The proposed dam site's geological flaws were mentioned in a November 2006 internal report, delivered the day before Tillegra was announced.

Greens MLC John Kaye said the state government covered up the document because it cast doubt on Tillegra's $477 million projected cost.

The report, obtained through a freedom of information request, was written by Hunter Water Australia senior civil and geotechnical engineer Raj Jairaj.

In it, Mr Jairaj identified fault lines upstream and downstream of the Williams River site, and a sheared zone of highly strained rock.

He said tests indicated "significant water losses in three zones, which raises concerns over the lack of water tightness of the site".

"This isn't about whether the dam will fall over or not," Dr Kaye said.

"It will cost money to address those issues, and instead of it being a half-billion dollar dam it could end up being a $1 billion dam."

A Hunter Water spokeswoman said the report could not be taken as recent geotechnical data, and that Dr Kaye was rehashing claims dismissed by the NSW Dams Safety Committee.

"The report recommends additional work around known geological features in the area, which has been undertaken by Hunter Water at a cost of $1.5 million," the spokeswoman said.

Dr Kaye first made the fault line claims in 2008, backed by geologist Graham Holt.

Mr Holt said Tillegra could emulate New Zealand's Clyde Dam, which blew out at more than $1 billion when fault lines caused leaks.

Dr Kaye reiterated his call for an inquiry into the dam.