A Tamworth ecologist has called for details around the operation of the new Dungowan Dam to be made clear.
The $480 million dam was announced in October last year, but a business case outlining ownership and the allocation of water has yet to be determined.
Tamworth MP Kevin Anderson said the business case for the dam would be outlined by Water NSW and would be released early next year.
"In terms of ownership of the dam and things like that, it is still a bit too early to have those discussions," Mr Anderson said.
"It is in the hands of Water NSW and what I am most looking forward to is the amount of local jobs this new dam will create during construction."
However, ecologist Phil Spark said the business case needed to be complete before construction began to ensure the dam was "value for money".
"I think there needs to be a lot more consideration of the supposed benefits," Mr Spark said.
"It concerns me that it's all to enable increased water extraction, which is the bottom line, at a time when we should be looking at improving water efficiency."
Mr Spark's comments come after an inquiry by the NSW Upper House into the rationale of Dungowan Dam was announced.
Greens MP Cate Faehrmann will chair the committee, which will seek to explore the impacts of the project.
"I think this inquiry is a very good idea," Mr Spark said.
"The Murray Darling Basin inquiry identified that we had to return a hell of a lot of water to the rivers and by building this dam and increasing extraction, we are aiming to do the contrary to that objective.
"Sooner or later we have to really get serious about setting ourselves limits and we can't just keep inviting development to town."
Mr Spark said he would be shocked if the state government did not assume ownership of the dam once it was finished and if local water prices did not rise as a result.
However, a Water NSW spokesperson said ownership of the dam had not yet been decided, nor had any decision on the impacts on water bills.
"Water NSW is working with Tamworth Regional Council to progress the development of the project, noting that the decision on ownership will form part of the final business case and ultimately sits with the state government," the spokesperson said.
"[As for raised water costs] Ultimately this will form part of the final business case due to be completed by mid 2021, with cost recovery mechanisms and any resultant price changes to be determined by IPART."