Water minister Kevin Anderson announced this week that the government had killed the project in the face of "significant opposition" from locals.

"It was about $24 million spent in all of that consultation phase. It was a $350 million project," he said.

Mr Anderson faces pressure from Infrastructure NSW to delay the $1.3 billion Dungowan Dam project in his own electorate, with the independent advisory body recommending a rethink and a delay for the "megaproject" in its 20-year infrastructure strategy, released this week.

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Meanwhile, the newly-elected Labor federal government has yet to declare whether it will meet a promise to fund 50 per cent of the project made under the previous government. The party did not promise either way in advance of election day.

Nonetheless, "it's business as usual as far as, as far as I'm concerned with Dungowan dam," Mr Anderson said.

"It's something that I believe in terms of regional water security, it's a must."

Mr Anderson said the government would now look to other water solutions, including "groundwater, bores and changing general security water licences to high security".

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"There was strong opposition to this particular dam, so it made good sense to me and it made good sense to the community [to kill the project]," he said.

"Farmers were saying that some parts of their properties would be inundated with water - in other words, flooded - by up to 50 feet."

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