Tamworth councillor Mark Rodda raised concerns that the state government may want control of Dungowan dam, if it was to sink close to half-a-billion dollars in to its upgrade.

A spokesperson from Water Minister Melinda Pavey said the upgrade would require significant investment from both the state and federal governments.

"Given the project is at the feasibility stage, it is too early to consider any changes to ownership," the spokesperson said.

"The government's priority is ensuring Tamworth and surrounding communities long-term water security.

"Who owns the dam is inconsequential when 66,000 people need water."

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However, Cr Rodda disagreed that ownership of Dungowan dam was "inconsequential".

"I think it is of consequence to us," Cr Rodda said.

"If the NSW government own it, and fritter water away to customers elsewhere, that's a problem for us."

As a council-owned dam, all the water in Dungowan is reserved for Tamworth and surrounding villages. Cr Rodda said if council lost control of the dam, the city would once again be fighting for its fair share of water.

He called on Ms Pavey and the state government to rule out taking over ownership of Dungowan dam, should it be upgraded.

"It would be good to understand in any discussions moving forward what level of control council and ratepayers are going to have over our future water storage," Cr Rodda said.

"If we are to going to proposer in to the future, we need assurances that we are going to have the water to do that."

Tamworth mayor Col Murray said the matter hadn't been decided yet, and would be part of future discussions.

"Keeping it would certainly be our first choice," he said.

"Dungowan has always been a Tamworth city water supply dam and hopefully that's the way it unfolds in the future. Council would certainly be able to maintain and look after an upgraded Dungowan."

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