There have been numerous reports and briefing to Council since 2016 on the project.

“An independent risk-based cost estimate was prepared in 2006 with a P80 confidence level estimates $36.3M. This estimate did not include land costs, investigation and detailed design costs, nor costs to upgrade the existing transfer system to accommodate the new storage.

A revised cost estimate, which included all the costs not previously considered was estimated in 2014 to be $61.4M.

The 2006 concept design was reviewed to allow for an increase the size of the storage from 3 GL to the required 8 GL (in another 40 years), by initially constructing a wider clay core, different profile, foundations to accommodate a larger storage and a future proof outlet tower.

A revised 30% design P80 cost estimate was costed at $94.1M in 2017, including an allowance for a new river pumping station ($6.4M).

NSW Government’s biodiversity offsets scheme was introduced in February 2018 to offset environmental impacts of developments. After estimating the cost at $3.5M using the Office of the Environment’s calculator, Council conservatively budgeted for $9M.

As design progressed further P80 cost estimates were prepared at 60% design and 95% design. The 60% design estimate (October 2018) was $100.9M. The 95% P80 design estimate was $106.7M as costed in December 2018.

“Formal tenders were invited from the four shortlisted tenderers and received April 2022. All tendered prices exceeded the tender estimate significantly, with the actual contract being $25.1M higher.”

“Since construction commenced, significant geotechnical issues have been encountered which have delayed the delivery of the project, originally due to finish March 2024 to now early 2025, assuming no significant rain delays.

The geological issues have also resulted in higher project management, consultant (design during construction services) and construction costs. “

Biodiversity Offsets

“Council, as part of its State Significant Development application, submitted an Environmental Impact Statement (EIS) and associated Biodiversity Development Assessment Report (BDAR) for State Government approval, with an assumption of assumed presence for some species, given (at the time) the relatively low biodiversity offset costs. The Office of the Environment (OEH) biodiversity offset calculator estimated at the time (April 2019) that the total value of biodiversity offsets would be about $3.4M. Council did not purchase them then as funding was not yet secured.

Council budgeted a conservative $9M for biodiversity costs for the total project.

Responsibility for estimating biodiversity offsets transferred from OEH to the Biodiversity Conservation Fund (BCF). Late last year Council requested a quote to purchase the biodiversity credits from the BCF and a quote of $30.9M (ex. GST) was provided to Council, $20.9M more than budgeted and $27.5M than the initial estimate.

Council has written to the Minister for Water and the Minister for the Environment seeking a solution which will not impact the final project costs nor potentially increase water rates.”

Land Acquisition

Land subject to the Project is controlled by the Forestry Corporation of NSW (Forestry) as Bodalla State Forest.

To facilitate completion of the Project, Council has an agreement with Forestry for Council to acquire the land subject to the Project by compulsory process, and to obtain early access to the relevant land to do the necessary works to carry out the Project prior to the land acquisition.

Forestry has since informed Council that Council’s acquisition of the land for the required purpose cannot be undertaken due to the classification of the land as Bodalla State Forest. Council has obtained legal advice to confirm that under s15 of the Forestry Act 2012 (NSW), in order to revoke the dedication of the relevant land as Bodalla State Forest, such that the land can be acquired by Council for the Project, an Act of Parliament for that revocation will need to be passed.

In that regard, Council will approach Forestry again to seek the formal revocation of Bodalla State Forest from the subject land. Given Council’s agreements with Forestry, the project will continue whilst Forestry is progressing this.

Native Title

“The Forestry Land is also the subject of a Native Title claim. In that regard, Council is required to consider the interests of the Native Title claimant as part of the acquisition process and, subject to the negotiations with that claimant for the acquisition of land, any compensation payable to the Native Title claimants. In early 2023, Council notified the Native Title claimants of the project and the need to acquire the land. In addition, Council has offered to meet to discuss the project further. The Native Title process before the Federal Court could take another five years or more. Council will be liable to pay compensation if the Native Title claim is approved.”

Once Council has further clarity on its exposure to the Native Title claim in connection with the acquisition, this will assist Council to confirm its position moving forward including how Council intends to further negotiate the acquisition with the Native Title claimants.

Financial

“When the project budget was increased to $104.1M in February 2018, financial modelling was carried out to determine the level of subsidy required to enable the project to proceed without increasing water rates. Modelling determined that 50% funding would be required and that Council could afford to spend $52M on construction costs without increasing water rates.

Council submitted a funding request to the NSW Government in March 2019. In November 2019 Council resolved to accept a funding offer of $25.6 million.

Council then applied for financial assistance under the Federal Government’s National Water Grid Fund in January 2021. While two years had passed since the project estimate was reviewed, the project estimate was not updated for the purposes of applying for Federal funding as access to federal funding was subject to the State contributing 25%, the project estimate was a risk-based estimate (P80 and included a 15% contingency. Inflation was low.

In May 2021, the Federal Government announced that it had allocated $51.2 million towards the project, representing 50% of the 2018 project construction estimate. Council resolved in May 2021, to accept the funding once a formal offer had been received.

A total of $76.8 million had been secured, reducing Council’s share of the project estimate of $104.1 million to $27.2 million at the time.”

“Following the increases in the project cost due to the higher than estimated construction cost, to proceed, Council’s contribution needed to be increased by at least $25M from $27.2M to $52.2 M (noting that modelling carried out in 2018 determined that a contribution of $52M was affordable without increasing water rates).”

It was subsequently carried THAT Council Note:

1. Latest update with regards to the delivery of the Southern Storage project and in particular:
2. a) Expenditure to date and forecast (within the confidential section)
3. b) Forecast completion date
4. c) Actions being undertaken to minimise risks to Council
5. That Council will now be provided with updates every 3 months or earlier if required.

Cr Mayne was the only councillor to speak to the item saying “I appreciate the transparency of the report” and acknowledged some of the figures are confidential.

“It’s something the next Council will have to deal with.”