on is the true cost of the project. It was under development when that number [$484 million] first came out."

Peel Valley water users, like irrigators, could be up for paying back much of the project's budget blowout.

Under the 2004 National Water Initiative, the Independent Planning and Regulatory Tribunal is required to either recover any costs spent on water infrastructure, or at least make transparent any subsidy. The Commonwealth component of the cost does not need to be paid back.

Professor of water policy at the ANU's Fenner School of Environment and Society, Jamie Pittock, said the billion-dollar blowout didn't come as a surprise to the academic community.

"All water infrastructure is expensive and almost all water infrastructure ends up costing vastly more than the initial estimates," he said.

"The money goes into building a lot of infrastructure and almost inevitably there is unexpected elements are found that require remedial engineering measures that blow out the costs. It's not a surprise to anybody involved in water that the cost of Dungowan Dam is blowing out; it's business as usual."

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He acknowledged that probably some of the extra bill came in the form of legally-required environmental offsets, though he said they were justified.

"It'd outrageous for any politician to suggest that the environmental damage from the projects they're promoting should be ignored," he said.

Dr Pittock said the government should look to alternatives to water storages to solve the problem of water security.

The chair of the Water NSW Namoi Peel customer advisory group, Ian Coxhead, said he is concerned about the cost of the project.

Nonetheless, Mr Coxhead said the project remains a "must-have".

"In the immediate, I just can't put a figure on whether the water will be astronomical or not, it just depends on how they factor it," he said.

"If they factor it that the new Dungowan will be run in conjunction with Chaffey Dam, then I think administration costs and running costs will certainly be reduced."

Mr Coxhead said local irrigator groups would work hard to make sure any cost-recovery formula wouldn't impose undue burden on irrigators.

"We've got an advisory group meeting in two weeks, in early April so that'll certainly be on the agenda to try and put our thoughts across as to what we think should happen and how the formula should work," he said.

"I think we can sort of come to some reasonable ground."

Mr Joyce said the allocation of "up to" $675 million in Tuesday's budget will only go to the Dungowan Dam and pipeline.

A plan by Tamworth council and the CSIRO to purify recycled water for industrial uses won't get a penny, he said.

"There is no money for the CSIRO project in the budget. We've given them the money and a buffer," he said.

"I know the game they're playing. They'll be no cheque coming from the Commonwealth for the CSIRO water reticulation plan. There'll be no item in the budget for it."

Mr Joyce is concerned the big bill was part of a "cunning political play" by the state bureaucracy, though he was careful not to criticise fellow Tamworth MP Kevin Anderson.

Mr Anderson said the original $484 million budget was an early estimate and he was confident the job could be done with the new budget of more than $1 billion.

"What this does is it shows that the work that Barnaby and I have done, that hard slog behind the scenes, to get this project doing, to bring it forward on the agenda when it was languishing, Barnaby and I have pulled out all of the stops to make sure that the project will proceed," he said.

The budget will be announced on Tuesday.

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