Dungowan dam doubles in projected costs, has no business case, no environmental approval yet is ‘moving ahead’

It's been called a "flawed" project by the productivity commission. It still has no business case or environmental approval and it's already doubled in cost before construction can begin.

But this week the deputy prime minister, Barnaby Joyce, announced the Dungowan dam near Tamworth was "moving ahead".

Together with the New South Wales water minister, Kevin Anderson, Joyce travelled to the old dam to announce the project - one of the biggest water infrastructure projects in the last two decades - again.

"Today we're here at the site of the existing Dungowan dam to announce real progress on this important piece of water infrastructure," Joyce said.

"I've never stopped fighting for this project, and this is a big step towards securing water security for Tamworth for years to come."

Anderson said, "Since I have taken up the responsibility of minister for lands and water, I have been pushing hard to get this project moving, to get shovels in the ground, and I believe significant progress has been made in regard to the new Dungowan Dam."

The "progress", announced in a National party media release rather than a government one, is that a final business case "has been lodged with Infrastructure NSW and Infrastructure Australia", and that it would be considered by the NSW government in the next month.

There is also a shortlist of two contractors, even though the project is yet to clear environmental hurdles and remains only part-funded.

However, the much-awaited business case, which will help Tamworth residents and farmers understand what this new dam might mean for the cost of water, will not be made public.

A spokesperson for the NSW department of primary industries later clarified that the business case will not be made public "because it includes cabinet and commercially sensitive information."

"It is common practice for the NSW government not to publicly release entire final business cases as they include commercial in confidence information. However, the EIS (environmental impact statement, which contains elements of the final business case) will be publicly exhibited before the end of 2022," the spokesperson said.

The project is one of a suite of contentious dam projects that have been pushed by the NSW Nationals and which the federal government has agreed to fund 50-50.

Two of these - Mole Creek dam and Wyangala dam are now on the backburner - after massive cost blowouts.

Dungowan dam, however has survived despite documents obtained during a NSW upper house inquiry showing it too has almost doubled in cost from $484m to $870m by November 2020 and that further budget allocations would be needed from both NSW and the federal government to cover the new hefty price tag.

The project has strong National party support and even scored a brief visit from the prime minister, Scott Morrison, during the 2019 federal election campaign.

For some of the decision makers, the project is very close to home.

The dam is located in Joyce's federal seat of New England and Anderson's state seat of Tamworth. The chairman of Infrastructure Australia, which comes under Joyce's portfolio, and who will consider the adequacy of the business case for the project, is former Tamworth mayor, Col Murray.

The project to build a new dam downstream from the old Dungowan dam and a new pipeline to the water treatment works was originally proposed because of fears the growing town of Tamworth will run short of water.

The town has an allocation from Dungowan, but the lion's share of water from the dam is used for irrigation and farming.

Critics, including the federal government's productivity commission argue that Tamworth's future needs could be met by spending just $10m on buying back water entitlements from irrigators.

In a scathing assessment in its paper on national water policy, released in 2021, the commission said the proposed dam was a "costly way" to deliver more water to Tamworth.

It said the government had failed to consider non-dam options to boost water supply to the area in the original feasibility study, such as water buybacks or investment in water efficiency.

"Unless governments recover the cost of major water infrastructure from users, funding major water infrastructure for the benefit of primary industries would amount to subsidising a commercial operation," the report warns.

The commission estimated authorities will get just $11m a year back on their investment which is now likely to be closer to $1bn.

The Dungowan project was originally being run by WaterNSW, which, as a state-owned enterprise, has a mandate to deliver a commercial return to the NSW government.

Last year the NSW government quietly moved major water projects back inside the department to "Water Infrastructure" after WaterNSW warned the three proposed dam projects were not viable and would require a budget subsidy or a waiver from its charter.

Greens NSW Upper House MP, Cate Faehrmann who chaired an inquiry into NSW dam projects, vowed to ensure that the business case for Dungowan dam would be made public.

Her inquiry called on the government to consider other alternatives to boosting Tamworth's water supply such as managed recharge of aquifers in the area and water efficiency projects.

The report pointed out that the project's proponents had failed to take account of climate change when considering the merits of a bigger dam.

The Nature Conservation Council said it was appalling the public would only have access to selected excerpts of the business case.

"The government is treating the public like mushrooms - keeping them in the dark and feeding them the bare minimum," the council's acting chief executive, Jacqui Mumford, said.

In 2020 WaterNSW, which was then in charge of the process, said many of the questions about the dams could be answered once the business cases were complete.

"Work on the development of the proposed Dungowan dam is only in its early stages," a spokesperson said. "Estimates of the practical benefits and additional availability of water for the community of Tamworth will be clearer once the final business case is complete in 2021."

The spokesperson for the NSW department said the EIS, which will be released by the end of 2022 would now provide more limited financial information.

"The EIS process allows the community to have their say on the project via public submissions. It also provides transparency to the community without disclosing cabinet and commercially sensitive information."