Tamworth mayor Col Murray said any investment in to local dams would be welcomed, however Dungowan Dam was a "particularly attractive option".

"Firstly, the dam is owned by council, and we have access to all the water in the dam," Cr Murray said.

"We don't have to worry about the complexities of a water sharing plan, as we do with Chaffey, so there is a clear understanding and a lot more certainty for everyone.

"Another strong point is Dungowan is in a slightly different rain catchment, it's more easterly."

Historically, Dungowan has supplied about 50 per cent of the city's water needs, even though it's only got a 6300-megalitre capacity. The proposed upgrade would see the dam expanded to 22,500 megalitres.

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"The Dungowan water is a higher quality than Chaffey, and it's more efficient to treat," Cr Murray said.

"The other strong attraction is that council owns all the land required for a Dungowan expansion. We've acquired it over time, so there would be no need for land acquisitions."

So far, the Dungowan upgraded has stalled, after the NSW government's feasibility study put the extension at $440 million - almost three times the budgeted $150 million.

However, Cr Murray is suspicious of the blow-out figure.

"We've been advised by water industry experts that costing is more than double per megalitre of any dam build in Australia in the last 20 years," he said.

New England MP Barnaby Joyce is also doubtful of the costing, and has request the federal government review the finding.

Given the city's water situation has changed since the study, and doesn't look to be improving any time soon, Cr Murray said there was a good case to revisit the costing.

"There was no geotechnical investigation, which is a necessary step for a more accurate costing," he said.

"Without that, it's hard to get a firm cost. It would take a lot of the contingency out of the cost."

Tamworth MP Kevin Anderson is pushing to upgrade Chaffey by 20 per cent, taking it to the 120,000 megalitres it was originally designed for.

However, council says that would only increase the city's water yield by around 2000 megalitres a year, as it is not the only user of the dam. 

In comparison, upgrading Dungowan would give residents an extra 6000 megalitres a year.

In the future, if Dungowan was upgraded and the city had plenty water, council would be able to sell off any of its annual surplus water entitlement in Chaffey to irrigators.

"That's a win-win, our irrigators get more water and we get a bit of extra cash," Cr Murray said.

Shooters, Fishers and Farmers candidate Jeff Bacon has backed upgrading Dungowan dam, along with a pipeline from Chaffey to the Calala water treatment plant.

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