Nationals MPs are defending a NSW dam project plagued by cost blowouts and a poor business case. 

Infrastructure Australia says it does not recommend including the new Dungowan Dam near Tamworth on the federal government's Infrastructure Priority List.

The New Dungowan Dam and Pipeline project aims to increase town water supply for Tamworth and maintain water reliability for agricultural production in the Peel Valley. 

The proposal was developed in response to long periods of drought and water restrictions. At a time in 2019, Tamworth was 12 months away from running out of water from its primary water source, the Chaffey Dam.  

The project has a capital cost of close to $1.3 billion and a benefit cost-ratio of just 0.09 - meaning it would return just 9 cents of value for every dollar invested. 

Although it offers sustainability and resilience benefits, Infrastructure Australia’s assessment has found that similar community benefits could be achieved through a combination of lower cost build and non-build options.

“This includes increasing the amount of water from Chaffey Dam that is available for urban use, along with policy changes such as demand management and water use efficiency measures,” the independent statutory body said. 

Former Nationals leader Barnaby Joyce - whose electorate includes the regional city of Tamworth - signed up to spending $675 million of federal money on the dam in a 50-50 funding split with the NSW government when he was Deputy Prime Minister and Infrastructure Minister in the previous federal government

Mr Joyce has dismissed the independent report, saying its findings are “wrong” and the dam should “absolutely” go ahead.

NSW’s Minister for Lands and Water - Nationals member for Tamworth Kevin Anderson - claims that the state’s business case for the dam shows it is “the only solution that will future proof water supply for Tamworth without impacting the $2 billion a year agricultural industry”.