A year ago the Government said it would suspend work on the project after an improvement in Sydney's water storage levels, as drought conditions eased.

Even so, its application with the Department of Planning for approval to tap the aquifer remained, and approval is expected in a matter of weeks.

The Government has eased water restrictions in the Sydney basin, just as the Bureau of Meteorology has stepped up warnings that an El Nino event has emerged in the Pacific Ocean, which threatens to cut rainfall at a time when the bulk of the state remains in the grip of drought.

"They need to get rid of this proposal altogether," said Cate Faehrmann, the executive director of the Nature Conservation Council of NSW. "The fact is they now have the Kurnell desalination plant, much as it is disliked, so they should now abandon the entire idea of Kangaloon."

When the Government said it would suspend the Kangaloon project last year, Sydney's dam storage levels stood at 66 per cent. The figure is now 61 per cent; for Warragamba Dam it is 57.5 per cent.

The Government had earlier said it would tap the Kangaloon aquifer if Sydney's water storage fell below 40 per cent. At that point, the Government wants to tap aquifers around Sydney for as much as 45 billion litres of water a year, with a third to come from the Kangaloon aquifer.

Work is proceeding on the proposal, even though the Kurnell desalination plant will be turned on about the end of the year and is to operate at full capacity for the next two years, irrespective of dam levels.

"The issue with Kangaloon is it's an enormous waste of money and environmental degradation for just a few days' water supply for Sydney," Ms Faehrmann said.

"It was an easy decision for [the Premier Nathan] Rees to shelve, when he was Water Minister. They need to now put it to rest, and give the local community, which is on tenterhooks over this issue, peace of mind."

Since the Government said it would suspend work on the Kangaloon aquifer, an additional monitoring bore was completed at the aquifer last September, to improve the monitoring of spring flows.