CALARE National Party MP John Cobb has called for government backing to build a dam at Needles Gap near Canowindra.
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Mr Cobb said the proposed dam would help secure water storages for Bathurst, Blayney, Orange, Cabonne, Cowra, Parkes, Forbes and Grenfell local government areas, and create about 150 jobs.
It would take about three years to complete a $3 million planning study and two years to build.
The catchment area would be 532 kilometres with feeder creeks generating potential water storage capacity of 90,000 to 100,000 megalitres, he said.
"I'm over the business of saying why we can't do something," Mr Cobb said.
"I want to know why we can do it."
Mr Cobb said he had written to Prime Minister Tony Abbott and Deputy Prime Minister Warren Truss seeking the initial $3 million so State Water could conduct a feasibility study.
Mr Cobb said the NSW government had identified the dam as the most urgent of three possible sites and State MPs in his electorate supported it.
NSW Primary Industries Minister Katrina Hodgkinson said she had discussed the proposal with Mr Cobb but wanted the federal government to fund the study.
Last week Mr Truss, Minister for Infrastructure and Regional Development, met mayors in Bathurst and later expressed concerns about the project.
"There's no point in building a dam and filling it with water unless there are really people who are committed to actually using it," Mr Truss said.
Cowra mayor Bill West said there was a potential impact on local landholders.
"I want all involved to look at all this in a most strategic manner so we get it right for the entire region, not just one or two areas," he said.
Parkes mayor Ken Keith said a 2010 water security study, which looked at a pipeline between Cowra, Forbes and Parkes, needed to be reviewed to include the project.