Dungowan Dam to deliver 27 cents of benefits for every dollar, according to project business case

Just 27 cents worth of benefits would be attained for every dollar spent on the scheme, according to the project's long-secret business case.

But the government made a decision to go ahead with the billion-dollar project anyway, which it said would "maintain reliability of water for Peel Valley agriculture."

The project's summary business case, which was released to NSW parliament this week, reveals the giant dam project was just one of six water security options considered by the state government in January.

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"The economics of the project are challenging ... which creates challenges for traditional government decision-making," the business case reads.

"This is not surprising and is common to many water augmentation projects and particularly regional projects."

A spokesperson for minister for water and member for Tamworth Kevin Anderson said the document shows the project is the only one that "ticks all the boxes", diversifying water sources, increasing town water supply, boosting drought security, and maintaining water for agriculture needs.

Mr Anderson said the project wasn't a waste of money.

"The business case makes it very clear - building the new Dungowan Dam and Pipeline is the only solution that will future proof water supply for Tamworth without impacting the $2 billion a year agricultural industry," Mr Anderson said.

"If you want greater water security, you need the right infrastructure in place to improve the way we capture and store water, so the region is on the front foot when the next drought comes."

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Greens MLC Cate Faehrmann said the dam is "a failure". She described the project's cost benefit ratio as "abysmal" and slammed the project as a "horrifically bad investment".

The party's water spokesperson sponsored the parliamentary call for papers motion, which forced the government to release the documents.

"Knowing this is the quality of evidence being used to throw potentially upwards of one billion dollars towards a dam that isn't needed, confirms the National Party should not be in charge of water," she said.

"The business case reveals the dam has nothing to do with providing water to the people of Tamworth and everything to do with keeping irrigators in business.

"The business case also confirms that the government has totally failed to give adequate consideration to alternative options and have instead made a lazy attempt to paint the dam as the best solution.

"I'll be continuing to pursue the full business case through parliament and hold this government to account for continuing to recklessly waste taxpayers' money on this dud of a dam."

Government considered four infrastructure and two non-infrastructure options, including recycling water, to resolve Tamworth's water security crisis.

Three made the shortlist: the new Dungowan Dam and pipeline project; an "increased urban reserve" in Chaffey Dam; and a pipeline to the city from the gigantic Keepit Dam.

The Chaffey Dam reserve option was rejected despite having the best cost-benefit ratio of any option, "significantly lower capital cost" and that it "may deliver better water security for Tamworth", according to the business case. That option is more "uncertain" because less work has taken place, it says.

"The Keepit Pipeline option results in a greater impact on Namoi Valley users and the increased reserve [in Chaffey Dam] option significantly reduces water supply security for agricultural users in the Peel Valley ..." the document reads.

"Peel Valley licence holders will be no worse off with the new dam."

"Direct potable reuse" - using recycled water for town water - was also on the longlist in the business case, but didn't make the shortlist because the government assessed it as having "low community support".

"The lead time to adequately engage and gain community support for this option will be prohibitively long," according to the business case.

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Inland Rivers Network President Beverley Smiles said the government should have chosen the option with the best cost-benefit ratio.

She accused the government of putting water use for agriculture ahead of drinking water for people, or the environment.

"They're prioritizing water for the irrigation industry over and above water for town water supply. In the NSW Water Management Act, town water has a higher priority than water for the irrigation industry," she said.

She said the government hadn't seriously consulted with the community on other options, and the assessment that the people of Tamworth would reject recycled water was just an assumption.

The project would "significantly improve social outcomes" including "quality of life and climate resilience" and would have other economic benefits, the government claims.

"There is real risk that Tamworth will run out of water if the region experiences a drought worse than the 2017-2020 drought," the document reads.

"Tamworth could go from full dams to running out of water within four years if the same rainfall and usage patterns we saw in the last drought were to happen again."

Minister Anderson said the dam could be under construction by 2023, with appropriate planning approval.

But canning the plan would put the city back to "ground zero".

"It takes years, sometimes decades, to get infrastructure projects shovel ready, but subject to a co-contribution from the Commonwealth, funding new Dungowan Dam will have bulldozers in the ground by 2023, once the appropriate planning approvals are in place," he said.

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"Without water infrastructure economic growth stops, people's livelihoods are on the line and employment opportunities disappear, which is why you cannot measure water security infrastructure in dollars alone.

"We need to consider the real risks that climate change presents to water supply, including the cost of relocating towns without adequate water and the risk of farmers walking off the land.

"Resolving water security in the Peel Valley is estimated to enable millions of dollars in investment and thousands of new local jobs."

According to the business case the dam will guarantee a 50 per cent reduction in the time the city spends on water restrictions, hitting level 5 water restrictions once every 50 years instead of once every 20.

The city's water demand will also be able to grow by 10 to 15 per cent and Tamworth will be 12 months from running out of water every century, rather than every 35 years.

"The recommended option, the new Dungowan Dam and Pipeline, is the only option that develops additional storage to improve water security and resilience to climate change for the Tamworth region."

Even with the dam, the city will still require additional water security measures, according to the business case, including "water efficiency," "demand management" and "water recycling opportunities".

"There is unlikely to be a single solution to improving Tamworth's water security and resilience to climate change in the longer term."

Maintaining the dam is expected to increase water bills by about 4 per cent, without considering the capital costs.

The dam was originally announced in October 2019 as a "fast tracked" project, amidst the worst drought on record.

The federal and state governments plan to jointly split the cost of the project, which was initially forecast to cost just $484 million before blowing out to $1.28 billion.

The state government completed a long-delayed business case in January. Work got underway on a new Dungowan Pipeline in February.

For months, the state government refused to release the document even in response to an order by NSW parliament. Tamworth Regional Council also pushed for the document to be released, in vain.

The full business case remains secret.

The document published on Wednesday contains only elements the state government had promised to make public when it released the project's environmental impact statement in the second half of 2022.

A spokesperson for minister Anderson said the document contains elements of the final business case but "protects information that is cabinet in confidence or commercial in confidence".

Infrastructure NSW warned in June that the cost of the multi-billion dollar project might blow out even more and declared that the dam proposal "should be re-evaluated alongside alternatives," and possibly delayed.

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

Though the May federal budget funded its section of the budget in its entirety, the recent state budget devoted just $37.8 million.

The Liberal government led by Scott Morrison and Barnaby Joyce were fiercely committed to the water scheme, but the new Labor government under Anthony Albanese has not announced a position on it either way.