A further $25 million will be invested on securing the Upper Hunter's water security.
Yesterday's budget contained $24.7 million for detailed planning and site assessments for a pipeline between Lostock Dam to Glennies Creek Dam.
It follows the allocation of $11.1 million for the project in the May federal budget.
The pipeline is a key link in a broader water security strategy to improve interconnectivity between the upper and lower Hunter regions.
It was among several linkages identified in the November 2018 Greater Hunter Regional Water Strategy.
Water NSW's 20 Infrastructure Options Study shows the Glennies Creek to Lostock pipeline could be built to transfer between 7.5 gigalitres per annum to 73 gigalitres per annum.
The state government funding for the Lostock Dam to Glennies Creek Dam project is a part of a $245 million package to address water security across Regional NSW.
An additional $20 million will ensure work can continue on the rollout of 12 Regional Water Strategies. "These strategies will set the direction for water policy, planning and infrastructure decisions for the next 20 years, putting water security and drought resilience on the same footing as other vital services, like transport and health," Water Minister Melinda Pavey said.
Minister Pavey said funding had also been committed to fighting water losses in regional areas where water infrastructure may be ageing or under pressure due to higher populations.
"Over three years the government will spend $12.5 million on a regional program to help local water utilities fix leaks across their networks, saving water and securing a safe supply for residents throughout the state," Mrs Pavey said.