WATER Minister Penny Wong will hold back $1 billion in Victorian water infrastructure until the State Parliament guarantees a controversial water entitlement for the north-south pipeline.
Senator Wong has written to Victorian Water Minister Tim Holding explaining she could not commit the money because it was not currently in Australian taxpayers' interests.
A bulk water entitlement was blocked by the Victorian upper house in August by Liberal, National and Greens members in part because it pumps water from the Goulburn River to Melbourne via the north-south pipeline.
But the bulk entitlement rejected by the Legislative Council would also ensure additional water for the environment and irrigators.
The water comes from savings derived from the Victorian Government's $2 billion food modernisation project in northern Victoria - to which the Federal Government has committed the $1 billion.
A spokeswoman for Senator Wong said yesterday the Government had so far committed just $3.5 million of that money.
She said the Federal Government would not hand the rest of the $1 billion in "the interests of taxpayers" until the Victorian Parliament allowed the bulk entitlements to pass and water flows for the environment could be guaranteed.
Senator Wong and federal Liberal Simon Birmingham clashed over the issue late on Tuesday night with Senator Birmingham accusing the minister of a clever stunt.
"She [Senator Wong] is now asking for Victorian MPs to vote for the north-south pipeline in order to get investment in a set of unrelated infrastructure projects," Senator Birmingham told The Age later.
He said that Senator Wong should instead write to the Victorian Government and insist the north-south pipeline be decoupled from water entitlements for the environment and irrigators.
Speaking at Tuesday's Senate estimates, Senator Wong said it was an "odd" situation that the Liberals, Nationals and Greens had combined to block water for irrigators and the environment.
Senator Wong added that she hoped Federal Opposition MPs such as Senator Birmingham would put pressure on their state counterparts to pass the entitlement.
Senator Wong said none of the $1 billion in Commonwealth money would be spent on the north-south pipeline.
The federal Water Minister's comments will be seen as an attempt to strong-arm Victorian MPs, in particular the Greens, into backing the entitlement.
Mr Holding has recently returned the bulk entitlement to the Victorian Parliament. He said it was an opportunity for the Greens to reconsider "the disastrous nature of their actions".
The $2 billion modernisation project will upgrade water infrastructure such as irrigation channels in Victoria's northern food bowl around the Goulburn Valley.
Objectors to the north-south pipeline consider it a grab by Melbourne for scarce water resources needed for the environment and irrigators in the area.
Doubts have also been cast over water savings the Victorian Government claims will come from the modernisation project from, among others, the state Auditor-General.
Sign up for our newsletter to stay up to date.