The federal government is pledging to contribute $65 million towards the planning process for a major desalination and water transport project in the Upper Spencer Gulf as part of the Future Made in Australia initiative.

It brings the total pre-construction funds for the Northern Water Supply Project to $230m, which includes funds from the state government and BHP.

The project includes plans for a seawater desalination plant at Cape Hardy, capable of processing 260 megalitres a day, and a 600-kilometre pipeline to transport the treated water to Whyalla and outback mining sites such as Carapateena and Roxby Downs.

At the moment mining operations in the far north draw on water from the Great Artesian Basin.

The hydrogen power station proposed for Whyalla would need a reliable and abundant supply of water to convert into hydrogen for power generation.

Jim Chalmers chose to make the announcement at Sundrop Farms near Port Augusta.(ABC News: Brant Cummings)

Federal Treasurer Jim Chalmers made the funding announcement at Sundrop Farm near Port Augusta, an operation that produces 14 per cent of the country’s tomatoes by harnessing concentrated solar energy to produce fresh water for irrigation and power to heat the greenhouses.

Mr Chalmers, who was making his first interstate trip since announcing the budget on Tuesday, said was important to go straight to the Upper Spencer Gulf.

“Port Augusta was the first port of call because the regions have a big role to play in a Future Made in Australia,” he said.

“South Australia has a big role to play.”

Tanya Plibersek says the natural water sources being used for industry are not reliable enough for that purpose and needed to be protected.(ABC North and West: Isabella Carbone)

‘Valuable’ resources being overdrawn

Federal Environment and Water Minister Tanya Plibersek said the project was important to provide water for “thirsty” green hydrogen production and copper development.

She said the only alteratives for those industries in SA would be a continued reliance the Murray River or the Great Artesian Basin.

“Both of these sources are not as reliable as they need to be for industry,” Ms Plibersek said.

“But they’re also incredibly valuable environmentally and the fact that we’ve been overdrawing on these resources has led to problems both for the environment and for the communities that rely on these water resources for faming, drinking and other purposes.”

State Treasurer Stephen Mulligan hoped the planning and pre-construction works would be completed within the next 18 months.

“We can’t bring this about soon enough and today’s funding announcement from the federal government really brings that forward for the state,” he said.

Mr Chalmers also addressed the additional delays to Whyalla steelworks coming back online.

Its dated blast furnace is scheduled to upgraded to an electric arc furnace made by Danieli to decarbonise and modernise the steelmaking operations. 

Mr Mulligan said there was “frustration” in the state government after the latest delays were revealed in a press release.

But he said Energy and Mining Minister Tom Koutsantonis had been “reassured” that Danieli was good partnership to develop the new furnace after a meeting in Italy overnight.