Member for Goulburn Wendy Tuckerman says a $3 million state government grant to improve Grabine Road will be suspended until further information on raising the wall at Wyangala Dam is made available.
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Earlier this month the federal and state governments announced the dam's spillway will be raised by 10 metres to add an extra 650 Gigalitres of storage.
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Stakeholders from Water NSW, Lachlan Valley Water, state and local governments, and Grabine State Park have all indicated that it is too early for detailed assessments on economic, infrastructure and environmental impacts.
"We also need to find out what the park (Grabine State Park) will look like going forward. I would be advocating for whatever will be disrupted to be reinstated," Mrs Tuckerman said.
"I'll be fighting to ensure landholders will be compensated through negotiation and we are trying to get as much information as possible currently, but the legislation (Water Supply Critical Needs Bill) needs to pass first."
The bill was introduced to Parliament on October 16 by the NSW Minister for Water, Property and Housing Melinda Pavey.
Under the proposed legislation the Wyangala Dam upgrade, a $480 million new Dungowan Dam near Tamworth and the Border Rivers project on the Mole River, will be completed in faster time frames.
A spokesperson from Water NSW said community engagement will begin before the end of the year.
"The planning and construction phases of the project will be accompanied by full community consultation," he said.
"The project will also be subject to a comprehensive impact assessment, which will include a detailed study into potential inundation levels. The outcome of these assessments of environmental and other impacts will be made public, including any proposed mitigation measures to be implemented.
"Mitigation works may be required for local roads."
The funding to improve the Grabine Road was announced around 12 months ago from the Growing Local Economies Fund.
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