NSW government should rethink billion-dollar Dungowan dam 'megaproject', Infrastructure NSW report recommends

Infrastructure NSW's 20-year strategy, released this week, recommended a rethink for much of the state's megaproject pipeline, including its ambitious dam construction program.

"The dam proposals should be re-evaluated alongside alternatives," according to the report, which specifically named Dungowan as a megaproject that should be reconsidered and possibly delayed.

"Alternative options, including rainfall-independent water supply options, should be exhaustively pursued given the likelihood of [the dam's] cost and delivery times increasing beyond reasonable expectations and potential for environmental, social and cultural impacts."

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Water minister and Tamworth MP Kevin Anderson said he remains committed to the billion-dollar water scheme, which is jointly funded by the state and Commonwealth governments.

"Infrastructure NSW is an independent body that provides advice to government. They do not write government policy," he said.

UNSW professor of civil and environmental engineering Stuart Khan, pointed to language in the infrastructure report recommending "strong discipline in strategic options assessment and economic assessment" as evidence the organisation may have been unconvinced by the project's business case.

"I would take that as them looking at what's been going on over the last five years saying really, this has not been best practice," he said.

He said the government ought to take the advice seriously and look at alternatives to the dam, like water recycling, urban storm water harvesting, and licence buybacks.

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"Infrastructure NSW exists solely for the purpose of providing expert advice. You'd want a very good reason for not taking that advice seriously," he said.

"We shouldn't be going ahead with a billion-dollar investment without a convincing business case."

In the report, Infrastructure NSW recommended the state employ almost every policy setting aside from dam construction to improve water security in regional areas, including "through demand management, water and wastewater recycling ... [improving] management of water in regional communities ... stormwater harvesting and recycled water projects".

"Due diligence is needed to ensure individual investment decisions [with regard to regional dam projects] are based on high-quality business cases," the report said.

Infrastructure NSW was sent a copy of the business case in early 2022. The document is currently secret, but much of the information contained in it is due to be made public later this year, when the project's environmental impact statement goes on public display.

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This week's report isn't the first to recommend the project be reconsidered.

The Productivity Commission argued the government could achieve the same results as the dam by spending $10 million to buy back water licences.

A state parliamentary inquiry also stopped just short of recommending the project be cancelled.

The new Labor government did not commit to fund the dam in advance of the May federal election.

Sydney MP Tanya Plibersek was appointed water minister on Wednesday.

"Now that the federal government have appointed a new water minister, I look forward to joining the mayor and our federal member to meet with the minister and reaffirm the Commonwealth commitment to Dungowan Dam," Mr Anderson said.

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If approved, the project would construct a new 22.5 gigalitre Dungowan Dam on the Dungowan Creek, about 3.5 km downstream of the existing Dungowan Dam

Initially estimated to cost just $484 million, the scheme's estimate cost blew out before completion of its business case, earlier this year.

Work has already begun on a new Dungowan pipeline, to replace the 70-year-old, leaking pipe with a higher-capacity one.

Both the dam and pipeline were announced as a "fast-tracked" project by former Prime Minister Scott Morrison and former Premier Gladys Berejiklian in 2019.

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