THE Iemma Government will build the first new big dam in NSW in almost 20 years in a $342million project it hopes will drought- proof the central coast and Hunter Valley.

Premier Morris Iemma will announce the details of the 450billion- litre water storage today, amid accusations from the Opposition, local farmers and green groups that he is using the project to deflect attention away from the child-sex scandal engulfing his Government.

The new dam, on the drawing board since the 1970s, is to be built at Tillegra, north of Dungog, on cleared grazing land on the upper Williams River, a tributary of the Hunter River.

Mr Iemma said the dam and associated water grid would more than double the Hunter’s water storage and provide about half of the central coast’s water.

The announcement follows figures yesterday showing 93.8per cent of NSW in drought.

“This will not only secure supply for Hunter families, but will ensure that the crisis which exists on the central coast will not happen again,” Mr Iemma said.

“The dam and water grid are an investment in infrastructure to ensure that as our population grows we will have ample water for families, industry and businesses.”

The central coast’s existing dams are down to just 15 per cent of capacity, thanks to drought and an increasing population.

But dairy farmer James Hopson, whose house will disappear under 30m of water should the dam go ahead, said the dam was not yet needed. Mr Hopson sold 200ha of land to the Government in 2000 and has been leasing it back ever since.

He said yesterday he was not surprised the Government had revived the dam proposal, which had “been on the books since World War II”.

“I have been saying to friends recently, the only reason it will come back on the burner is political,” Mr Hopson said. “There isn’t any real reason to construct it.”

Mr Hopson said he was in regular contact with the Hunter Water Corporation, which would have carriage of the project.

“They see no need for Tillegra for another 20 years — that is the timetable they have been working on. I suspect this is purely political, to make Iemma look like an action man regarding water storage.”

Construction of the dam and an upgrade of the Newcastle to central coast water pipeline were to have begun in 2016.

But NSW Minister for Water Utilities David Campbell said it would now begin in mid-2008 and would take between six and 10 years to fill.

A hydro generation plant, generating about 3000 megawatts of energy annually, would also be built at the dam.

The Government had already acquired half the land and negotiations with the remaining landowners would commence soon.

Australian Water Association chief Chris Davis said the proposal was reasonable in light of the region’s dire water shortages.

Mr Davis said that while the dam would not help in the immediate drought, it would provide long-term assurance to the communities north of Sydney.

“The central coast is in desperate need of reinforcing its water sources,” he said.

“A dam like Tillegra would be preferable to smaller-scale desalination plants, which are very expensive to run.”

But NSW Opposition Leader Peter Debnam accused Mr Iemma last night of trying to deflect attention from the child sex abuse scandal surrounding former NSW Aboriginal affairs minister Milton Orkopoulos.

He described the announcement as a desperate attempt to win back support in the Hunter region after 12 years of failure to deliver on water infrastructure.

Director of the Nature Conservation Council of NSW Cate Faehrmann said dams had gone out of favour last century.

“It has been government policy not to build dams,” she said. “Dams are notorious for the environmental havoc that they wreak … For the Iemma Government to look at doing this when they are not looking at long-term sustainable water solutions such as water recycling is very disappointing.”