A BLISTERING report on the new half-a-billion dollar Dungowan Dam build slated for Tamworth has identified it as expensive with 'poor viability'.
The Productivity Commission has found that any increases in construction on the $480 million project would result in a blowout so significant the project would likely become unviable.
The new dam was proclaimed to be the solution to Tamworth's water security problems by NSW Water Minister Melinda Pavey, federal New England MP Barnaby Joyce and NSW Deputy Premier John Barilaro on a visit to town last year.
But the commission has now declared the project is based on "flawed decision-making".
It highlighted the prospect of 'new' water is "illusory", and because the project is already in a fully-allocated water system, it will lead to an expensive transfer of water.
"Any infrastructure that improves reliability for one user will affect water availability for others," the report read.
The commission found that the same amount of water in the new dam could be purchased for less than $10 million a year from the region's entitlement holders, instead of a $480 million spend.
The 22.5GL dam is expected to provide an extra 6GL of water on average a year with a market value of $11 million.
If irrigators bought that water at full cost, it would be valued at more than $60,000 a megalitre, compared to the current market price of about $1341.
It found the feasibility study that underpinned the funding commitment had three key shortcomings.
It found the cost-benefit ratio was based on 'optimistic assumptions' like the willingness of the locals to pay for fewer water restrictions.
The original analysis ignored no-build options like purchasing general security entitlements, which would likely come at just two per cent of the Dungowan Dam construction cost.
And, the scope of the project was "narrowly" defined, focused only on long-term water supply, rather than ensuring water security in extreme droughts.
A WaterNSW spokesman recently told the Leader the plan for 2021 was to conduct ongoing consultation with landholders and the community.
The final business case is expected to be complete in late-2021 when the four-year build should start.