The project will see a new Dungowan Dam constructed, increasing storage capacity from 6.3GL to 22.5GL.
The new dam will be around 3.5km downstream of the existing dam, which will be decommissioned. A new 55km pipeline will supply water from the dam to the Calala Water Treatment Plant.
This project will improve water security, help build drought resilience and improve water reliability for agricultural production.
The $484 million project is jointly funded by the Australian Government ($242 million) and the New South Wales Government ($242 million).
Australian Government funding is provided through the National Water Infrastructure Development Fund.
Construction is expected to be completed late 2025.