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Infrastructure Australia review slams case for building $1.3 billion dam near Tamworth, NSW

The Dungowan Dam would be the first dam built in NSW in more than 30 years. (Supplied: Tamworth Regional Council)

An independent review of the business case for a billion-dollar dam in north-west NSW has slammed the case for building it as "poorly substantiated".

Infrastructure Australia has not recommended including the new Dungowan Dam near Tamworth on the federal government's Infrastructure Priority List.

The estimated cost has blown out to $1.3 billion and was due to be funded in a 50-50 split between the state and commonwealth.

But the Infrastructure Australia review suggests the dam could only produce nine cents of economic benefit for every dollar invested.

"It is a significant infrastructure intervention with costs that far outweigh the benefits that will be delivered," the report read.

"We would welcome a revised business case that recommends a lower cost response."

The review found an Increased Urban Reserve in the city's main dam, Chaffey Dam, would be a more cost-effective solution to improve water security.

The Chair of Infrastructure Australia, former Tamworth Mayor Col Murray, declared a conflict of interest and was not involved in any of the deliberations.

NSW Labor won't commit

The NSW Opposition has given its strongest indication yet that it could withdraw government funding for the dam if it wins the state election in March.

During a visit to north-west NSW, Labor Leader Chris Minns was asked whether an incoming NSW Labor government would honour the Coalition's commitment.

"I can't give that assurance today," Mr Minns told ABC Local Radio.

"I'm concerned that the initial budget has gone from $480 million to about $1.3 billion."

Labor Leader Chris Minns says he's "concerned" about the project's increased price tag. (AAP: Dean Lewins)

The government claims the full business case cannot be released due to commercial sensitivities.

Mr Minns has repeated calls from Labor and the Greens for the full document to be made public.

"I'm not a local, but if I was I'd expect governments of either political persuasion to release the full information so we can understand what the costs and what the benefits are for the local community," he said.

"Infrastructure NSW has seen it as well and called on the government to pause the project."

Mr Minns addresses the Tamworth Labor branch meeting. (Supplied: NSW Labor)

Meanwhile, an independent business case into the dam by Infrastructure Australia is expected to be released in the coming weeks.

Federal Water Minister Tanya Plibersek has told the ABC that this will help inform her view about whether the federal funding should proceed.

"I think that'll be a key determinant about the future of the dam," Mr Minns said.

'Back to ground zero'

The NSW Water Minister Kevin Anderson today released the summary business case for the project after some details were leaked last week by Greens MLC Cate Faehrmann.

It confirms the government considered, but rejected, two other options to improve water security; a pipeline from the nearby Keepit Dam and an increased urban reserve in Chaffey Dam.

"The two other short-listed options improve water security for the town but reduce water security for license holders in the Peel Valley and the wider Namoi Region," the document read.

"The proposed new Dungowan Dam … nearly halves the risk of Tamworth running out of water."

Mr Anderson said the government hopes to have "bulldozers in the ground" by next year.

"If we don't build the dam and pipeline, we are back to ground zero."

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