A private company planning to build an $84m southern Queensland dam will be given $168.5m from the federal government for the project – prompting concerns that the extra money was allocated without proper scrutiny or due diligence.
The 2019 detailed business case for the Emu Swamp Dam, near Stanthorpe, and all formal documents for the project estimate it will cost $84m to build. The Queensland Department of State Development says the same amount.
Guardian Australia revealed last month that the dam project’s estimated construction costs had blown out, and that some irrigators had since pulled their investments, believing it was now unviable and would never be built.
The proponent, Granite Belt Water Limited, did not respond to questions last month about the leaked cost blowout. The increased cost has not previously been acknowledged publicly.
But on budget night, the federal government said it had allocated an additional $126.5m for the project, on top of more than $40m already set aside. The announcement was made without any explanation as to why the significant additional funds were now needed.
The Queensland government previously pledged $13.6m to the project, and about 50 irrigators, who are members of Granite Belt Water Limited, have agreed to cover another $23.4m. With the federal money, the project now has $205.5m in funding.
The cost blowout has raised serious concerns that the project now represents a waste of taxpayer money. Based on the proponent’s own business case, the cost of building the dam would significantly outweigh decades of economic benefit.
The detailed business case found that, in a scenario using standard assumptions, the 12,000-megalitre dam and irrigation project would contribute – directly and indirectly – about $139m to the local economy over 30 years.
The 2019 business case gave the $84m dam a benefit-cost score of 1.47 – or $1.47 in economic benefit return for every dollar invested.
Assuming the $205.5m in committed funding is spent, the dam would return less than 65c in benefit for every dollar.
Richard Denniss, the chief economist at the Australia Institute, said funding such projects was “not taking the job of managing Australia’s economy seriously”.
“If you were going to be really generous to the proponents, maybe it stacked up at the original cost. But by their own analysis it clearly doesn’t stack up now,” Dennis said.
“For decades previous finance ministers have said ‘no’ to crazy ideas like this.
“[Funding these projects] is not taking the job of managing the Australian economy seriously. This is reckless public spending that they’re proud of.”
In response to questions from Guardian Australia, the federal Department of Infrastructure confirmed the funding was allocated “following advice from the Queensland government that the expected cost of the project had increased”.
“This will ensure the delivery of this important project, which will create jobs and deliver water security to the region, increasing agricultural production and driving economic growth.”
Guardian Australia understands the National Water Grid advisory body – established by the government in 2020 to scrutinise major water projects – had not been made aware of any cost blowout, or any government plans to allocate additional funding to Emu Swamp Dam.
That body was disbanded by the deputy prime minister, Barnaby Joyce, immediately after the federal budget.
Stuart Khan, a member of the advisory body, had previously written to members to express concern that the government was considering diverting additional funding to New South Wales-based dam projects, which were subject to cost blowouts but where no additional studies or scrutiny had taken place.
Regardless of the funding, the Emu Swamp Dam project is at a “pause” phase, and the proponent faces significant practical challenges before being able to start spending its money.
Those challenges include the need to secure additional water allocations to fill the dam, and the need to acquire several properties at the proposed dam site. A local newspaper, Stanthorpe Today, has reported that some landowners are at loggerheads with the proponent over the sale of their properties.
Some small farmers and others in the Stanthorpe area are opposed to the dam. They say the project will benefit about 50 irrigators who are members of Granite Belt Water and have invested in the project in order to secure an allocation.
They say public money is needed for genuine water security projects that benefit the entire community.
“You have to ask how did the 2019 business case get [the construction cost] so wrong?” said Melissa Hamilton from the group Protect Our Water.
“Arguably the entire business case should be referred for independent review. Taxpayers deserve a rigorous, consistent and transparent assessment of the costs and benefits of all options.
“A proper merit-based assessment would ensure the best use of taxpayer dollars to improve the long-term water security of the whole Granite Belt community, rather than just 50 irrigators.”
Granite Belt Water Limited did not respond to questions. In a statement released after the federal budget, the company did not acknowledge a construction cost blowout or say why the additional money was needed, but welcomed the funding.
The company’s chief executive, Lloyd Taylor, said: “This project will not only increase water security to the region, it will also create a significant number of jobs during construction, as well as long-term full-time positions in agriculture and supporting businesses, to help substantially grow the productivity of southern Queensland.”
