The proposal to build a new Dungowan Dam in Barnaby Joyce’s seat of New England at a cost of $1.27bn appears to be dead after Infrastructure Australia delivered a scathing assessment.
The project, which was promoted by the former National party leader as a way to secure the water supply for Tamworth, in New South Wales, had originally been costed at $433m, with the Morrison government promising to contribute $242m.
But the cost more than doubled to $1.27bn.
“As a result of our assessment, the proposal has not been added to the infrastructure priority list at this time,” Infrastructure Australia said in its business evaluation released on Wednesday.
“While the new Dungowan Dam and pipeline will have community benefit and increase resilience, it is a significant infrastructure intervention with costs that far outweigh the benefits,” the assessment said.
The federal infrastructure minister, Catherine King, has said she would wait to see the Infrastructure Australia view before deciding whether the commonwealth would meet the additional cost of the project.
It now seems certain the project is effectively dead.
“Based on our assessment, the increased urban reserve option [Chaffey Dam], which is also considered in the business case, appears to be a feasible, lower cost solution that addresses the problem and warrants further detailed consideration,” Infrastructure Australia said.
Other “non-infrastructure solutions, including demand management and water use efficiency measures, combined with more targeted, small-scale supply solutions, such as recycled wastewater for industrial users, could be a more efficient means of addressing the service need,” it said.
During the most recent drought, Tamworth came perilously close to running out of water and had severe restrictions in place.
But the Nationals’ proposal to build a new bigger dam was heavily criticised because of its cost and the fact the dam would not necessarily increase water for the town in a future drought.
In its national water inquiry, the productivity commission described the project as a dud that would cost the equivalent of $162,000/ML, compared with a current market rate of $1,500/ML, if cost recovery was pursued.
Drew Collins, a former associate commissioner of the 2020 productivity commission national water inquiry, said Peel valley residents already had access to 22GL of high-security water from Chaffey and the old Dungowan dams and “only use about 11GL a year”.
The main consumption of water from the dam is for agriculture.
The productivity commissioner, Jane Doolan, previously said that unless governments recover the cost of major water infrastructure from users, funding it for the benefit of primary industry amounted to a subsidy.
Infrastructure Australia said the new Dungowan Dam and pipeline had a benefit cost ratio (BCR) of 0.09. Another opinion it costed, the increased urban reserve option, had a BCR of 0.49. The lower the ratio, the less beneficial the project is.
“It’s disgraceful that the National party has squandered the opportunity to drought proof Tamworth,” said NSW Greens MP Cate Faehrmann, who has led the charge to get the business cases for NSW dam proposals released publicly. “Instead they wasted millions of taxpayers dollars and years of work chasing this white elephant of a project.
“It’s been clear from the start that the dam was a dud.”