Tamworth: NSW water minister Rose Jackson confirms Dungowan Dam project in the dust

The Labor government pulled the plug on the project in its federal budget, rolling back its share of $595 million previously committed by the former government in a split bill with the state.

"The business case did not provide sufficient support for construction of the project," the budget papers read.

State funding for the project was then withdrawn on Wednesday, May 10, with water minister Rose Jackson citing concerns over the viability of the project and the decade it would take to build and fill.

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Dungowan Dam is gone, New England MP Barnaby Joyce told the Leader.

"That is an incredibly bad outcome for the city of Tamworth and for the Peel Valley," he said.

"That means the amount of water we've got for the city of Tamworth goes down, not up. This has real ramifications, and it's so disappointing."

The project has been a distraction for the community, Tamworth Water Security Alliance member Graham Carter said.

"It's a 19th century solution to a 21st century problem," he said.

The focus for the alliance is on having water security for Tamworth, which will come in the form of water recycling, he said.

"That's an easy, urgent, cost effective action that can really diversify Tamworth's water supply," he said.

"It's a bold step to take to really start putting in recycling in a large scale, but it's 21st century technology.

"It's used around the world, there's no reason we can't use it here in Tamworth, and it's ridiculous that we're not, given that we're a drought nation."

The strategy moving forward is to meet with council and unify an approach to call for an investment from the state government, Mr Carter said.

What disappoints Tamworth MP Kevin Anderson, who supported the Dungowan Dam project, is that the government hasn't redirected the cut funding to other water security measures.

Budget papers state the funds will be "redirected to fund other government priorities".

"They don't have an alternative option, their option is no investment, no more water, no funds set aside for alternative projects like the industrial water recycling facility in Tamworth," he said.

"It's a complete lack of investment in water security and that is a real concern for regional communities."

Ms Jackson told the Leader she acknowledged the frustration about water security in the region.

"Understandably, people are concerned as we move into another dry period, that action is taken urgently to resolve the water security issues," she said.

The state government will release the final Namoi Water Strategy "in the coming weeks" to outline the plan to improve water security issues in the region.

Options include advanced water treatment plants, purified recycled water facilities, water efficiency and demand management.

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