Hunter Water is investigating sites at Limeburners Creek and Upper Chichester as possible locations for a new dam as part of its review of the Lower Hunter Water Security Plan.

The Healthy Hunter Rivers Group, which is fighting to prevent the construction of a dam, has cited several documents that indicate koalas would be among the most affected native species if the project proceeds.

A GHD environment and social assessment review of the Limeburners Creek site says 66 threatened fauna species have been recorded within the locality. Koalas are among the species most commonly recorded.

"These species may be directly impacted through potential drowning during the flooding process, loss of habitat and severing connectivity," the document says.

It warns animals within the Chichester dam exploration area would be similarly affected.

"There is a possibility for the storage area to compromise koala habitat as listed under SEPP 44," the document says.

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The warnings about the potential loss of koala habitat comes at a time when the State Government is desperate to be seen taking action to stop the loss of koala populations.

"This government just doesn't seem to get that koalas need trees. You can't just offset the biodiversity impacts and loss of critical habitat from a dam by purchasing a property in another location or by planting a few trees," NSW Upper House MP Justin Field who obtained the documents as part of a Call for Papers motion last year, said.

"We keep hearing from the Premier that she wants to protect koalas and Environment Minister Matt Kean wants to double Koala numbers, but the government is spending money on developing a proposal that will do the opposite. It's simply not the place for a dam."

Healthy Hunter Rivers Group spokesman Ken Edwards said the construction of a new dam would be environmental vandalism.

"It is time Hunter Water practiced what it preaches, commit to conserving the koalas and koala habitat and halt the plan to dam and destroy," he said.

"For Koalas to survive and thrive, they require habitat and connectivity with each other and other populations, not token gestures of environmental offsets and band aid treatments and contradictory statements by Hunter Water."

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A Hunter Water spokesman said the state-owned corporation was actively exploring all supply and demand options as part of the water security review.

"Given the number of supply and demand options being considered as part of the comprehensive review of the Lower Hunter Water Security Plan, Hunter Water is completing high level environmental, social and economic assessments to provide sufficient information that supports community and stakeholder engagement and evidence-based decision making," he said.

"This work is informing the draft Plan, and ongoing investigations."

No decisions had been made about the preferred portfolio of options.

"Any final options will be subject to a rigorous, formal planning approval process, which includes detailed assessment of each option's environmental and social benefits and impacts and community consultation," he said.

Hunter Water expects to release the draft Lower Hunter Water Security Plan mid-year.

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